by John M. Curtis
(310) 204-8700

Copyright June 22, 2008
ll Rights Reserved.

oping to get control of spiraling oil prices, Saudi King Abdullah confirmed he would up oil production from 9 million barrels a day to 9.7. President George W. Bush has been pushing the oil-rich desert kingdom to increase production hoping to deflate the ever-rising price of crude oil. U.S. Energy Secretary Samuel Bodman, participating in a summit in Saudi Arabia, rejected the theory the oil speculators were responsible for the dramatic price run-up. Bodman and other administration officials—including those voices inside the oil industry—blame rising prices on growing global demand, especially in India and China. Yet China and India only account for a fraction of the demand factoring into the equation. Bodman would like to forget completely the so-called “Enron loophole,” permitting energy traders to transact oil futures outside the Commodities Future Trading Commission.

      When California suffered its power shock in 2000-2001—in which the state experienced rolling blackouts and spiraling electricity prices—the White House blamed the problem in insufficient supply. Bush and Vice President Dick Cheney hastily blamed the state for not building enough power plants. When the dust settled and the state was billions in the hole, it became clear the state was fleeced by Enron and other out-of-state power suppliers. Bodman now blows more smoke, blaming oil's spectacular rise on pent-up demand and dwindling supplies. Trying to serve up a healthy dose of reality, Democratic presumptive nominee Sen. Barack Obama (D-Il.) blamed the problem on unregulated energy traders. Without federal regulations governing oil futures, traders have gone hog-wild bidding prices into the stratosphere and reaping obscene profits for biig investment funds.

      No one from the White House, or the GOP for that matter, admits that oil futures' trading markets are out-of-control. “My plan fully closes the Enron loophole and restores commonsense regulation as part of my broader plan to ease the burden of struggling families today, while investing in a better future,” said Barack in a campaign statement, rejecting White House spin that rising oil prices were simply related to supply-and-demand. Even the ever-transparent Iranian President Mahmoud Ahmadinejad admitted oil prices were out of whack. “At a time when the growth of consumption is lower than the growth of production and the market is full of oil, prices are rising and this trend is fake and imposed,” said Ahmadinejad June 17, blaming the rise on speculators and the falling U.S. dollar. Iran is the world's fourth biggest crude oil exporter yet can't supply enough diesel and gasoline to its people.

      Since taking office in 2001, the Bush White House has given a green light to the oil industry to fleece the country. Only oil companies have broken all profit records over the last eight years. Only the oil sector can boast about record profits, plunging the economy into dangerous slowdown. Escalating crude oil prices have been the perfect storm for the oil industry to sock it to virtually all other industries, decimating the transportation sector, driving many bus, train and airline companies toward Chapter 11. White House officials still spew the same talking points blaming the current run-up in crude oil on limited supply. No one knows what happened in May 2001 when Cheney convened his energy task force, meeting with executives from Exxon Mobil, British Petroleum and other multinational companies. Less than two years later, Cruise missiles reined down on Baghdad.

      New Jersey Democratic Gov. John Corzine, a former chairman of Wall Street's Goldman Sachs, said oil volatility “is absolutely indicative of speculation in the market,” trying to confront the White House spin machine perpetuating the myth that only supply-and-demand affects prices. Saudi Arabia's proposed 700,000-barrel increase won't make much oif a dent unless Congress closes the so-called Enron loophole. Even King Abdullah acknowledges that oil speculators drove the market to record highs. “Any increase in production in today's oil market is welcome,” said White House Deputy Press Secretary Tony Fratto. “It is important that we also take steps to increase domestic production and our refining capacity,” urging Congress to approve offshore oil drilling and tapping into Alaska. Fratto makes no mention of how oil futures' traders have driven prices through the roof.

      When Ahmadinejad blames rising oil prices on speculators and a depressed U.S. dollar it's tough to ignore. He, along with other members of OPEC, opposes increasing production, precisely because he sees output and supply outpacing consumption and demand. Only the White House with their close ties to big oil wishes to perpetuate the myth that rising oil prices are due to added demand. Saudis' attempt to ramp up production won't bring prices down unless Congress finally reins-in currently unregulated oil futures' traders. As Obama correctly points out, changing the current miniscule margin requirement—the huge percentage of oil investments financed on credit—would dramatically reduce speculation. Forcing traders of follow the CFTC's strict guidelines, rather than permitting unregulated overseas trading, would also dampen today's wild speculation.

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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