Oil Watchdog

1-05-10 by dugan

Supplies of oil and fuel in the U.S. are up, and so is the price of oil–it has surged to $82 dollar a barrel, pushing gasoline over $3.00 a gallon in California. Wait, isn’t price supposed to go down as supplies rise? This kind of speculator-driven disconnection of energy prices from supply and demand trashed the economy in 2008, and regulators need to act before the usual spring spike in gasoline prices. The regulatory sheriffs might make the deadline, according to a Bloomberg report:

The U.S. Commodities Futures Trading Commission, criticized for its
alleged failure to curb 2008’s historic runup in oil prices, will soon
propose caps on how much any single investor can hold in a set of
commodity futures, says an official.

In an e-mail answering questions from Bloomberg BusinessWeek,
Bart Chilton, one of the CFTC’s five commissioners, says the commission
will soon propose a rule aimed at preventing any one entity from
"controlling too much of a given market." The proposal, which has been
anticipated for months, would be subject to a public comment period
before implementation, according to CFTC procedures. That means it
could take effect as soon as April. "I don’t want commodity markets to
become a private jungle gym for speculators," Chilton says.

But what’s taking regulators so long in the first place? In part it’s a ceaseless lobbying blitz by the same investment banks that drove the price frenzy in 2008.  White-glove banks including Goldman Sachs are are even buying oil rigs so they can pretend to be in the oil business–and thus evade new controls on purely financial speculation in energy markets.

Chilton is one of the good guys at the CFTC, and he’s surely sincere about acting by April. He’s fully aware that if the oil market climbs over the $100-a-barrel mark, it will be a banana peel under the feet of economic recovery. Almost as damaging as the price spike itself is the fear of another unpredictable roller-coaster of energy prices, which makes it impossible to attract steady funding for greener, cleaner forms of energy. And if jobless or half-employed Americans see $4.00 a gallon gasoline coming their way again, they’ll look at that "private jungle gym for speculators" and blame the regulators who dithered away their opportunity to stop it.