J.P. Morgan's Take on Oil Prices? Views to Congress, Clients Differ
Thursday, September 18, 2008
J.P. Morgan Chase's view on whether speculators are to blame for high oil prices depends on which J.P. Morgan Chase guru you listen to. On Tuesday, Congress heard one version in testimony, while wealthy clients got an opposite version in an e-mail the same day.
Lawrence Eagles, global head of commodity research at the bank, testified before a Senate subcommittee that "we believe that high energy prices are fundamentally the result of supply and demand." Written testimony submitted by Blythe Masters, a managing director at the bank's global commodities group, said "we fundamentally believe that high energy prices are a result of supply and demand, not excessive speculation."
But wealthy clients of J.P. Morgan's "private banking" arm got a different view in an e-mail sent by the unit's chief investment officer, Michael Cembalest. He said "there was an enormous amount of speculation pent up in energy markets . . . and it wasn't just the supply-demand equation."
An angry Sen. Byron L. Dorgan (D-N.D.), sponsor of legislation to address oil market speculation and a member of the Senate Committee on Energy and Natural Resources, sent a letter to J.P. Morgan chief executive Jamie Dimon. "I am troubled," he wrote. "Please explain why J.P. Morgan testified before Congress that the high oil prices are only due to supply and demand when your experts clearly acknowledge privately that it was speculation, not market fundamentals, that sent oil prices skyrocketing."
J.P. Morgan spokesman Joseph Evangelisti said that nothing was amiss. "These two people are in completely separate, firewalled groups," he said, "and we are careful to preserve the independence of our client research."