Gas prices approaching $4 dollars per gallon in California. So not only are we paying more to the oil companies and the speculators, refineries will be taking more of our hide as well. Of course, California is already brushing the $4.00 mark and could hit $5.00. Big oil companies and greedy speculators. The speculative market may have driven crude oil prices up, but that's not the price oil companies pay for the crude oil that goes into our gasoline. America's big oil companies use crude oil that they have harvested from the ground or bought much cheaper through long term contracts to refine into gasoline. You'll see the results in next quarter's profit statements: big profits from both crude oil sales and refineries that make gasoline, what's called "upstream' and "downstream" operations in profit reports.
Rather than compete with each other to provide more cheaper gasoline, oil companies cheat together to withhold needed gasoline supply from the market. Consistently, the companies artificially pull back refinery production of gasoline in order to reduce supply coming in during periods of peak demand so they can increase prices. It’s legal so long as there is no smoky back room where they talk about it, but they don’t need to since industry data about supply flows freely on corporate computer screens. This behavior has been documented by government agencies like the Federal Trade Commission.
Fear and greed, expertly manipulated by billionaire speculators in oil markets, are much more to blame. Here are five ways to curb the speculators and oil companies. Nothing easy, like a gas station boycott. But more effective if the public voice can cut through the financial and oil lobbies. Obama campaigned against oil company greed on the campaign trail but now he seems to have lost his voice on the subject.
Policy actions
1. President Obama, stop the speculators. The president is the boss of the should-be regulators at the Commodity Futures Trading Commission (CFTC), who are supposed to be setting rules that would slow down the purely financial speculation that is driving energy prices. Surely Obama knows that ordinary Americans can’t stand much more of unaffordable gasoline, heating oil and food. Yet it’s U.S. workers who are paying for energy speculators’ yachts and vacation homes. President Obama should be cracking heads at the CFTC, replacing some members if necessary to get the votes for regulation that is written but not approved by the CFTC.
We want the CFTC to make energy trades public, not secret, and establish strong “position limits,” in commodity markets, which would stop huge trades that drive the market up in a single day. We also want speculators–including oil companies–to put up at least 50% of the cost before they place a futures market bet, just like stock purchasers already do. Today, commodity speculators only put up cents on the dollar before they gamble. Just try that in Vegas. Making all these things happen could drop the price of oil by up to half.
Want to take personal action? Call the White House (202-456-1111). Someone at the other end does listen to and log the White House messages.
2. Release oil from the U.S. strategic reserve. This is another one that’s up to President Obama. Admittedly, there’s a 38-billion-gallon surplus of privately owned oil in storage tanks in Oklahoma pipeline country alone. But releasing oil from the public’s reserve would be a signal that Obama serious about pulling back oil prices that threaten economic recovery. The U.S. Treasury would also benefit from selling high.
Caution: This only works if he also gets serious about curbing speculation. All the more reason to call the White House yourself.
3. Get one single regulation past the CFTC. The Commodity Futures Trading Commission has done little but drag its feet on regulating financial markets, but it is finally taking comments on proposed position limits that would help curb speculators. But there are only two certain votes for it on the five-member committee. Even CFTCchairman Gary Gensler, an Obama appointee, hasn’t declared himself in favor. Big financial companies like Goldman Sachs, which profit from huge amounts of trading, hate it. They are flooding the CFTC with lobbyists and comments predicting disaster. OilWatchdog’s friends at the Commodity Markets Oversight Coalition
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