In a letter sent to Republican congressional leadership on Tuesday, 48 Senate Democrats criticized the large Republican cuts to the Commodity Futures Trading Commission and clean energy investment in a time when oil market speculation is at record levels. Brad Johnson has the story.
The House continuing resolution for the 2011 fiscal year (H.R. 1) “will condemn our country to continued reliance on foreign oil and allow market manipulation that could lead to gas prices rising unchecked,” they said:
As you know, H.R. 1 would reduce funding for the Commodity Futures Trading Commission (CFTC) by one-third. The CFTC serves as an important “cop on the beat,” working to protect American consumers by cracking down on manipulation and other market abuses that can drive up oil prices. Yet your spending plan would shrink the CFTC budget back to 2008 levels, when Americans were blindsided by both record high gas prices and a financial crisis that cost us millions of jobs. According to CFTC Chairman Gary Gensler, these cuts would cause “significant curtailment of staff and resources.” At a time where gas prices are rising and squeezing American families, we have a responsibility to provide our watchdogs the resources they need to fulfill their important oversight and regulatory responsibilities.
Watch commodities experts explain how the Republicans’ plan could leave excessive speculation unchecked:
“We find it equally troubling that your preferred budget would cut billions of dollars in investments in critical programs focused on developing new alternative fuels and clean energy technologies, undermining our competitiveness and increasing our trade deficit with oil producing nations,” the Democrats wrote.
As economist James Hamilton explained in 2008 in “Understanding Crude Oil Prices,” speculators will take advantage of situations when consumers don’t have ways of switching off oil (“demand elasticity”), dramatically increasing price spikes (“price volatility“). The Republican agenda at the federal and state level is designed to keep Americans hostage to oil “” killing off high-speed rail, public transit, electric cars, smart growth, biofuels “” while preventing regulation of the profiteers and vulture capitalists benefitting from political instability in oil-producing nations.
The only Democratic senators that did not sign the letter were Sen. Kirsten Gillibrand (D-NY), Sen. Ben Nelson (D-NE), Sen. Mary Landrieu (D-LA), Sen. Joe Manchin (D-WV), and Sen. Jim Webb (D-VA).
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I’m all for high fossil fuel prices. We don’t pay the true cost (including externalities) and a price floor would help spur clean tech investment. But this is NOT creating a price floor. When will the GOP learn that deregulation does not work!? Do they need their irresponsible behavior to cause a global financial crisis before they get it… oh, wait…
Republican Congressional policy only makes sense if you realize that they are following direct orders from fossil fuel company lobbyists and banks. This is no exaggeration, since lobbyists were shown to have written legislation verbatim during the Bush Administration, and apparently continue to do so.
This is really, really scary, and the Republicans must be held accountable for it before the American public.
Yes.
As Matt Taibbi documented in his series of articles in Rolling Stone, an average barrel of oil during the previous price bubble during the Bush administration was traded an average of 27 times – jacking up the price each time- before being refined.
Matt Taibbi- The Great American Bubble Machine
I also think that similar speculation has been done to jack up food prices, and deliberately exaggerate the impact of biofuel crops on food prices. It’s part of a unified Wall Street strategy to destabilize the climate, and simultaneously profit from it, I think.
In a later article, Matt Taibbi asks why Wall Street is not in jail. It’s an appropriate question to ask when examining the greatest series of thefts of all time, I think.
I’d like for someone to explain very slowly and clearly exactly how “speculation” is the primary cause for oil price rises. I mean, more people are using oil now, and production, at least of traditional crude, has not increased since 2005. Basic supply and demand dictates that the price goes up.
I’m all for regulation of the commodities markets, don’t get me wrong, but is sadly typical of Democrats to seize on the “speculation” angle rather than the more fundamental “limited oil” angle. Focus on the latter leads to better policy.
Finally the GOP are pushing an aggressive carbon tax on oil!
Nothing like a good gas price spike to clear the minds of distracted Americans about the threat of oil.
I’d rather everyday Americans got to use the carbon tax proceeds to cut other taxes and to shore up something like healthcare. But if GOP insist that we send the carbon tax to speculators, multi-nationals and tyrant regimes…well that is up to them at this point.
@4 with the doves:
Read the article carefully, and I think you’ll take away the message that the role of speculation is to create and/or exaggerate price spikes. Since speculators buy and sell, they do not drive long-term trends in oil prices. Leland Palmer’s (@3) recommendation is an excellent one if you want to read more about the role of commodity speculation in general – Taibbi’s book, Griftopia, is also an excellent source for understanding the wider range of Wall Street theft to which we are now exposed almost without any protection whatsoever.