Speculators, Oil and Democrats

The recent Senate Judiciary Committee hearing on oil prices, convened by the Democrats, was a charade. It is standard operating procedure for our pathetic elected representatives to parade oil executives in front of a camera and chastise them when oil prices increase.

It’s just theater without the cotton candy and Barnum & Bailey logo. But the political circus leaves the impression that Congress is doing something. If they were really searching for the culprit, they would resemble dogs chasing their tails.

Sam Bodman, the US Energy Secretary, recently stated that oil prices are driven by global demand and tight supplies. That’s true, but he omitted to mention the declining value of the dollar, the lack of refineries, the stalemate against off-shore drilling and shale oil development, international uncertainty and the depletion of easily accessible oil reserves as causes for the soaring prices.

And that is only part of the reason why energy costs are crippling American families.

Economic and market experts almost universally agree that oil speculation is responsible for about 50% of the recent price increases. Mr. Bodman, in his statements, all but dismissed the influence of financial speculators. Of course, this is outright balderdash.

The origin of this rampant speculation can be traced to the Commodity Futures Modernization Act passed in 2000, with the full backing of President Clinton. This legislation gave the Commodity Future Trading Commission (CFTC) oversight responsibility for retail foreign exchange trading.

In 2006, this independent agency (CFTC) granted the Atlanta based corporation, Intercontinental Exchange, the lead Internet energy exchange company, the right to route commodity trades through Great Britain. This procedural change placed the company under its jurisdiction.

CFTC, created in 1974 to monitor commodity trading, has since turned a blind eye to the “off-shore” transactions conducted on Intercontinental Exchange’s Internet facilities. This opened the door to speculators, including US companies and citizens, to trade oil futures through Intercontinental Exchange, rather than through the well regulated US stock exchange.

In effect, this independent agency removed the restraints on commodity trading. Congress should be screaming. But we only hear silence. In an election year it is natural for liberals to blame the oil companies for the market chaos rather than to admit a Democratic packed Congress has been asleep at the helm.

Billions of dollars, including pension funds, are being poured into hedge and commodity funds through this untamed portal. Sam Bodman would have us believe that this uncontrolled speculation and the insane price of energy are just a coincidence. Who or what is he protecting? Maybe it’s Enron, who lobbied for the change.

But those who have allowed this trading frenzy are cut from the same political cloth as those who oppose nuclear energy, off-shore drilling, new refineries and shale oil conversion. They are called Democrats.

There is a simple cure for the commodity trading fever: Prohibit any buyers incapable of taking delivery of the goods from purchasing them.

But the Democrats tipped their hand during the recent hearings. They are toying with the idea of nationalizing the oil companies. If they can get government control of energy, they can control every aspect of our lives. That’s the dream of socialists like Speaker Pelosi and Senator Obama.