Given the timing, does it sound like the president’s alleging that speculators are culpable for rising oil prices is an election campaign strategy?
This is what some have quickly said, but a presidential proposal nonetheless aims to stiffen penalties for those found to be gaming the system at the peoples’ expense.
According to the White House, one of the reasons for unpredictable fuel price fluctuations “has nothing at all to do with production or even consumption.” Instead, it contends, there are those who are playing energy markets for their own financial gain.
“We can’t afford a situation where speculators artificially manipulate markets by buying up oil, creating the perception of a shortage, and driving prices higher — only to flip the oil for a quick profit,” Obama said in the Rose Garden yesterday. “We can’t afford a situation where some speculators can reap millions, while millions of American families get the short end of the stick. That’s not the way the market should work. And for anyone who thinks this cannot happen, just think back to how Enron traders manipulated the price of electricity to reap huge profits at everybody else’s expense.”
The President’s plan would do five things:
1) Increase funding to increase the number of surveillance and enforcement staff charged with oversight of the oil futures market;
2) Allow the Commodity Futures Trading Commission (CFTC) to upgrade the technology used to monitor the energy markets;
3) Increase the civil and criminal penalties for those convicted of manipulating the oil futures market;
4) Provide the CFTC with additional the authority to limit disruptions in the oil market; and
5) Expand access to CFTC data so that analysts can better understand trading trends in the oil markets.
In response, the Daily Ticker’s Henry Blodget said the president’s $52 million proposal – which would also increase the powers of the Commodity Futures Trading Commission – is “embarrassing,” because speculators have very little to do with the fluctuation in gas prices.
“It does not require a PhD in economics to see the main driver of gas prices and oil prices is supply and demand,” Blodget said. “Three billion new capitalists in India and China are sucking up the same finite oil supply. Speculators couldn’t care less whether the price goes up or down, they bet both ways. So this idea that all speculators do is drive gas prices up is a crock.”
Blodget said the problem is that people want the president to do something, so why not blame speculators?
“Congress loves to focus on speculators,” he said, “the same way they love to focus on shortsellers on the stock market. The real problem is that U.S. still does not have a long-term energy policy. Until we have that everything else is just buffing up the paint on the house while the wood is rotting.”
What do you think? Is the president just making waves, or are his contentions valid in whole or in part?