In the past few years no commodity has played such havoc on our lives than has oil, and little has more directly touched the political and economic sinews of our era than the pernicious impact of the price of oil. It has penetrated everything from our governance, our foreign relations, our well being and most importantly our sense of personal destiny and our communal sense of the future.
And yet, it is the one issue that has received little insightful analysis by our media other than a repetition of the oil patch mantra that prices are a reflection of the free interface of market forces.
Just the other day a panel discussion whereby Fox News' Neil Cavuto discussed Exxon's staggering quarterly earnings with Sen. Byron L. Dorgan of North Dakota, ranking Member of the Subcommittee on Interior, a vocal proponent of a windfall profits tax on oil companies (perhaps Senator Dorgan's crusade would have more traction were he to call it a "War Profiteering Tax", given that oil company earnings have escalated in almost direct tandem to the length of the war in Iraq).
The assembled panel talked about the usual shibboleths handed out to us by press and oil patch flacks; shortages, political instability, government policy, rising demand in China and India, and on. The focus came down to supply side problems, but never querying anything other than the accepted presumption that free market forces were setting the price of oil and oil products. That in turn oil patch profits, i.e. Exxon's profits, were a mere reflection of market conditions. That oil is a world commodity and its price is set accordingly, reflecting market supply and demand. Even Dorgan's main complaint was that profits aren't being used adequately to increase supply through new exploration and drilling (Exxon expects to use profits to increase dividends and buy back stock, and of course to hoard additional cash). Any hint alluding to the price of oil being a stacked deck through OPEC collusion and Big Oil's happy acquiescence, or mention of a doctored futures market wasn't touched on and would have been steamrolled by the assembled panel.
My contention has been, as set forth in these postings, that there is no "free market" in oil. And yet there seems to a total unwillingness in the press to even examine this possibility. It has permitted the administration to hide behind the oil patch's fig leaf rallying cry "it's not us, it's market forces", or "the price reflects the market place, and there is little we can do" as a convenient excuse to do nothing.(see "As Prices Go Through The Roof, Some Tough Questions For President Bush" 4.27.06)
In the meantime the enormous transfer of wealth continues to the oil companies, and to state oil producers who are using their new found wealth to act with impunity on the world stage, undermining in turn our interests, and if allowed to be successful, our future.
I am not alone in my perceptions. Let me cite some examples some of which I have touched on before. In September of 2005 no less a personage than Gordon Brown, Britain's Chancellor of the Exchequer publicly accused the Organization of Petroleum Exporting Countries of deliberately holding back oil production from the market thereby artificially causing a doubling of prices in two years time (from circa $30/bbl to over $60/bbl back then), please see "As Oil Prices Rise the Media Slumbered Away- Psst, Don't Wake Up the New York Times or Wall Street Journal" 4.25.06. - Neither the New York Times nor the Wall Street Journal picked up on Gordon Brown's brave and prescient declaration (prices would only get worse), nor did any of the national press.
In the summer of 2005 Senators Mike DeWine (R. Ohio) and Herb Kohl (D. Wisconsin) introduced a bill which passed a Senate vote giving the Justice Department and the Federal Trade Commission specific power to override the sovereign immunity exemption extended to OPEC members (see "The Price of Oil, OPEC and Our Laws", 3.10.06) The bill would have permitted the Justice Department and the FTC to process legal action through our courts of law against OPEC members for colluding to set oil prices (action permitted and often successful against other cartel adherent or like organizations that happen not to be government entities). The bill died in joint committee with the House. There was total lack of press follow up nor interest.
Even Alan Greenspan has now joined the Alfred E. Neuman, "Who Me Worry" Club jetting around the country giving lectures on the blandishments of speculative oil futures trading (see "Gasoline Over $3.00 Gallon, Why? BP Knows. Plus Alan Greenspan Sings In the Energy Choir" 7.12.06) without a hint that manipulated price distortions might be in play. And because he comes to the issue as Alan Greenspan (especially given his long history as an oil man??), nary a commentary in the press questioning that perhaps, just perhaps, he's wrong.
Recently Senators Coleman and Levin, ranking members of the of the Senate Permanent Subcommittee on Investigations agreed to investigate the manipulation of commodities, especially oil trading in the futures markets, with the prospect of enacting legislation that would close major loopholes in federal oversight of oil and gas trades (see "The Enron Loophole Helps OPEC Serve Up a Hefty Helping of Oil-Price Baloney" 7.20.06). The press has been totally absent in focusing our attention on this important initiative
In my experience with such as CNBC, CNN, Fox News, Bloomberg (viz. Bloomberg's very recent pandering headline, "Bush Silence on Oil Prices Reflects Lack of Influence on Market" reporting that a government run by a president devoted to free market principles doesn't have much influence over energy prices) has been fairly consistent. If the issue of the "manipulation of oil markets" is touched upon, however gingerly, that is either the end of the interview or we wont call again.
Not that my comments are especially insightful, but there is a consistent insistence that this issue begin to be looked at closely. The circling of the wagons mentality by the media is sadly misguided. It is not a question of market orientation or mercantile philosophy that is at stake, but rather the essential key is to assure the true functioning of a primordially important market in a way that our future is not endangered.