Gambling on Oil Prices

Today the Wall Street Journal reports a campaign has begun to challenge oil speculators in the financial industry:

Strapped by rising fuel prices, the airline industry, gasoline retailers and an array of transportation interests are enlisting thousands of travelers to pressure Congress to reign in oil markets speculation -- a campaign that has triggered a lobbying war with the financial-services industry.

The article continues that, "The airline industry email to frequent flyers urges them to learn more on a campaign website, www.stopoilspeculationnow.com." In part, the e-mail says:

"Twenty years ago, 21% of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66%" of all oil futures contracts, the frequent flyer letter reads. "Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs."

The Bush administration, and Phil Gramm (photo with McCain above), are responsible, in part, due to their deregulation ideology, which promotes rampant speculation. See the July/Aug 2008 Issue of Mother Jones Magazine, on the Enron loophole: Forclosure Phil.

The financial industry counters the airline industry claims, saying, according to the Journal, that "speculation is less responsible for spiraling oil prices than is turmoil in supplier countries and the weakness of the dollar on world markets." If you believe the financial industry, we can also blame the Bush administration for the first factor, turmoil in supplier countries. Bush is also to blame for the second factor, a weak dollar, which is due in part to the US debt created by Bush.

Bottom Line: Bush administration policies have fed the increase in oil prices and gas prices at the pump. Call this a failure? No! Bush represents a small elite minority, not the vast unwashed masses. Unfortunately, the latter failed to figure this out soon enough, many voting for Bush, and against their own interests, in 2004 when the writing was on the wall.

Hopefully they won't make the same mistake in November 2008 by voting for John McCain, for whom Foreclosure Phil Gramm is a key economic adviser.

Sources:

Wall Street Journal, Airline Oil Lobbying Alarms Financial Firms, Elizabeth Williams, July 12, 2008.

Photo Credit: Mother Jones Magazine, Foreclosure Phil, July/August 2008 Issue.