I know, I know: China, India, SUVs. But tonight's Marketplace leads with this interview with former commodity regulator Michael Greenberger, who says we can also thank "the Enron Loophole" for our high oil prices:
...[A]bout 30 percent of our crude oil energy futures are traded in what is called a dark market -- that is a market that was deregulated in December of 2000 at the behest of Enron. Prior to that legislation being passed, all energy futures traded in the United States or affecting the United States in a significant fashion were regulated by United States regulators under a very careful regime that had been perfected over about 78 years and many observers believe that because those markets are not being policed, malpractices are being committed and traders are able to boost the price virtually at their will [Michael Greenberger, interviewed by Kai Ryssdal, "Deflating the Oil Bubble," Marketplace, 2008.06.16].
Greenberger says straight out that speculators are making the oil futures market "completely dysfunctional and out of control."
Want to see your price at the pump go down? Forget the gas tax holiday or tapping the Strategic Petroleum Reserve. Bring back the regulations:
From my own experience as a commodity regulator, I believe that if the Bush Administration were serious about its regulation, we could begin seeing prices drop within a month. If we don't get the kind of regulation that has been done for decades and the market proceeds along the pace its proceeding, we will have to go through a very, very serious recession. The question is do you want to deflate the bubble by that kind of suffering or do you want to deflate the bubble by applying tight U.S. regulatory controls? [Greenberger, 2008.06.16]
Congress? President Bush? Anyone listening?
This is what I have been saying since gas prices started to creep to the $3 mark. It's just weird to me that gas prices were first linked to Hurricane Katrina, then there was a fire (I believe) at another refinery, then it was blamed on the war, then it was blamed on global demand, and so on and so on... Do we even know why????
ReplyDeleteMy hubby and I were talking and he said that there was something that could be done (I can't remember off the top of my hat what it was), but I have been saying that the govenment does need to step in. If the government has to approve the merger of a cellphone, cable, or any other utility, why can't they regulate gas prices? The Saudi people are stating that there is not a gas shortage and they even think the oil prices are out of wack. Something is seriously wrong here. Does half the working world have to be unemployed and forclosed on before people realize that we have a problem here?
I truely belive (and pray every night) that the people that can right this wrong can and will.
I've been reading a biography of Theodore Roosevelt during the last few days. Many of the problems facing humanity 100 years ago are being repeated now.
ReplyDeleteIf one dares to extrapolate this Mandelbrot-like space-time twist, one can only be horrified ...
If we are to learn anything from history, it might be that government regulation can sometimes help, but it is only a palliative, not a cure.
The cure, as Joseph remarked in response to my radical health-care post (if I understood him rightly), is return to solid moral ground. Theodore Roosevelt would agree.
The only person I see on the radar who even remotely resembles T.R., whose spirit I think we can use right now, is none other than Barack Obama. Is this crazy, or what?
Hmm, 78 years. That takes us back to the 1930s if my math is correct. For most of that time--1930 thru 1970--The U.S. was able to control foreign markets just by being the 800 lb. gorilla. In the early 70s, OPEC started making noises, but the U.S. was still their largest customer and thereby still exercised some control on the markets. It's a different world out there today, boys and girls. No longer is the U.S. the only gorilla in the cage. China and India are both demanding more and more oil. The supply isn't increasing. According to some, it cannot increase. Higher demand + steady supply = higher prices. Regulation can only smooth the bumps in the ever climbing curve of the price of oil. Nothing Congress or the President can do can significantly lower the price of gas at the pump. Barack's plan to tax the "obscene" profits the oil companies are making will only increase the price of gasoline.
ReplyDeleteShort term, we can only live with it. Long term, we have to exploit our own oil, coal, wind, nuclear and solar energy resources and the best way to do that is to have the government get the heck out of the way.
Anon: I'm with you on rising demand as a reality. So let's at least smooth out the bumps caused by the speculators who can make the price of oil jump on their merest profit-making whim. The speculators don't have a thing to do with the actual demand in the market. That's the best reason for the government to regulate commodity trading: to weed out the BS and let the genuine forces of supply and demand run their proper course.
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