Human Events Blog

The War on Oil Speculation begins

Time for President Obama’s latest excuse for high gas prices!  In a Rose Garden speech on Tuesday, your new designated hatred target became oil speculators, who are somehow doing more to increase the price of oil than Obama blocking pipelines, killing the offshore drilling industry, and reducing the production of oil from federal lands by 17,000 barrels a day.

Of course, the President began with his withered deception about the amount of domestic oil resources available to us.  He even admitted that he tells this lie repeatedly: “As I’ve said repeatedly, the problem is we use more than 20% of the world’s oil and we only have 2% of the world’s proven oil reserves.” 

These “proven reserves” are, as every school child should know by now, less than 2 percent of the resources available for exploration.  The “proven reserves” are just the oil fields we are currently drilling.  We have a real problem in this country when Obama can keep dropping this nonsense on us without getting laughed off the stage. 

Amusingly, Obama touted his “payroll tax cut” (in truth, a raid on Social Security funding) and claimed rising oil prices are one of the reasons it was passed.  Thank Heavens Obama had the foresight to ensure “the average American is getting that extra $40 in every paycheck right now,” before he blasted the price of gas into the stratosphere!  We are, incidentally, well past the point where that forty bucks you’re pulling out of Social Security every paycheck offsets the increased cost of Obama’s gas, and the rising pressure from inflation on food and other essentials.  Are we supposed to keep short-changing Social Security forever, or will this little subsidy disappear on schedule when “Taxmageddon” hits next year?  It sure doesn’t sound like a future that’s “built to last.”

The President who blocks American oil exploration with every ounce of his strength – including the same kind of exploration he uses our taxpayer money to fund in Brazil – told us how dependency on foreign oil is jacking up prices at the pump.  Strangely, he did not remind us that increasing the price of gas has long been one of his explicit policy goals.  Instead, he acted like this was a bad thing.  It’s wonderful to have a leader whose heartfelt principles completely evaporate in the face of a few bad polls.

Obama even went as far as mentioning “issues of supply and demand,” which is hilarious for two reasons.  First, Obama’s crony capitalism is entirely premised on the notion that government power can repeal the laws of supply and demand.  There’s no demand for the “green energy” garbage he blew a hundred billion dollars of your money on – that’s why he plowed fantastic amounts of money into increasing supply, and even attempting to artificially create demand, through subsidies.  It didn’t work, but Obama has sworn to keep trying, for as long as he holds his office.

Second, according to Obama economic dogma, oil is the one commodity in the universe that is completely immune to the laws of supply and demand.  Increasing American supply, as he said once again during this very same speech, will not reduce the price we pay for oil in the slightest.  Conversely, Obama’s reduction of supply supposedly hasn’t increased the price at all.  It’s actually sort of impressive he had the nerve to mention the basic laws of economics, which he understands about as well as the role of the Supreme Court, or the oil industry.

Well, never mind all that supply and demand stuff, because Obama zeroed in on the real, previously obscure villains in our gas pump drama: oil speculators.  Unlike Obama’s “green energy” speculation, which siphoned fabulous sums of money away from your children and produced nothing but bankruptcy, this speculation is pure evil, even though it doesn’t involve compulsive force.  (You may have noticed that you were not consulted before Obama gave your kids’ money to his top contributors at Solyndra.)

War was declared on “an irresponsible few aren’t able to hurt consumers by illegally manipulating or rigging the energy markets for their own gain,” because “we can’t afford a situation where speculators artificially manipulate markets by buying up oil, creating the perception of a shortage, and driving prices higher – only to flip the oil for a quick profit.”

Got that?  When the Obama Administration blocks oil exploration, it has no effect whatsoever on consumer prices, but people buying that very same American oil drive prices higher by creating the “perception” of a shortage. 

Say, were these evil speculators at work back when Candidate Obama was bashing George Bush for high gas prices?  I don’t recall him mentioning speculation as a factor back then.  Or is oil speculation a new horror, dating from January 2009?

The real problem is an insufficiently large army of regulators, so “Congress should provide immediate funding to put more cops on the beat to monitor activity in energy markets.”  Bear in mind this is coming from the man who blasted through every mechanism of oversight and review in his haste to pour money into Solyndra, and his Administration is still refusing Congressional subpoenas on the subject.  If we need more cops anywhere, it’s the Energy Department, the EPA, the GSA…

In case this all wasn’t stupid enough, Obama threw in a jab at Republicans for ostensibly failing to “stand up for families already paying an extra premium at the pump”… by refusing to raise taxes on oil companies.  Are even you die-hard Obama voters buying this?  Even if you’re a dedicated class warrior who fervently wants everyone richer than yourself to pay more in taxes, do you really believe for a moment that raising taxes on oil was going to reduce the price? 

Obama was being totally honest about one thing: those evil oil speculators certainly are “few” in number.  So few, in fact, that puzzled CNN analyst Al Velshi declared, “I don’t know what he’s talking about,” and spoke of “pants on fire.” 

Even White House spokesman Jay Carney was forced to concede “it’s hard to know” what the actual impact of the President’s plan might be.  White House economic advisor Brian Deese added, “I’m not going to speculate on this provision, or any other provision, having an impact on prices at the pump.”

The President somehow managed to get through his big anti-speculator rollout without actually naming a single villain, or introducing any concrete evidence that speculation is having the dreadful effects he spoke of.  The Washington Free Beacon quotes Michael V. Dunn, a former member of the Commodities Futures Trading Commission, saying “the whole time I was there, I never saw any empirical data that said speculators were responsible for an increase or a spike in fuel cost.”  Dunn left the commission five months ago.

Writing for the Heritage Foundation, David Kreutzer pokes a few holes in the Evil Speculator Theory.  After wondering why those dastardly villains only seem to jack up oil prices intermittently, why they never seem to try this villainy with natural gas, and how they manage to find “an endless string of chumps” to take the other side of their rotten deals, he makes the devastating point that if they were doing what Obama was accusing them of doing, it would hurt them in the long run:

For speculation to drive up prices, the speculators must either cause oil production to slow down (which they haven’t) or to pull oil off the market.  If the flow of petroleum and its products remains unchanged, the price at the pump will not change.  If petroleum is pulled off the market, which can happen even though there are limits to what can be stored, it will eventually come back on the market.  And the question becomes, “When the oil comes back on the market, is the price higher or lower than when it was pulled off the market?”  The price will only be higher if the amount supplied at that time is lower or the demand is higher.  In either of those cases, speculators have helped moderate price fluctuations and will be rewarded with profits.  If the price is lower, then the speculators did a bad thing and will be punished by losing money.

American Fuel & Petrochemical Manufacturers president Charles Drevna swiftly responded to Obama’s speech:

“To the extent that there is any manipulation in the marketplace, the government should investigate and take corrective actions. Historical data shows speculators are not the primary force impacting prices at the pump. In fact, U.S. refiners count on financial markets to hedge against potentially higher crude oil costs, which work to prevent consumer costs from increasing further.

“We have vast untapped resources under our feet and off our shores and available from our good friend and neighbor Canada via the Keystone XL pipeline. If the president is serious about meeting our energy and national security needs, it’s time we take the appropriate steps to increase our North American oil and natural gas production and bring our nation back to economic prosperity.”

Presidential candidate Mitt Romney also offered a strong response, as related by The Hill:

“President Obama’s government by gimmick is reaching another new low today,” Romney said in a statement. “While American families struggle to pay gas prices that have doubled on his watch, the President’s only solutions are to target oil and gas producers for higher taxes and now to dramatically increase federal regulation.”

“These policies will do nothing to reduce energy prices, expand domestic production, or strengthen the American economy. And they will not distract the American people from the President’s consistent record of sacrificing America’s energy future to appease the environmental extremists in the Democratic Party,” he said.

Say this much for President Obama: he’s got a real gift for producing sound and fury signifying nothing.

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