One of the principle reasons for the current high gas prices is the rampant speculation of high-end, unregulated, money people whose rampant greed is fueled by the Republican's willingness to look the other way and do nothing to get in the way of profiteering. The willingness of OPEC countries to increase oil production will not result in lower prices at the pump until oil company loopholes are closed and the industry is forced to pay a windfall profits tax to discourage price gouging.
Oil industry executives recognize this fact and openly admit it. John Hofmeister, Shell Oil Company president says, "The proper range of crude oil is somewhere between $35 and $65 a barrel." J. Stephen Simon, Exxon-Mobil executive vice president, said in testimony to the House of Representatives, "The price of oil should be $50 to $55 per barrel based on supply and demand fundamentals." Gerry Ramm, an Inland Oil Company senior executive, said during Senate testimony, "Excessive speculation on energy trading facilities is the fuel that is driving this runaway train in crude oil prices."
John McCain, obviously, does not see a problem. Former Senator Phil Gramm, McCain campaign co-chair and lobbyist to mega-money clients, is the one who slipped into law the so called "Enron Loophole" in late 2000 at the urging of Enron lobbyists. The law exempts some energy traders from the regulations that apply to exchange-traded commodities.
Subsequently, the Commodity Futures Trading Commission (CFTC) is unable to fully oversee the oil futures market and investigate cases where excessive speculation may be driving up oil prices. CFTC oversight of oil market speculation is also limited by rules that allow energy traders to engage in unregulated transactions through foreign subsidiaries of U.S. exchanges.
Currently, about 30 percent of U.S. oil futures trades fly below the radar because they are transacted on a U.S. exchange that works through a subsidiary in London. Similar arrangements are being pursued by U.S. exchanges in partnership with Dubai as well.
Barack Obama has announced his plan to crack down on excessive energy speculation and fully close the "Enron Loophole" to ease the impact of skyrocketing gas prices. In his statement Obama explained, "For the past years, our energy policy in this country has been simply to let the special interests have their way - opening up loopholes for the oil companies and speculators so that they could reap record profits while the rest of us pay $4 a gallon. My plan fully closes the Enron Loophole and restores common sense regulation as part of my broader plan to ease the burden for struggling families today while investing in a better future."
Obama's plan would limit the price impacts of excessive speculation by preventing traders of U.S. crude oil from routing their transactions through off-shore markets in order to evade speculation limits and also impose reporting requirements. His plan proposes working through the International Organization of Securities Commissioners (IOSCO) and other international organizations to harmonize regulations across countries. This effort will help to ensure that as the U.S. strengthens oversight and transparency in U.S. exchanges, these efforts are not undermined by overseas trading that is subjected to lax regulations.
Additionally, Obama supports imposing a windfall profits penalty on oil selling at or over $80 per barrel. Revenue from the proposal will be invested in a number of mechanisms to reduce the burden of rising prices such as expanding resources for the federal Weatherization Assistance Program, increasing federal support for state and local level efforts to relieve the burden of rising energy prices on low and moderate income families, and helping permanently expand the Low Income Home Energy Assistance Program which helps families pay their heating and cooling bills.
In 2007 Obama supported legislation that gave the Federal Trade Commission (FTC) new authority to investigate and pursue price manipulation in oil markets. Even in the face of record oil prices and growing concerns about excessive speculation, however, the Republicans have failed to utilize these new powers.
Since the American people cannot afford to wait months or even weeks for the federal government to investigate market manipulation, Obama has called on the FTC to expedite its investigation. He is also calling on the Department of Justice to open an investigation into energy traders as well.