No Excuse for Tied Hands on Oil Speculation

Anyone who drives or owns a business has noticed the recent surge in oil and gasoline prices recently. We have also heard that the price is dependent upon nothing more than good old Econ. 101 supply and demand. This is simply not the case, and there is absolutely no reason that the Obama administration has not initiated investigations at the Department of Justice and the Commodities Futures Trading Commission.

Oil futures speculation has contributed at least 40% to the recent run up in oil prices. Moreover, Wall Street firms trading in oil futures with no intent to ever take delivery of one drop of oil works to distort the market. Wall Street is not a family farmer attempting to lock in a price for his or her soybeans, or a pig farmer seeking to hedge against a drop in pork belly prices. Wall Street’s involvement in any commodities futures market does nothing to serve the people who produce commodities nor the public at large. As of today, Wall Street controls more than thirty times the amount of oil being produced and 80% of the oil futures market. In other words, a group of investors who do not use or produce oil are driving the global price. Supply of oil worldwide is at near record levels, and demand is falling
. There can be no other explanation but oil speculation for the recent price spike.

The public does not bear the responsibility to force the administration’s hand to enforce the law. Even in the case that the administration fears taking action due to tepid interest by the public in such an investigation, numerous groups have petitioned the government seeking action on this front. Trade groups across the spectrum have begged Obama to take action, from large trucking conglomerates, to food retailers, to major airlines, to large-scale shippers, to mom and pops. One is left with no other explanation but that Wall Street has more power than not only the public, but also major corporations. The list is long and varied. Essentially, Wall Street can do as it damn well pleases.

Take for example the Wall Street reform Act, Dodd-Frank. The law required that the Commodity Futures Trading Commission impose strict limits on the amount of oil that Wall Street speculators could trade in the energy futures market by January 17, 2012. It has not yet done so, and by all accounts the CFTC is facing no pressure from the administration to do so. In essence, the CFTC itself is breaking the law.

It is certainly not our position that fossil fuels represent the future of energy, in fact we believe the opposite. This is about a fair market, whether it be for oil or for something more obscure. Price manipulation and price fixing hurts every consumer, and if the administration can prosecute  a company for raising the price of milk in three small states, oil should be somewhere on its list of priorities.

It is time for this administration to act, and act boldly. Can Wall Street really be so powerful as to prevent a sitting president from taking action that will quite obviously help his reelection chances? That is a frightening proposition indeed.