In Search of Petrovillains
The Delegator-in-Chief has announced the creation of yet another inert task force, this one forced upon the attorney general and tasked with examining the role of "traders and speculators" in skyrocketing gasoline prices. Technically this "working group," as the administration is calling it, is a sub-task force of the extant Financial Fraud Enforcement Task Force, and will include representatives from the FTC, CFTC, FRB, SEC, USDA, etc. Presumably, when the group finishes its work at some indefinite point in the future, its findings will be carefully reviewed by a commission, which will then issue a handsomely bound report to a czar, who will finally inter it in a filing cabinet.
If the task force were merely impotent, it would be silly enough. But it is also redundant. The Federal Trade Commission already covers this turf, having been equipped by several federal laws with the power to monitor and investigate instances of market manipulation at the pump. Its major work product, a congressionally mandated 2006 report on post-Katrina price spikes, failed to find a significant pattern of gouging. Moreover, the Dodd-Frank Wall Street-reform bill passed last July vested the Commodities Futures Trading Commission with sweeping new authority to combat speculation, requiring the commission to write new regulations within six months of passage -- a deadline that body has, by the bye, blown by three months and counting. So it seems safe to conclude that gas prices are not rising because the organizational charts of our regulatory bureaucracies are insufficiently complex.
Nor are the putative "speculators" -- "investors" is the right word -- themselves half the problem they are made out to be. In fact, they play a critical role in the marketplace. Among other things, they help companies with serious financial exposure to fluctuating oil prices (such as airlines and trucking companies) hedge against rising fuel costs. Unlike the U.S. government, FedEx can't just print money when its expenses go up. The futures market provides businesses -- and governments -- with critical intelligence about the state of supply and demand for petroleum. An intelligent administration, or one at least less hostile toward profit-making businesses, would be looking for a more robust market, with more market participants, rather than hunting for villains.
What is causing high gasoline prices? Increased demand associated with the global economic recovery and (greater than average) Mideast instability certainly play their part, as does the continued control of a major portion of proven petroleum reserves by OPEC, a paradigmatic cartel whose very raison dÍtre is market manipulation. But the operant cause here, the main event to which this speculator business is a sideshow, is the man himself: President Obama, and his say-one-thing-and-do-another energy policies. He demagogues on oil speculators because he can't -- he won't -- do anything else.
Explain away an economic calamity as the byproduct not of bad policies, but of evildoers gaming the system, and find a group rich and unpopular enough to fit the bill; the rhetoric comes from page one of the Obama playbook and recapitulates the sorry formula we saw at work in his deficit speech. (Thus the president sneaks into a weekly YouTube address on the topic of fuel prices a perfect non sequitur about government subsidies to rich oil companies. There are many good reasons to end this bit of corporatism, but it is exactly wrong to suggest it will redound to the benefit of consumers at the pump in the near term.)
Behind the doublespeak, the reality is that President Obama's favored policies do nothing to ease fuel prices, and more damning still, he doesn't care. In 2008, when the national average was last peaking above $4 per gallon, candidate Obama made it clear that while he would have preferred a "gradual" increase, he saw ever-higher petroleum prices as a necessary antecedent and augur of our immaculate, green-energy future. And even now, as oil in the Gulf of Mexico sits and waits for new permits and the EPA scuttles the latest effort to tap the estimated 27 billion barrels of crude sitting below Alaska's north Arctic coast, the president assures us that "what's driving oil prices up right now is not the lack of supply. There's enough supply." We agree, there is enough supply to meet current demand: at $4 dollars a gallon, and beyond.