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President Obama Bests Bush and Cheney in Coddling Oil Markets

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President Obama has accomplished in his first year what President Bush and Vice President Cheney, whose support of all things oil, with policies forever favorable to ratcheting up the price, failed to accomplish until their fifth year at the helm: Doubling oil's price!

At the time of George W. Bush's inauguration in January 2001 the quoted price of oil according to U.S. Energy Information Administration hovered around $24 a barrel. It was not until March 2005 that the traded price of oil had doubled to reach $48/bbl.

In January /February 2009 the price of oil dipped to the mid thirties a barrel and now, barely a year later, it is touching and exceeding $80/barrel. A doubling of price in one year's time.

Yes, President Obama is well focused on climate change and alternative energy, but in the meanwhile the oil boys continue to take the rest of the country and the world to the cleaners. Given the current construct of the wet oil market (that is the real wet barrels that are delivered and consumed) as opposed to the paper barrel market (that is the 'virtual' barrels of oil traded on the commodity exchanges), the price of oil should be $30/bbl or less (please see "The Billion Dollar Day Extortion: A Somnolent Administration and Dysfunctional Congress' Gift To The American People") as the world is awash in oil to the point that super tankers are being used to store crude at sea. The oil market has lost all bearings to supply and demand.

The cost of this differential to the United States and world consumers is enormous. Recognizing we are dealing with a world market in oil, the United States, by far the world's largest consumer, sets the tone of the marketplace. What happens here in oil impacts everyone else around the globe.

It's true that the President has his hands full, especially given the political capital being expended on health care reform. But multitasking is part of his job description, and the price of oil now risks debilitating the economy. It also means there's worse to come, as it is giving the oil producers and their allies in industry and the halls of Congress and a somnolent media the ability to permeate a zombie like blind acceptance by the public, government, the world of finance and industry, that the $80 price for a barrel of oil is the new norm. Should that now be permitted to take hold, $100/bbl oil and $4.00/gallon plus gasoline will not be far behind.

As these posts have pointed out, there is much the President could do to change the psychology of the market and put downward pressure on prices. Among these include immediately stopping purchases for the Strategic Petroleum Reserve and to begin a program of releasing oil from the SPR thereby playing havoc on the oil speculators' one-way bets. Resubmitting a NOPEC bill (removing the sovereign immunity granted to the national oil companies of OPEC members) that had wide Congressional support under Bush but was killed by Bush's threat to veto. Reconfiguring and sharpening the vigilance of our feeble oversight of the commodity exchanges and over-the -counter trading of oil and oil product futures by such currently hapless commissions as the Commodity Futures Trading Commission. Calling for reciprocal transparency over oil futures trading on American and all off shore trading exchanges, i.e. London, Singapore, Dubai, Hong Kong, etc. Subjecting importation of oil to the American market to import licenses based on country of origin, thereby alerting all offshore suppliers that access to the U.S. market is not automatic and can no longer be taken for granted.

Yet not a single step has been taken by this administration that would have an immediate impact on the way the price of oil is currently being played. By a lack of forceful engagement the administration is conveying carte blanche to the oil speculators and manipulators, extending to the oil trading desks of the bank holding companies such as JP Morgan, Morgan Stanley, Goldman Sachs (Citigroup has graciously withdrawn from the field) not only an unencumbered field to speculate, on a proprietary basis, on ever higher oil prices, but through federal programs and implied guarantees, permitting them to aim for the bleachers.

Certainly, surprisingly and sadly, President Bush and Vice President Cheney must be delighted to have found such a kindred spirit on this issue in the White House.