I just read a great muckraker-type article from SF Weekly, which details and uncovers the transgressions of oil speculators
On July 11, 2008, the price of oil rose to $147 per barrel, a record high. Gas stations engaged in hot pursuit as the price of a gallon rocketed past $4. All hell was about to break loose.
Why?
America's political leaders could only muster a simpleton's response. Demand had outstripped supply, they claimed. And it was all the fault of radical environmentalists. If they'd only let us drill for more riches offshore — or on protected lands in Alaska — we could all go back to cranking Toby Keith in our Chevy Tahoes.
http://www.sfweekly.com/...
But that response was mythological and false”
There was just one tiny problem: Absolutely none of it was true.
In four short years, the price of oil had risen nearly 400 percent. For this to be a natural occurrence, it would have required a sudden, massive increase in world oil consumption — coupled with equally massive shortages in production. None of which had happened.
And what about those damn, wicked and fascist environmentalists?! (That was sarcasm, cool off in the comments).
And those politicians who were bleating about environmentalists? What they conveniently forgot to mention was that millions of acres had already been approved for drilling in the U.S., but remained untouched. The demand just wasn't there.
It was all one big laugh for Wall Street
The boys on Wall Street must have had a hearty laugh over this. After all, they knew oil prices had ceased to have anything to do with supply and demand. Eight years earlier, they'd been granted the right to make huge, unregulated bets in the oil markets. Now they'd driven gasoline to the brink, just as they had with the mortgage industry.
The funniest part: All those finger-pointing politicians were their accomplices. This was an inside job.
So how did this all happen?
Big oil, big banks, and big speculators like the Kochs wanted to make monster bets in the futures markets. But they wanted to do it in secrecy — without any government regulation.
The futures markets are where the world trades its raw materials, from wheat to oil, coffee to cattle. They were designed not as toys for banks or speculators, but for merchants who actually use those products.
The catalyst for all of this was Gramm's amendment became known as the "Enron Loophole. Gramm’s amendment
That evening, Gramm inserted a 262-page amendment into the Commodities Futures Modernization Act. Leaked e-mails would later reveal that it had been written by lobbyists for Enron, Goldman Sachs, and the Koch brothers, Kansas billionaires who would later fund the Tea Party movement.
From Wikipedia:
It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. The legislation was signed into law by President Bill Clinton.
http://en.wikipedia.org/...
Life was good before the change. Returning to SF Weekly:
Prior to the change, speculators were generally kept to no more than 30 percent of any given market. Anything beyond that became dangerous. That's because they have no concern for the things they're buying or the people who use them. They're simply betting on price swings. The more volatile the market, the more money they make. Most sell well before they'll ever take delivery of, say, a load of sugar.
Yet Congress had set them free. Banks like JP Morgan and Lehman began to rally large, institutional investors to bet on oil. It took them just five years to pervert the market's very purpose. By 2005, they'd set off a buying frenzy that launched prices into the stratosphere.
Before the collapse of the economy in 2008, we were returned to the days of the old robber barons:
By the time the economy began to collapse in the summer of 2008, speculators had cornered a stunning 81 percent of the oil market. Some had even begun to hoard fuel, just as the robber barons had done a century before. Olav Refvik, a top trader at Morgan Stanley, became known as the "King of New York Harbor" because he was leasing so much storage space.
Yet the bankers' incompetence would once again prove dangerous to themselves and everyone else. They'd already sabotaged the housing market. Artificially high fuel prices were the second prong of their attack.
But then the economy collapsed! (I know shocker).:
When the economy collapsed, speculators found themselves with a small problem. No one could afford to buy gas. In just a few short months, the price plunged from $147 to $30 a barrel.
Despite all of this the speculators are going nowhere:
Yet the heirs to Phil Gramm have done their best to protect speculators, hosing the nation in the process. "Every time the economy starts to show signs of rising, the oil speculators jump in," says Joseph Kennedy II, a former congressman from Massachusetts. "They suck the life out of the economy."As analysts spoke of recovery in April 2011, the price of gasoline approached the $4 mark. The wicked swings had resumed. Last spring, it topped out once more at $3.96 a gallon.
But at least now banks and speculators are admitting their sins:
But this time it had become difficult to screech about environmentalists or supply and demand with a straight face. Even the banks were confessing their sins. An analyst for Goldman Sachs admitted that banks like his had added an artificial 40 percent to the price of a barrel. Everyone from the Federal Reserve to the CEO of ExxonMobil has conceded much the same.
And it was left to us Democrats to come to the rescue (however weak that rescue might be)
Democrats managed to pass the Dodd-Frank Act in 2010. One of its goals was to hand the oil market back to actual users and allow the feds to crack down on excess speculation. Kennedy believes this alone would have reduced the price of gas by $1 a gallon.
And this is just another reason why you should not vote for Romney:
In the meantime, it could all get a lot worse if Mitt Romney is elected. Even after the JP Morgan fiasco, he reiterated his plan to repeal Dodd-Frank, which also contains measures guarding against future bank bailouts.