I would like to respond to Mr. Nash's letter regarding Congress' ability to lower consumer gas prices. This topic has been concerning me since the 3rd of June, when I watched the hearings on the manipulation of energy markets available for viewing on CSPAN. I, like most others, had believed that the combination of peak oil and the windfall profits being made by oil companies is causing the sharp rise in gas, diesel and oil prices, affecting everything from transportation to food production. After watching the hearing, which featured testimony by energy market experts, I understand that it is the unregulated futures market which is driving up the price of oil.
At an earlier hearing, an executive from Exxon Mobil testified under oath that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals. In October 2007 the CEO of Marathon Oil, Clarence Cazalot Jr. said, "$100 oil isn't justified by the physical demand in the market". "It has to be speculation on the futures market that is fueling this." Enron played this game with the electricity market in California and an oil company named Amaranth played it with natural gas.
Goldman Sachs and other investment firms are playing this game now. When Goldman Sachs' energy strategist Argun Murti predicted that oil would rise to more than $200 per barrel before the end of the year, he was not demonstrating his talent for clairvoyance. As much as 60% of today's crude oil price is pure speculation driven by large trader banks like Goldman Sachs, and hedge funds. Companies are bidding up the price of oil to create profits. At the hearing on the 3rd of June, Michael Greenberger, Former Director of the Commodity Futures Trading Commission (CFTC) testified that legislation passed in 2000 created an atmosphere of unrestrained trading where speculators influence oil and crude prices. In the middle of the night, right before leaving for Christmas break, Senator Phil Graham introduced the "Enron Loophole" legislation designed to allow unregulated speculation of oil markets. During a separate interview on CSPAN, Mr. Greenberger goes so far as to say that it is the traders from Enron actually working in the futures market doing these trades. There must be limits to what they are allowed to do. If the Justice Department were to begin an investigation tomorrow, Mr. Greenberger says prices would drop immediately.
Geopolitical factors are no worse now than they were a year ago and demand has changed little. Crude oil inventories are actually up. No matter how much supply enters this market, speculators have created an environment where we can drill and drill, OPEC can release oil, and prices will still go up. That is why OPEC refuses to increase supply to us. The OPEC secretary-general Abdalla Salem El-Badri blames speculators for the rise in oil prices which have "stripped his cartel of control over the global cost of fuel" (International Herald Tribune, May 22, 2008). Call your representatives and tell them you want to have the CFTC regulate the energy market.
Anyone interested in learning more about this should go to CSPAN.org and watch any of the videos featuring Mr. Greenberger. Call your representatives and tell them you want to have the CFTC regulate the energy market.
Cimbria Badenhausen
Chocorua, NH
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