TRUE OR FAKE. Is the rise in prices “largely due to speculation by large groups”, as Adrien Quatennens asserts?

Nothing seems to stop the rise in prices. In a study published last month, INSEE warns: “Energy Prices Accelerate in June.” Over one year, the cost of petrol increased by 35.9%, that of diesel by 45.9% and that of gas by 49.3%. For food, prices are also soaring: +6.6% for bread and cereals, +17.7% for oil.

In the midst of a debate in the Assembly on the examination of the purchasing power bill, the question of inflation caused Adrien Quatennens to react strongly. Invited on BFMTV, on July 18, the deputy of La France insoumise designated those responsible, according to him, for this surge: the “rise in prices (…) is largely due to speculation (…) large groups“.

It is not fair for the French to pay for a rise in prices which is largely due to speculation and the superprofits of large groups. The blocking of prices that we propose is to put a stop to speculation and make the profiteers of the crisis pay their share. pic.twitter.com/U9lBvGggcm

— Adrien Quatennens (@AQuatennens) July 18, 2022

Adrien Quatennens did not detail the industrial groups targeted. Nor even specified the source of his analysis. So, is the deputy saying true or “fake”? Franceinfo interviewed several economists to verify this.

In economic matters, it should first be specified that speculation is a common behavior on the markets. If a petrochemical fertilizer plant needs oil to manufacture its fertilizers, it may want to protect itself against a rise with a futures contract, i.e. the right to buy a barrel in several months at a fixed price. In this case, the factory speculates: it acquires oil at a price different from that of the current market to be certain of the price it will pay for its raw material.

“This is called a hedging operation which has an industrial logic“, explains Jacques Percebois, professor at the University of Montpellier and director of the Center for Research in Energy Economics and Law (Creden).If I think the price of oil will go up in the future to $130, I will get more oil“, for example with a futures contract giving the right to buy a barrel at 110 dollars for delivery in three months. “CThis operation will increase prices, but will allow me to hedge against a higher future price, like insurance“, reasons the economist.

But manufacturers are not the only speculators on the commodity markets. Investors, such as banks or funds, also buy oil or foodstuffs with the sole aim of making a profit on resale. An essentially financial speculation. If the action of the investors makes it possible to ensure the liquidity of the markets, that is to say the possibility of easily finding a buyer or seller, they raise the suspicion of speculation decorrelated from real economic life.

Under these conditions, is it relevant to incriminate the speculation of large groups to explain current inflation? In other words, are manufacturers organizing a shortage to artificially raise selling prices? The question divides economists, because speculative behavior is not exactly the same depending on the sectors concerned, whether the market for foodstuffs or oil products, for example.

The oil market does not indulge in purely financial speculation, judges Jacques Percebois: “Refineries and oil companies are just hedging.” For the specialist, oil groups mainly seek to protect themselves against price fluctuations. Unlike Adrien Quatennens, the economist wants to be cautious, however: “The degree of speculation and its effect on rising prices can only be measured after the fact and studies will have to be carried out to analyze it.”

Because an effect of speculation on the volatility of oil prices cannot be completely ruled out. “It could amplify both up and down movements“prices, assures Carine Sebi, energy specialist and professor at Grenoble Ecole de Management (GEM). “According to a Senate report [de 2005]speculation represents 10 to 20% of the price of oil, which is not negligible.”

The grain market, for its part, appears by its organization to be even more sensitive to price manipulation than the oil market. According to Olivier De Schutter, author of a report on the right to food at the UN and member of Ipes-Food, a panel of experts on food issues, there is indeed speculation on the market for this guy. “It did not create inflation, but can make it worse“, he explains. Olivier De Schutter denounces the responsibility of trading companies that act as intermediaries between cereal producers and buyers. “Grain traders are a small number of highly concentrated firms that control 75-80% of the trade“, he says. These companies “may delay sales, accumulate stocks and, through their acts of buying and selling, speculate on rising food prices to create a kind of scarcity.“

An analysis rejected by Philippe Chalmin, liberal economist and president of the Observatory of the formation of prices and margins of food products. Linking speculation to inflation is a bullshit fabriche asserts. There have been many studies to assess the effect of speculation on the markets. They showed that in the medium term, there was no impact in terms of incidence on prices, or even, on the contrary, an impact patch.“ A report published in 2011 by the Economic Affairs Committee of the National Assembly confirms “that no systematic link could be established between speculation and the formation of long-term prices”.

Despite the absence of studies proving price manipulation by speculators, NGOs remain concerned and are calling for more regulation on food markets. “The lack of recent scientific evidence on the impact of excessive speculation on food prices does not justify the absence of political intervention”insists Thomas Braunschweig, trade policy expert at the NGO Public Eye, to the Swiss magazine economic life.

In summary, it is difficult to be as positive as Adrien Quatennens. So far, no study has established an indisputable link between rising commodity prices and corporate speculation. But some markets, such as cereals, show real vulnerabilities in terms of price manipulation.