Even discounting the environmental consequences of
continuing to burn
more than 20,000 barrels of petroleum
every day at steadily increasing rates, the world is
running out of the stuff at an accelerating pace, as worldwide
demand increases. Petroleum products are on an unshakable
trajectory to becoming ruinously expensive, and what McCain is
proposing is to speed up the transformation. Which is to say,
not only can he not offer voters a proper bribe, he can't even
offer them a harmless imaginary bribe. What he is offering is a
usurious mortgage suckers can freely sign up for.
On second thought, let's not discount the environmental
consequences of spending the indefinite future trying to hoard
every last drop of black goo instead of finding another means of
sustaining industry. Unlike, to pick an example at random,
terrorism, climate change really is an existential threat to
human civilisation. One can scarcely discern this from McCain's
supposedly trailblazingly green cap-and-trade scheme for carbon
emissions. On its own terms, McCain's meagre cap-and-trade
framework is about as likely to stop climate change as a
band-aid is to stop a bleeding artery. In the context of the
McCain energy policy, however, which actually encourages
contributions to global warming, the cap-and-trade programme is
incapable of achieving anything apart from being a minor drag on
the economy. Picture spreading poison on a band-aid before
trying to use it to stop a bleeding artery, and you get a fair
sense of the efficacy of the overall McCain
energy-and-environmental package.
You also get a sense of the level of respect the McCain
policy shop must have for the voters whom they hope to win over
with such rotten, cynical ideas. Imagine an energy policy aimed
at overturning the laws of economics by reducing gas prices,
that exacerbates our dependence on overseas petroleum,
guarantees at least four unnecessary years of further
unaffordable damage to the earth's atmosphere, actually
incentivises contributing to global warming and utterly vitiates
the small redeeming features of the McCain platform, ie the
cap-and-trade plan and McCain's opposition to wasteful
government spending. All of that, my fellow Americans, can be
ours for the small opportunity cost of trading away an
ultimately economically productive transition to alternative
energy sources, the rebuilding of our national infrastructure
and finally accepting the relatively negligible burdens today
that will be required to avert catastrophic climate change in
the not-distant future
High gas prices fuel speculation about speculation Gas in Minocqua sails to $4.19
A 2006
U.S. Senate report warned
lawmakers that unregulated
speculation in oil markets
would drive gas prices to
record levels. Two years
later, oil markets remain
unregulated, and, yes, oil
prices are at record levels.
The report by the Senate
Permanent Subcommittee on
Investigations told
legislators they needed, to
quote the report's title,
put a cop back on the beat.
They
didn't then, but with oil
rising to a record $143 per
barrel last week - compared
to $75 just two years ago -
a flurry of legislative
proposals, the latest by
Calif. Sen. Dianne
Feinstein, is seeking to
bring oil markets under the
same restrictions and
standards of accountability
that are imposed on other
commodity markets.
Such legislation may prove
critical given the regional
price variations that occur
in addition to overall oil
market increases. For
instance, on Tuesday gas was
$4.19 in Minocqua compared
to $4.05 in Wausau and $3.99
in Madison.
The role of supply and
demand, rather than
speculation, has long been
considered the prime reason
for rising oil prices - and
still is by many - but
speculation has gained
increased notice in recent
years.
As the 2006 Senate report
observed, "U.S. oil
inventories are at an
eight-year high, and OECD
oil inventories are at a
20-year high. Accordingly,
factors other than basic
supply and demand must be
examined."
Chief among those is
speculation, the report
stated.
"[O]ver the past few years,
large financial
institutions, hedge funds,
pension funds, and other
investment funds have been
pouring billions of dollars
into the energy commodities
markets - perhaps as much as
$60 billion in the regulated
U.S. oil futures market
alone - to try to take
advantage of price changes
or to hedge against them,"
the Senate report stated.
"Because much of this
additional investment has
come from financial
institutions and investment
funds that do not use the
commodity as part of their
business, it is defined as
'speculation' by the
Commodity Futures Trading
Commission (CFTC)."
According to the Senate
report, since 2004 some
speculators had made tens
and perhaps hundreds of
millions of dollars in
profits trading in energy
commodities.
The art of the deal
So just how does speculation
work?
Well, investors with large
sums of cash purchase, on
contract, barrels of oil at
a pre-determined price for a
future date, anticipating
that, with rising prices,
they will make a profit when
the oil is delivered. So,
for example, speculators may
purchase in 2008 a barrel of
oil at a certain price
because of a contract - and
leverage it later to a
petroleum user for a higher
price.
The trick is, these
speculators themselves drive
up the price because, by
entering the market, they
drive up demand.
"The large purchases of
crude oil futures contracts
by speculators have, in
effect, created an
additional demand for oil,
driving up the price of oil
to be delivered in the
future in the same manner
that additional demand for
the immediate delivery of a
physical barrel of oil
drives up the price on the
spot market," the Senate
report stated. "As far as
the market is concerned, the
demand for a barrel of oil
that results from the
purchase of a futures
contract by a speculator is
just as real as the demand
for a barrel that results
from the purchase of a
futures contract by a
refiner or other user of
petroleum."
Even in 2006, the report
stated, analysts estimated
that speculative purchases
of oil futures had added as
much as $20-$25 per barrel
to the 2006 price of crude
oil, thereby pushing up the
price of oil at the time
from $50 to approximately
$70 per barrel.
In addition to this direct
effect, the report stated,
speculation has a pernicious
domino effect: by purchasing
large numbers of futures
contracts, and thereby
pushing up futures prices to
even higher levels than
current prices, speculators
have provided a financial
incentive for oil companies
to buy even more oil and
place it in storage.
"A refiner will purchase
extra oil today, even if it
costs $70 per barrel, if the
futures price is even
higher," the report stated.
"As a result, over the past
two years crude oil
inventories have been
steadily growing, resulting
in U.S. crude oil
inventories that are now
higher than at any time in
the previous eight years."
Of course, it is the role of
the Commodity Futures
Trading Commission to
prevent just such market
manipulation by setting
reporting standards and
trading limits on such
contracts. With most
commodities, it does, but
the commission does not
regulate oil.
"Most significantly, there
has been an explosion of
trading of U.S. energy
commodities on exchanges
that are not regulated by
the CFTC," the report
stated. "Available data on
the nature and extent of
this speculation is limited,
so it is not possible for
anyone, including the CFTC,
to make a final
determination about the
current level of
speculation."
Needing to know
The flow of information
about speculative trading -
or any trading - in the oil
market is critical to
understanding why oil prices
are rising, and thus to
developing sound policies to
confront them, the report
states.
"If price increases are due
to supply and demand
imbalances, economic
policies can be developed to
encourage investments in new
energy sources and
conservation of existing
supplies," the report
stated. "If price increases
are due to geopolitical
factors in producer
countries, foreign policies
can be developed to mitigate
those factors. If price
increases are due to
hurricane damage,
investments to protect
producing and refining
facilities from natural
disasters may become a
priority."
But to the extent that
energy prices are the result
of market manipulation or
excessive speculation, only
a cop on the beat with both
oversight and enforcement
authority will be effective,
the report concluded.
Despite that finding, the
Congress has taken no
action, though this month
some lawmakers responded
with proposals to have the
CFTC regulate and monitor
oil markets.
At hearings earlier this
month, several energy
analysts told legislators
that oil could drop to as
low as $2 a gallon if
speculation were curbed. And
the drop, analysts told the
House Energy and Commerce
Committee, could come within
a month of passing
legislation to limit
speculation because fund
managers would liquidate
their holdings in futures
markets.
To be fair, others -
primarily futures traders
but also Treasury secretary
Henry Paulson and Energy
secretary Samuel Bodman -
say that supply and demand
is setting the price, not
speculation.
Advocates of this viewpoint
say that while production is
rising - Saudi Arabia's
production is at its highest
level in four years - oil
demand is rising faster.
According to Cambridge
Energy Research Associates,
world oil demand will
increase by 1.3 million
barrels per day this year,
with Asia and the Middle
East generating 800,000
barrels a day of that
amount.
New legislation
This past week, U.S. Sen.
Dianne Feinstein ( D-Calif.),
and U.S. Sen. Ted Stevens
(R-Alaska) introduced
legislation to curb
speculation.
Specifically, the bill would
limit the amount of oil that
large institutional
investors could trade,
requiring the CFTC to impose
the same position limits on
institutional investors in
oil that they are subject to
with other commodities.
Under current law, CFTC is
required to impose
speculation limits on the
size of energy trader
positions, but it exempts
institutional investors who
make deals through brokers.
The bill would also require
the CFTC to conduct a review
of trading practices in the
oil futures market within 30
days and bring Congress a
plan for preventing high
price increases in the
futures markets.
While this legislation is
considered, most lawmakers
and politicians continue to
focus on supply and demand
solutions to the problem. In
particular, Democrats want
money for renewable energy
sources and energy
efficiency, while
Republicans want to open up
more land for drilling
For instance, Rep. Dave Obey
(D-Wausau) has been touting
Congress's appropriation of
$500 million to help states
and local communities use
renewable energy, including
$30 million in grants to
automakers and parts
suppliers to upgrade
factories in order to
produce fuel efficient
vehicles.
Sen. Russ Feingold (D-Wis.)
supported an initiative to
suspend the filling of the
strategic petroleum reserve,
while 8th District of
Wisconsin congressional
candidate John Gard wants to
increase the domestic supply
of oil by allowing what he
calls environmentally safe
oil exploration in the
Arctic National Wildlife
Refuge (ANWR), increasing
access for oil exploration
in the Outer Continental
Shelf, allowing development
of shale oil sites, and
cutting red tape on
refineries.
His opponent, incumbent Rep.
Steve Kagen, has proposed a
Gas Price Relief for
Consumers Act that would
allow the United States to
sue foreign oil cartels for
anti-competitive price
discrimination, as well as
enable the Department of
Justice Antitrust Task Force
to aggressively investigate
both gas price gouging and
market manipulation.
Drilling
is not the issue.
A nation that destroys its soils destroys itself.
Forests are the lungs of our land,
purifying the air and giving fresh strength to our people."
- Franklin Roosevelt
As of yesterday, gas
prices are the highest
in U.S. history—we just
passed the 1981 record,
even adjusted for
inflation.1
Prices could reach $4.00
per gallon in parts of
the country, just in
time to crimp summer
vacation plans. As
consumers suffer, the
oil industry continues
to reap the
windfall—breaking profit
records on an almost
quarterly basis. It's
outrageous!
Enough is
enough. Hearings start
today on H.R. 1252, a
House bill that would
make gas price gouging a
federal crime,
punishable by 10 years
in prison. Speaker
Pelosi has said she'll
move the bill to a vote
this week—if
there's the two-thirds
majority required to
fast track the bill
through the process.2
Oil company lobbyists
are frantically trying
to stop the bill. Your
representative needs to
hear from you today.
Will you sign our
petition asking Congress
to pass the
price-gouging bill—and
then send it to your
friends?
"Gasoline price
gouging should be
made a federal crime
before the summer
price increases hurt
more American
families."
Rep Bart Stupak
(D-MI), sponsor of the
House bill said this of
his motivation to
introduce the
legislation:
"In April ... crude
oil was $7 a barrel
cheaper than last
year (but) gas
prices were almost
50 cents a gallon
higher. Clearly
there's more at play
than simply the
world crude oil
market."3
In April, more than
two-thirds of Americans
reported that their gas
bills were causing
financial crunches, with
a full third saying it
was having a "serious"
impact on their
families.4
That same month, the
top two US companies,
Exxon-Mobil and
Chevron-Texaco,
announced a combined $14
billion in first quarter
profits.5
It seems like even
the oil industry has
gone too far this time,
and it's time to balance
the scales. The Senate
passed a price-gouging
measure out of committee
last week, and the House
bill now has over 100
co-sponsors from both
sides of the aisle.
The oil industry is
nervous. They've sent
their lobbyists to the
Hill in full force to
stop—or at least
weaken—these bills, and
they're pulling out all
the stops. The American
Petroleum Institute, an
industry front group of
more than 400 oil and
gas companies, even
threatened that new laws
could increase gas
prices more.6
Enough is enough.
This summer, we can stop
Big Oil from profiting
at the expense of
American families.
Can you sign the
petition to ask your
representative to make
gasoline a price gouging
a federal crime now?
2. "Debate on [H.R.
1252], offered by Energy
and Commerce Oversight
and Investigations
Subcommittee Chairman
Bart Stupak, D-Mich.,
will kick off Tuesday
with a hearing in
Stupak's subcommittee.
It is possible that an
Energy and Commerce
markup will follow. But
Democratic leaders might
opt to bring the bill up
to the floor under
suspension of House
rules by Wednesday."
Excerpted from
National Journal's
Congress Daily,
Monday, May 21, 2007
Support our
member-driven
organization:
MoveOn.org Political
Action is entirely
funded by our 3.2
million members. We have
no corporate
contributors, no
foundation grants, no
money from unions. Our
tiny staff ensures that
small contributions go a
long way. If you'd like
to support our work, you
can give now at:
It's time to end the double-talk on oil. People from Wilmington
and Los Angeles aren't paying $3 a gallon for gas because of our
"addiction to oil." They are paying $3 a gallon because this
administration's national energy policy is written by the big oil
companies.
Since President Bush took office, the price of gas has doubled -
increased 100 percent.
High gas prices that make us queasy at the pump have been very
good for the major oil companies. They are flush. Prices went up
during Katrina. Six months later we learned that these oil companies
made record breaking profits -- $111 billion in 2005.
Last year Exxon Mobil reported the highest annual profits -- $36
billion -- of any corporation in US history. Those are profits
approaching twice the return earned by the average American
corporation.
The CEO of Exxon Mobile received a $400 million retirement
package. His paycheck went through the roof, while the rest of us
were left watching dollars tick up at the gas pump.
It is time for President Bush and Vice President Cheney to get
tough with their big oil friends.
Last year, they gave them $2.6 billion dollars in oil and gas tax
breaks in the energy bill. Guess what? It turns out they don't need
them.
I know - because I asked them.
The CEOs of the six largest oil and gas companies came in to
testify before the Senate Judiciary Committee last month.
So I asked them, under oath: Do you need these tax breaks? And
they said: No. Each one agreed. No. They don't need them.
So I have a simple, common sense proposal. Let's repeal them.
Let's do it immediately. Let's not give them billions in tax breaks
that they clearly don't need. It is a waste of taxpayers' money.
This is a nonpartisan, no-brainer decision. We have the word of
the oil companies themselves - they don't need them.
Instead of giving them a break they don't need, we should invest
in bringing more flex-fuel vehicles to market and adding alternative
fuel pumps at gas stations so that people who drive them have a
convenient place to fill up. And, this week, Senate Democrats are
introducing a bill that would do those things and much more to put
us on a path to becoming an energy independent nation.
Signing on to my bill to repeal tax breaks for oil and gas
companies is the first step in taking back control of our national
energy policy. Let's show the oil and gas companies that the days of
handouts from the Bush administration are over.
Activism
Issues
