6-22-09
Nothing changed in the real world today–economy still shrinking, gasoline consumption near 10-year lows. But speculators who doubled the price of crude oil and sent prices at the pump shooting up got some kind of extraterrestrial message today. The price of crude oil dropped about $2.50 a barrel, to around $67, and gasoline started inching downward a few pennies. Sigh of relief? Not yet.
Energy markets won’t be stable until the speculators who repealed the laws of supply and demand are under control. There are plenty of proposals circulating in Washington, but nothing on the books yet. Legislation and new regulation are stagnating while financial companies look for ways to neuter or kill them.
This week a diverse reform group, the Commodity Markets Oversight Coalition (OilWatchdog is a member), will urge the House Agriculture Committee (which also and unaccountably controls petroleum trading) to get a move on and pass the Derivatives Markets Transparency and Accountability Act of 2009 (H.R. 977).
To steal a paragraph from our letter to the committee chairman, Pete Peterson:
This legislation would make several very positive changes to commodities oversight laws, including requiring the clearing of all standardized futures contracts including those traded over-the-counter, greatly strengthening traders’ and exchanges’ record keeping and reporting requirements, and closing many of the loopholes that undermine the price discovery functions of the futures markets. As you know, the CMOC believes that, with the addition of a provision in your bill that would require the Commodity Futures Trading Commission (CFTC) to impose aggregate speculative position limits on traders across all markets, your legislation is exactly what is needed to address the glaring shortcomings in our nation’s commodity futures regulation framework.
To put that in plainer English, the bill would get rid of totally unregulated trading in some markets, and force some attention to actual supply and demand. If the amendment we asked for gets added in, traders and financial companies that don’t sell or buy actual oil would have limits put on the size of their speculative trades. It’s less than the energy markets need, but at least puts some fence around the cowboys.
$3.00 gasoline today is almost as unwarranted as $4.50 gasoline was last year, and it’s a warning that energy markets are still seriously askew. After all, the Consumer Price Index is down 1.3% this year, the biggest drop in 59 years. Cars cost less, washing machines cost less, even handymen come cheaper. The only place where the economic rules don’t apply is at the gas pump. And we’re paying to line the pockets of Exxon, Chevron and friends, not to develop new sources of energy.
If gasoline were just a regular product, it would cost under $2.00 a gallon at the pump. At that point, a gas tax for renewable energy wouldn’t be so painful, would it?