What factors are causing the zooming price of crude
oil, gasoline and heating products? What is going to be done about it?
Don't rely on the White House - with Bush and Cheney
marinated in oil - or the Congress - which has hearings that grill oil executives
who know that nothing is going to happen on Capitol Hill either.
Last week the price of crude oil reached about US$130 a
barrel after spiking to $140 briefly. The immediate cause? Guesses by oil man T. Boone Pickens and Goldman Sachs that the price could go
to $150 and $200 a barrel respectivly in the near future. They were referring
to what can be called the hoopla pricing party on the New York Mercantile
Meanwhile, consumers, workers and small businesses are
suffering with the price of gasoline at $4 a gallon and diesel at $4.50 a
gallon. Suffering but not protesting, except for a few demonstrations by
A consumer and small business revolt could be
politically powerful. But what would they revolt to achieve? Their government
is paralyzed and is unable to indicate any action if oil goes up to $200 or
$400 a barrel. Washington, D.C. is leaving people defenseless and drawing no
marker for when it will take action.
Oil was at $50 a barrel in January 2007, then $75 a
barrel in August 2007. Now at $130 or so a barrel, it is clear that oil pricing
is speculative activity, having very little to do with physical supply and
demand. An essential product - petroleum - is set by speculators operating on
rumor, greed, and fear of wild predictions.
Over the time since early 2007, U.S. demand for petroleum
has fallen by 1 per cent and world demand has risen by 1.3 per cent. Supplies of
crude are so plentiful, according to the Wall Street Journal, "traders of
physical crude oil say their market is suffering from too much supply, not too
Iran, for instance, is storing 25 million barrels of
heavy, sour crude oil because, in the words of Hossein Kazempour Ardebili,
Iran's oil governor, "there are simply no buyers because the market has
more than enough oil."
Mike Wittner, head of oil research at Societe Generale
in London, agrees. "There're various signals out
there saying for right now, the markets are well supplied with crude."
Historically, oil has been afflicted with the control
of monopolists. From the late 19th-century days of John D. Rockefeller,
and his Standard Oil monopoly, to the emergence of the "Seven
Sisters" oligopoly, made up of Standard Oil, Shell, BP, Texaco, Mobil,
Gulf and Socal, to the rise of OPEC representing the major producing countries,
the "free market" price of oil has been a mirage. Despite the breakup
of the Standard Oil company by the government's
trustbusters about 100 years ago, selling cartels and buying oligopolies kept
"Energy markets have been dictated for too long by hedge funds and speculators, who artificially manipulate the numbers for their own benefit. The current market isn't based on the sound principles of supply and demand but it is being rigged by companies and speculators who are jacking up prices for their own greed."
- Deborah Fineman, president of Mitchell Supreme Fuel Co. in Orange, New Jersey.
an ironic twist, the major price determinant has
moved from OPEC (having only 40 per cent of the world production) and the oil companies
to the speculators in the commodities markets. What goes on in the essentially
unregulated New York Mercantile Exchange (NYMEX) - without Commodity Futures
Trading Commission (CFTC) enforced margin requirements, and, unlike your
personal purchases, untaxed - is now the place that leads to your skyrocketing
gasoline bills. OPEC and the Big Oil companies reap the benefits and say that
it's not their doing, but that of the speculators. Gives new meaning to
"passing the buck."
Deborah Fineman, president of Mitchell Supreme Fuel
Co. in Orange, New Jersey, summed up the scene: "Energy markets have been
dictated for too long by hedge funds and speculators, who artificially
manipulate the numbers for their own benefit. The current market isn't based on
the sound principles of supply and demand but it is being rigged by companies
and speculators who are jacking up prices for their own greed."
Harry C. Johnson, former banker who worked for many
years inside Big Oil and ran his own small oil company in Oklahoma, blames the
CFTC, the Department of Energy, the Administration, and Congress, as
"asleep at the switch on an issue that is probably costing U.S. consumers
$1 billion per day."
He cites "some industry experts, who profit
greatly from the high price of crude, and have stated openly that the worldwide
economic price of crude, absent speculators, would be around $50 to $60 per
Imagine, our government is letting your price for
gasoline and home heating oil be determined by a gambling casino on Wall Street
called NYMEX. The people need regulatory protection from speculators and an excess profits tax on Big Oil.
In addition, a sane government would see the present
price crises as an opportunity to expand our passenger and freight railroad
capacity and technology.
A sane government would drop all subsidies and tax
loopholes for Big Oil's huge profits and other fossil fuels and promote a
national mission to solarize our economy to achieve major savings from energy
conservation technology, retrofitting buildings, and upgrading efficiency
standards for motor vehicles, home appliances, industrial engines and electric
Those are the permanent ways to achieve energy
independence, reduce our trade deficit, create good jobs that can't be exported
and protect the environmental health of people and nature.
Those are the reforms and advances that a muscular
consumer, worker and small business revolt can focus on in the coming weeks.
What say you, America?
Click here: For feedback and comments.
Note: Ralph Nader is running for president as an independent. The above article was posted on counterpunch.org.