Gas prices continue to rise, which is finally giving Republicans an issue. Mitt Romney is demanding the President open up more domestic drilling; the super PAC behind Rick Santorum just released a new ad in Louisiana blasting the President on gas prices; and the GOP is attacking the White House on the Keystone XL Pipeline.
But the rise in gas prices has almost nothing to do with energy policy. It has everything to do with America's continuing failure to adequately regulate Wall Street. But don't hold your breath waiting for Republicans to tell the truth.
As I've noted before, oil supplies aren't being squeezed. Over 80 percent of America's energy needs are now being satisfied by domestic supplies. In fact, we're starting to become an energy exporter. Demand for oil isn't rising in any event. Demand is down in the U.S. compared to last year at this time, and global demand is still moderate given the economic slowdowns in Europe and China.
But Wall Street is betting on higher oil prices in the future -- and that betting is causing prices to rise. The Street is laying odds that unrest in Syria will spill over into other countries or that tensions with Iran will affect the Persian Gulf, and that global demand will pick up as American consumers bounce back to life.
These bets are pushing up oil prices because Wall Street firms and other big financial players now dominate oil trading.
Financial speculators historically accounted for about 30 percent of oil contracts, producers and end users for about 70 percent. But today speculators account for 64 percent of all contracts.
Bart Chilton, a commissioner at the Commodity Futures Trading Commission -- the federal agency that regulates trading in oil futures, among other commodities -- warns that too few financial players control too much of the oil market. This allows them to push oil prices higher and higher -- not only on the basis of their expectations about the future but also expectations about how high other speculators will drive the price.
In other words, a relatively few players with very deep pockets are placing huge bets on oil -- and you're paying.
Chilton estimates that drivers of small cars like Honda Civics are paying an extra $7.30 every time they fill up -- and that money is going into the pockets of Wall Street speculators. Drivers of larger vehicles like the Ford Explorer are paying speculators $10.41 when they fill up.
Funny, but I don't hear Republicans rail against Wall Street speculators. Could this have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?
Wall Street isn't bankrolling Democrats nearly as much this time around because the Street is still smarting from the Dodd-Frank Wall Street reform law pushed by the Democrats, and from the president's offhand remark in 2010 calling the denizens of the Street "fat cats."
The Commodity Futures Trading Commission is trying to limit how much speculators can bet in oil futures -- a power it was given by Dodd-Frank. It issued a rule in October, but it won't take effect for another year.
Meanwhile, Wall Street has gone to court to stop the rule. It's already won a stay.
As rising gas prices start wagging the election-year dog, the President should let America know what's really causing prices to rise.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
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Inflation is the fault of the fed, not Obama.
Gas prices are the fault of world gas prices and inflation, not Obama.
Regulate Wall Street?
What?
Wall Street is just a place where thing as sold. A market place. Do you blame high food prices on the government's failure to regulate grocery stores?
Drop an A bomb of regulation on Wall Street, and things will be bought and sold in London.
Speculators simply make markets react faster for a tiny fee.
We should be grateful for oil speculators collectively calculating the most likely future.
They take nothing in the long run, just something during price transitions.
Obama is likely to loose in 2012 because he owes political lip service to the environmental religion.
And yes it IS a religion, right now every bit as obnoxious as Christianity was in the middle ages.
80% of people take some form of government aid at some level
80% consider Obama to be evil and a socialist
80% vote straight-ticket GOP
80% have never seen the insides of a college or university
80% of the time I see people in the community I appreciate having tons of land and free space and not seeing any of them.
I have been saying that Keystone XL (KXL) will be the primary issue used to try and prevent an Obama re-election. So far, the president has taken the huge political risk to keep this monstrosity at bay. Even if we detest every other single thing he does, we need to have his back if we are at all concerned about the harm that KXL can do.
It's sinister to see how people like Bush and Krauthamer can repeat the mantra "no brainer" about approving KXL. Watch for how often the GOPers use this term. Even more chilling is the dead silence from "liberal" pundits when they hear this from their conservative colleagues. It's lonely out there, and we need people to speak up on this number one issue of the election.
Not that the right wing wants real issues discussed. It's been a weakness in there platform for many years and they now only know more lying and more cheating.
But here is the real deal about oil cost --The foreign oil we are buying is costing $2.78 per gal to the government that supplies it ,then you add shipping cost to the US ,then you add refining costs then transportation costs to the station , The oil company nets approx 8 to 10 per gal , so how much is left for the speculators after all those costs are figured in?? I'm not trying to justify speculation, I'm just tired of always passing the blame
When actually at $4 per gal for foreign oil 70% goes to the producing country.
If you could supply a link I may better understand your post thank you
And this is not a game, with gas prices the way they are the only loser is the American gas buying public
You're making it all about oil companies, because that is the way you are being programed.
Oil copany profits a disbursed among millions of stockholders into private porfolios and 401Ks.
Green Energy companies just go bust and taxpayer money is lost ..
Start the de=programing, you're smarter then that!!!
Politicians are the only people in the world who create problems and then campaign against them.
Have you ever wondered, if both the Democrats and the Republicans are against deficits, WHY do we have deficits?
Have you ever wondered, if all the politicians are against inflation and high taxes, WHY do we have inflation and high taxes?
You and I don't propose a federal budget. The President does.
You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.
You and I don't write the tax code, Congress does.
You and I don't set fiscal policy, Congress does.
You and I don't control monetary policy, the Federal Reserve Bank does.
One hundred senators, 435 congressmen, one President, and nine Supreme Court justices equates to 545 human beings out of the 300 million that are directly, legally, morally, and individually responsible for the domestic problems that plague this country.
He also addressed a related issue: how will he reduce the cost of gasoline? By slapping another $4 billion in taxes onto oil companies’, he says. Now $4 billion is actually a tiny burden on the big oil companies and will never be noticed, though it will hurt the small independents but, insignificant or not, since taxes on businesses are invariably passed on to consumers, how does Obama figure those taxes will cut the cost at the pump? The community organizer’s knowledge of economics is as pathetically ignorant as his grasp of the oil industry.
Right - which is why oil production in the U.S. is up 12% from 9 years ago. Get a clue!
Obama's administration is issuing new drilling permits at roughly half the rate of the previous administrations. Extrapolate that forward. This is what oil futures markets are doing. They say production is going to go down.
It is you who needs a clue.
Please tell us -just when does this President become responsible for conditions? What year?
The GS Banksters have 26T$ from the FED in money to borrow, and they are using it to buy tankers full of oil just to jack the price up.
Don't believe it?
The finance industry used to be 5% of our economy in 1980,
now it's over 45%.
Wake up.
The banksters own you.
Iran has the rocket propelled torpedoes that can sink aircraft carriers.,
Thanks for this info. I have been blaming President Obama and AG Holder for not enforcing it; I thought it was in full effect now.