Yesterday Fox Business hosted me for a short debate on whether a variety of federal subsidies for electric cars and batteries costing $7.5 billion over a decade were a good investment. My response that it’s pretty cheap considering the nearly $300 billion America spends to import foriegn oil. We need to diversify our transportation fuel, and electric cars must play a role.
Archive for the ‘gas prices’ Category
You might think that the declining price of gasoline means that we don’t have to pay attention to all that talk about speculation driving up the price of oil. Right? Wrong.
Even though the price of gas has fallen, you’re still lining the pockets of Wall Street every time you gas up. As Memorial Day approaches and summer driving season kicks off, remember that speculators will clean up even as the price of oil drops.
It’s a rigged game, with rules that make you give your hard-earned money to financiers no matter what. It’s like the bully on the playground who established the ground rules for a coin toss game as “heads I win, tails you lose.” Under those rules, the bully always wins.
In this case, the bully is Wall Street. With oil markets, loose rules allow speculators, not end users, to dominate the volume of trading, increasing price volatility and making more money the more the price changes – whether that price is going up or down.
Goldman Sachs has admitted that speculation adds as much as $23.39 per barrel to the price of crude. That translates to 56 cents per gallon.
So, we pay more. They get richer. And it has little to do with actual supply and demand.
You would think that since speculators can legally game the system, they wouldn’t
need to resort to fraud or illegal manipulation. But last year, federal regulators charged five speculators with manipulating the price of oil in the early months of 2008 and making a $50 million profit from the scheme.
One way to solve this is for the Department of Justice to investigate fraud and manipulation in the oil markets. President Barack Obama has directed the agencies responsible for overseeing oil markets to root out anti-competitive and collusive behavior by the Big Banks that could be contributing to higher prices for families.
So far, it hasn’t produced any public findings. The government should get on the stick and report back to the American people.
As for legal manipulation, efforts are being made to curb it, but they aren’t enough. For instance, the Commodity Futures Trading Commission last year issued new rules pursuant to Dodd-Frank designed to curb excessive speculation in energy commodity markets, but they do not go far enough to protect consumers. And Wall Street is challenging even these inadequate rules.
Solutions include establishing a legal limit on the amount of oil contracts that any single trader can hold at once (legislation that would do this has been introduced), restricting communication between petroleum energy infrastructure affiliates and trading affiliates, improving trading market data disclosure by publishing trader-specific positions, requiring companies to detail energy trading activities in their financial reporting and imposing financial disincentives to speculate. Some of these solutions are contained in legislation introduced by U.S. Sen. Bernie Sanders (I-Vt.) called the End Excessive Oil Speculation Now Act.
Long-term, we need to wean ourselves off gas. We can do this by aggressively investing in electrification of the transportation sector and mass transit.
Until then, it’s more pain at the pump while executives cash in.
Statement of Tyson Slocum, Director of Public Citizen’s Energy Program