04-5-2010 by dugan
Flash back to two years ago. Oil prices were nearing $120 a barrel and jamming up the price of food, gasoline, travel, almost everything we buy. In April 2008, energy analysts marveled, and worried, that the price of oil had doubled in only three years. Within a few months, oil prices would peak at nearly $150 a barrel, tipping the world economy into free fall. Today, the price of oil is back over $86 a barrel, and has more than doubled in barely over one year. It’s time to worry whether an economic recovery that has barely begun will be crippled at the gas pump. Again. So soon. For no reason.
Even more evidently than in 2008, there is no market reason for the price of oil to be pushing $90 a barrel, and for gasoline to be over $3.00 a gallon in many states. California is a good example. Gasoline consumption has fallen every year since 2005, and there is no indication that it will do more than level out in the next few years. As a San Francisco Chronicle story points out, new-car purchases are smaller and more fuel-efficient, and $3.00 a gallon is the point at which drivers appear to cut back on driving.
Nationally, gasoline supplies on hand keep growing even as refiners cut production. World oil supplies are ample.
Just as in 2007 and 2008, the price of oil is in the hands of financial speculators who behave as if supply and demand don’t matter. Yet federal regulators and Congress, under pressure from these same financial companies–from Goldman Sachs to the corner hedge fund–can’t bring themselves to enact the regulations that would curb purely speculative gambling with the world’s energy supplies.
No wonder a tiny action by the chairman of the House Finance Committee to spurn the lobbyists made such news recently. Rep. Barney Frank’s angry tirade against a former Finance Committee aide who went over to the financial lobby won’t bring down oil or gasoline prices. But it at least acknowledges what is going on betweent the financial industry and Congress. The Frank aide was only the latest of several to quit for the big bucks of the finance industry, including one who went striaght from the committee to Goldman Sachs.
Consumer groups and businesses crippled by high energy prices–from struggling airlines to farmers to heating oil dealers–are trying to to make their voices heard in Congress. I’s an uphill battle against a swarm of billionaires. But at least this time there are stronger voices telling it like it is: Speculators won’t hesitate to kill the economy for their own gain.