SURPRISE! SPECULATORS ARE BLAMED FOR OIL’S RISE
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AH! Now everyone suddenly is in agreement that speculators – and not market forces – have been responsible all along for the explosion in the price of commodities like oil and gasoline.
The price of a barrel of oil dropped nearly 10 percent in recent weeks and other commodities declined significantly as well when, in the middle of the Bear Stearns crisis, speculators were forced to unload whatever investments they could in an attempt to raise capital.
Their biggest recent profits were in oil, so – out the door those investments went.
Financial newscasts – which usually cooperate shamefully with the speculators – suddenly changed their tune with questions like: “Is the commodity bubble over?” And, “Have the speculators been licked?”
The answer: Not yet – even though oil dropped another $1.28 a barrel yesterday to $100.56.
(You can bet that the fast money crowd on Wall Street will try to run crude up again on some wobbly pretense or another.)
Also helping to keep commodity speculation alive is this: as long as the Federal Reserve is making interest rates cheaper, bailing out private companies, debasing the value of the dollar and – overall – stoking inflation fears, some people will be more comfortable in assets they can touch and smell.
This is a speculator’s dream.
But make no mistake about it, speculators – not Americans who drive too much, or Chinese who are beginning to drive or some stray storm in the Gulf of Mexico that causes a refinery shutdown – have been responsible for squeezing the family budget these past few years.
What amazes me most is that Americans aren’t irate about this.
Go ahead, punch a wall!
Or at least slam down a toilet seat! Even better, kick your elected official in the rear and tell him/her to do something about it.
I’ve been on this tirade for nearly two years now.
Back in May, 2006 oil was $66 a barrel and gasoline was already more than $3 a gallon.
The media was playing along, blaming hurricanes, South American and African countries and any other cock-and-bull notion conjured up by Wall Street.
The trouble was, it wasn’t any of those things.
The same folks who brought us the subprime crisis were also jazzing the price of oil – all those real and imaged problems around the world were just excuses for getting their way.
In this column on May 23, 2006, I did an interview with Red Cavaney, president of the American Petroleum Institute – the industry group that represents the oil giants – and he blamed speculators trading so-called paper barrels of oil for the rise in prices.
I know this was a self-serving statement on Cavaney’s part – deflecting blame as it did away from the ExxonMobils of the world that are still reaping unimaginably obscene profits at everyone else’s expense.
But the fact is, Cavaney was right.
There was plenty of oil in the world then and there is plenty now.
And there will be an even more adequate supply of oil if the US economy goes into a recession and people have to put their cars up on blocks.
Since the May 2006 interview, even OPEC members have publicly argued that there is plenty of oil in the world and that the trouble is with speculators driving the price higher.
Again, OPEC wants to blame someone else.
But it just so happens that the Middle East oil producers are also right – as much as we’d like to, they can’t be blamed for high oil prices this time around.
So it’s amusing that last week, right smack in the middle of the banking system crisis, Vice President Dick Cheney went to Saudi Arabia to ask King Abdullah for more oil.
Cheney should have saved the long flight, booked the shuttle from Washington to New York and banged a few speculators’ heads.
Here’s the funny part about all of this – the oil companies either can’t make full price hikes stick, or they are too embarrassed by their good fortune to ask for more a gallon.
Back in mid-2006, the price of gasoline was about where it is now even though crude oil prices were then more than $34 lower.
That extra $34 a barrel in the price of a barrel of oil – not to mention much of the price before that – was being caused by speculators.
Gasoline makers wanted no part of that or they’d have a gallon of gas averaging more than $4 by now. Imagine if the people we vote into office had awakened two years ago and had actually done something about the unnecessary and unwarranted rise in fuel prices.
Yep, imagine what people would have done these past two years with the extra money that ultimately went to oil companies because the insatiable bloodsuckers on Wall Street had decided to take our corpuscles by the barrel instead of merely the pint.
Maybe, just maybe, a few million people wouldn’t have had to use mortgage money to fill their gasoline tanks.
Perhaps we wouldn’t have had so many subprime loans on a slab right now.
Maybe there’d be no financial crisis in this country at all.