Why Republicans Aren’t Mentioning the Real Cause of Rising Prices at the Gas Pump ( By Robert Reich)

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http://yubanet.com/opinions/Robert-Reich-Why-Republicans-Aren-39-t-Mentioning-the-Real-Cause-of-Rising-Prices-at-the-Gas-Pump.php

Thursday, March 15, 2012

Gas prices continue to rise, which is finally giving Republicans an issue. Mitt Romney is demanding the President open up more domestic drilling; the super PAC behind Rick Santorum just released a new ad in Louisiana blasting the President on gas prices; and the GOP is attacking the White House on the Keystone XL Pipeline.

But the rise in gas prices has almost nothing to do with energy policy. It has everything to do with America’s continuing failure to adequately regulate Wall Street. But don’t hold your breath waiting for Republicans to tell the truth.

As I’ve noted before, oil supplies aren’t being squeezed. Over 80 percent of America’s energy needs are now being satisfied by domestic supplies. In fact, we’re starting to become an energy exporter. Demand for oil isn’t rising in any event. Demand is down in the U.S. compared to last year at this time, and global demand is still moderate given the economic slowdowns in Europe and China.

But Wall Street is betting on higher oil prices in the future — and that betting is causing prices to rise. The Street is laying odds that unrest in Syria will spill over into other countries or that tensions with Iran will affect the Persian Gulf, and that global demand will pick up as American consumers bounce back to life.

These bets are pushing up oil prices because Wall Street firms and other big financial players now dominate oil trading.

Financial speculators historically accounted for about 30 percent of oil contracts, producers and end users for about 70 percent. But today speculators account for 64 percent of all contracts.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission — the federal agency that regulates trading in oil futures, among other commodities — warns that too few financial players control too much of the oil market. This allows them to push oil prices higher and higher — not only on the basis of their expectations about the future but also expectations about how high other speculators will drive the price.

In other words, a relatively few players with very deep pockets are placing huge bets on oil — and you’re paying.

Chilton estimates that drivers of small cars like Honda Civics are paying an extra $7.30 every time they fill up — and that money is going into the pockets of Wall Street speculators. Drivers of larger vehicles like the Ford Explorer are paying speculators $10.41 when they fill up.

Funny, but I don’t hear Republicans rail against Wall Street speculators. Could this have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?

Wall Street isn’t bankrolling Democrats nearly as much this time around because the Street is still smarting from the Dodd-Frank Wall Street reform law pushed by the Democrats, and from the president’s offhand remark in 2010 calling the denizens of the Street “fat cats.”

The Commodity Futures Trading Commission is trying to limit how much speculators can bet in oil futures — a power it was given by Dodd-Frank. It issued a rule in October, but it won’t take effect for another year.

Meanwhile, Wall Street has gone to court to stop the rule. It’s already won a stay.

As rising gas prices start wagging the election-year dog, the President should let America know what’s really causing prices to rise.

Read More of Robert Reich's Op Eds Here: http://robertreich.org/

Sacramento Dave's picture
Sacramento Dave
Joined:
Nov. 27, 2010 10:46 am

Comments

Bernie Sanders brought this up last year. The oil execs testifying before congress said over 40% of the price is speculation. Supply and demand don't apply. Production was up, consumption down, and the prices were spiking. Fraud is america's main business.

Our motto is on our money 'In Fraud we Trust'.

douglaslee's picture
douglaslee
Joined:
Jul. 31, 2007 4:01 pm

We've been following the strategy used to hoard oil, called "Contango" by the Koch Brothers, Goldman Sachs, and a few others. The CFTC currently has the power to refer contango cheats to the Justice Department, which can act. Thus far they've only gone after a handful of small fish.

What we're witnessing now is politically weaponized contango. It's being used as a wedge issue. Want to know more? A good article: The Koch Brothers' Contango Strategy: Oil Prices as Political WMD Against Obama"

theclevertwit's picture
theclevertwit
Joined:
Mar. 18, 2012 3:42 am

Even once (if ever) the speculators are driven from doing harm to the country there will still be the need to undumbdown consumers on the hoaxUS-pokeUS of gas-at-the-pump pricing.

Here's a tiny primer from my '60s organic chemistry textbook. Please accept trailing numbers as subscripts. Crude Oil is a collection/mixture of:

CH4 (methane); C2H6 (ethane); C3H8 (propane); C4H10 (butane); C7H16 (heptane) thru C10H22 (decane) are what we call Gasoline; C10H22 thru C16H34 are what we call Kerosine; C15H32 thru C22H46 are the Fuel Oils; C19H40 thru C35H72 are the Lubricating Oils and C36H74 thru C90H182 are Parafin Wax and Asphalt.

A Barrel is defined as equivalent to 31.5 gals. This does not mean 31.5 gals of gasoline. Large molecules (ones with more than 10 C atoms) can be broken down by thermal and catalytic cracking and yield a higher (less dense) volume than at the beginning of the process.

Some Crude yields 50 gallons of gasoline per barrel plus some other flammable gases (also captured for resale) and other leftover parts for resale also. It's good that little is wasted, it's bad that citizens are kept at the kindergarden level of knowledge when it comes to how much world oil pricing really has to do with the price at the pump.

As long as I'm at it: Even back in the '60s we knew that powdered Coal treated with steam and controlled oxygen form: CH4 (methane) + H2 (dihydrogen) + CO (carbon monoxide) + H2S (hydrogen sulfide) + CO2 (carbon dioxide). The H2S & CO2 are removed and the others separated can be burned as fuel.

I never hear anyone saying how the price of Coal tonnage effects the cost of Hydrogen Fuel or Methane - wonder why that is?

Rodger97321's picture
Rodger97321
Joined:
Jul. 31, 2007 4:01 pm

That dihydrogenmonoxide has been covered. Inhale it and you die. Ingest too much of it you die. If it accumulates in the brain you cannot walk. Red states want to outlaw it.

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douglaslee
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Jul. 31, 2007 4:01 pm

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Earth's credit card has been maxed out!

If Earth's resources were a credit card, we have already maxed out our entire allocation for this year. The think thank Global Footprint Network announced that August 19th was “Earth Overshoot Day,” meaning that all the resources we use after that day exceed what our planet can produce in a single year.

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