by John M. Curtis
(310) 204-8700

Copyright March 13, 2005
All Rights Reserved.

ump prices have gone through the roof, jumping 15-cents a gallon during the first two weeks of March. Energy analysts see more pain ahead with China's exploding demand for fossil fuel sending jitters through world energy markets. Like any commodity, oil prices vacillate according the laws of “supply-and-demand.” While quantifiable, supply-and-demand is more psychological than real, leaving consumers the short end of the stick. “Right away, nationwide, we're going to see an increase of gas prices of 12 cents, said Peter Beutel, president of energy tracking firm Cameron Hanover, predicting almost to the penny the current run-up in wholesale gasoline prices. While Beutel isn't psychic, he's an energy insider, monitoring carefully Wall Street's trading on oil contracts. When he sees frenzied buying—regardless of supply-and-demand—he knows prices are on the way up.

      Consumers have no control over energy traders, or eventual gyrations at the pump. Insiders like Beutel can predict energy pump prices not because they control worldwide demand or refinery output but precisely because they control the price of energy contracts. “We'll see it almost everywhere by Tuesday [March 8]. In addition, some time between St. Patrick's Day [March 17] and the end of the month, I expect to see and additional 12 cents. This is extraordinarily bad news for consumers,” said Beutel, watching wholesale gasoline prices exceed $1.50 per gallon. No one at the Department of Energy or the Federal Energy Regulatory Commission has said boo about crude oil traders bidding prices into the stratosphere. In today's anti-regulation atmosphere, consumers don't have a prayer. Before the economy tanks, crude-oil traders must be reined in.

      When California's electricity prices went through the roof in 2001, President George W. Bush and Vice President Dick Cheney blamed the problem on too few power plants. In reality, power plants gamed the market withholding electricity, allowing traders to bid prices into outer space. In today's oil markets, the same practices drive pump prices wild. Wall Street readily points to China's exploding demand, supplying the excuse for inflated prices. An increase of only one cent at the pump costs consumers $38-million a day. Trader's have no regard for consumers or whether hiking prices could torpedo the nation's economic recovery. Without some type of federal controls, Wall Street sets pump prices, not the Organization of Petroleum Exporting Countries, publicly traded oil companies, refineries or global petroleum demand. China has little to do with today's pump prices.

      It's no accident the world's Titanic oil companies, including British Petroleum, Royal Dutch/Shell and Exxon-Mobil, to name a few, have reaped unprecedented profits from their stranglehold on refineries who set pump prices. Exxon-Mobil's profits were up 51% to $5.1-billion in the first quarter of '05. According to the Energy Department's Energy Information Administration the average price of regular unleaded hovers at $2.00 a gallon and could jump to $2.17 by the end of March. “This one isn't speculative. The wheels are in motion. It just takes a while for it to deluge into retail,” said Tom Kloza, senior analyst for Oil Price Information Service, predicting spectacular pump-prices heading into the peak-demand summer driving season. Unless Congress turns up the heat, the White House has no intention of reining in Wall Street's crude-oil and gasoline traders currently running amok.

      OPEC has agreed to boost production beyond current limits to help ease price of crude oil. “Petronoia is in full flower. Retail gasoline has some 25 to 28 cents a gallon in increases ahead to catch up to what has happened with wholesale (gas prices) since Christmas week,” said Kloza, coining his own term for petroleum traders' irrational buying binge, driving wholesale oil prices out of sight. Traders' panic or greed shouldn't threaten the economy or hold consumers' hostage. Without some federal controls, the endless spike in oil prices can't be contained. According to the latest government midweek report, the U.S. crude oil stockpile is up 8.6% and the gasoline supply is up 10.1% from last year. Despite swelling inventories, Wall Street's current panic over the falling dollar and buying frenzy has pushed crude oil and gasoline prices to almost unprecedented levels.

      Panic and greed on Wall Street can't threaten the economy and hold energy consumers over a barrel. Regulating petroleum and gasoline trading is long overdue. If U.S. petroleum and gasoline reserves no longer affect pump prices, then something must be done to rein in greedy crude-oil traders. With rising U.S. and global inventories, it's irrational to blame the developing world for causing price spikes. Wall Street must stop making excuses and restrain its current buying binge, fueled more by greed than domestic or global supply. Congress must take a closer look at how publicly traded oil companies routinely take refineries off line for “routine maintenance” in order to boost pump prices. If the U.S. dollar shows too much weakness, global oil markets should consider trading on a more stable currency. One thing's for sure: Pump prices must be brought back under control.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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