Like a Fourth of July crescendo of fireworks, our gasoline prices are rising
higher and higher. While this is tough on consumers, we’re assured by a covey of tongue-clucking industry analysts that nothing can be
done about it, for it’s simply the law of supply and demand in action — so suck it up, and pay up.
But hold your BPExxonMobilShellChevron horses right there. Supply and demand?
The supply of crude oil has risen this year to its highest level in nearly two
decades, even while the demand for gasoline has dropped dramatically, having
fallen this month to a 10-year low. Let’s see — supply up, demand down. That’s a classic market formula for cheaper prices at the pump. Yet our prices have steadily moved up, rising by two-thirds
since the beginning of the year.
What’s going on here is not the “magic of the marketplace,” but some hocus-pocus by brand-name dealers. What might surprise you, though, is
that the wheeler-dealers now jacking up our pump prices don’t operate under the BPExxonMobilShellChevron brands — but the logos of Goldman Sachs, Morgan Stanley and other Wall Street traders
that have been placing vast, unregulated, secretive bets on the future price of
oil. They’re playing an electronic casino game in a global “dark market” of exotic derivatives and credit swaps.
If this sounds vaguely familiar to you, it’s because this is the same game that Wall Street played with subprime mortgages,
leading to the present crash of our economy. And, yes, these are the exact same
banksters that you and I are presently bailing out with tax dollars.
Yet, there they go again. By pooling money from sheltered hedge funds, sovereign
state funds, offshore accounts and other super-wealthy investors, speculators
like Goldman and Morgan have quietly been buying trillions of dollars worth of
oil derivatives — which essentially are bets that oil prices will rise to a certain level by a
certain date.
Unlike those investors who actually purchase contracts for future delivery of
oil, there is no limit on how much money these gamblers can put into the oil
market. Nor do they have to report to anyone how much they have bet, even
though their massive infusion of money is totally and artificially distorting
the real value of petroleum.
As CNBC television’s top energy correspondent, Sharon Epperson, reported last month, “It’s this money flow — rather than the fundamental supply-demand data — that’s driving oil prices higher.”
Why is this allowed? Because the Commodity Futures’ Modernization Act of 2000 included a provision that was quietly tucked into the
law by then-Sen. Phil Gramm, R-Texas, specifically prohibiting any regulation
of such commodity-based derivatives. Among the enthusiastic backers of this
legalized thievery were Robert Rubin, the Wall Streeter who was Bill Clinton’s treasury secretary, and his protege, Larry Summers, who is now Barack Obama’s chief economic advisor.
This bipartisan cabal created a speculative mechanism that’s presently sucking money out of your pocket with every gallon of gas you pump.
Meanwhile, every dollar that Goldman, Morgan and the rest use to inflate oil
prices is a dollar they are not investing in real economic activity that could
create middle-class jobs.
Of course, Wall Street culprits are trying to keep their involvement hush-hush.
When a McClatchy newspaper reporter approached Goldman Sachs about it, the
response was terse: “Goldman Sachs declines to comment for your story.”
As Woody Guthrie wrote in a song about outlaws: “Some’ll rob you with a six-gun/Some with a fountain pen.” It’s time to regulate Wall Street’s gas-pump thievery — and to put a few of the perpetrators in jail.
This article appears in Jul 2-8, 2009.
