| Return
to The |
|
|
| |
| |
The
View from the Meadow
Observations
of the Passing Scene
Political
and Social Commentary by Dave Satre
|
Who
Caused the Gas Price Crisis?
2008 was a roller coaster ride for Americans and the petroleum industry. In the past year, oil prices rose from $69 a barrel to almost $150, then crashed back down when Wall Street collapsed. But the price changes were not the result of changing supply and demand, as historically claimed by the petroleum industry. It was a speculative bubble that burst on Wall Street that caused the crash and the investment banks facilitated it.
But the commodities market has now attracted other kinds of investors who are buying oil contracts like they would purchase cotton, steel or coffee futures, in hopes that the products will increase in price by the time they are actually delivered. Almost 70 percent of oil contracts are now held by futures investors looking to profit from their speculations, not the oil companies. Over the past five years investments in the oil market by institutional investors, hedge funds and the nation's largest banks increased from $13 billion to $300 billion. The trading increased to the point in 2008 where 27 barrels of crude oil were traded for every single barrel that was actually consumed in the U.S. More than a year ago those markets started to behave erratically and oil prices more than doubled, reaching the $147 per barrel mark. The market was managed by Wall Street insiders and these sky-high prices happened at a time when the supply was plentiful and demand was actually decreasing, despite the contrary claims by the petroleum industry and the media. It wasn't just Exxon Mobil, British Petroleum or Chevron that caused this crisis, it's more like Morgan Stanley. This investment bank sells oil through its subsidiaries and companies that it controls. The company received an initial $10 billion bailout from the Bush Administration and is using this money to buyout its competitors, like Chinatrust Bank and $2 billion to $3 billion to obtain a controlling interest in Citigroup. The manipulations of oil and gas prices were facilitated by the lack of government control fostered by the systematic elimination of related usury laws over the past few decades. Congress lifted regulations on the futures market in 2000 and federal regulators no longer have access to industry data. Most trading is now conducted in private with little public or government oversight.
Enron's leaders also learned they could make greater profits by simply trading other companies' oil, without the bother and costs of exploration, drilling, refining and transporting their own product. Thus increasing America's dependency on foreign oil. When Enron was caught in this scheme, most of their traders who knew how this scam worked found lucrative careers on Wall Street. And to think that GW Bush tapped Ken Lay to design his Energy Policy when the Bushies took over the White House. The opportunities for garnering huge fortunes by manipulating stock evaluations have proven irresistible to investors. Wall Street has gone berserk over the years, and went completely bananas under the GW Bush regime, enabling the biggest criminals on the planet to reap the largest rewards in history as the financial industry succumbed to rampant greed and ripped off America. The corruption of the stock market reached a point in the 90's where corporations were rated according to the quarterly increase in their profits instead of their ability to provide a consistent profit. If a company's quarterly earnings don't increase and meet Wall Street analysts' predictions, its stock value drops and the company finds itself in financial trouble. Instead of providing a consistent profit capable of satisfying the needs of the organization and its employees, the focus is now on the profits required to satisfy investors. And if they don't toe the line, the company's stock crashes and it will be quickly engulfed by larger monopolistic organizations looking to gain complete control of an industry. Big Business has deteriorated to the point of a scam. They're now more like Ponzi or Pyramid Schemes than traditional corporations. There is rampant corruption at all levels with top executives ripping off companies for huge fortunes in salaries and bonuses, at the expense of their employees and customers. The result has been an unstable stock market. This is especially unfortunate since most retirement programs are tied to the market, as well as most of the personal investments of the populace. The increases in gasoline prices have affected all of America and the rest of the world. The high costs of transportation have raised prices in all markets, especially the basic food and fuel costs of American families. The regulatory lapses in the futures market that many believe fomented the rampant speculation in oil have still not been addressed, although the Obama administration has promised to do so. If the economy has any hope of recovering from this travesty the government must take the responsibility for overseeing industries, especially the financial markets. An economy that cannot trust the banks and other financiers cannot survive. Both Legislative and Legal Actions are Required! Do what you can to support Obama in his efforts to right this sinking ship. It will be a tough job, but somebody has got to do it. Note: California gas prices (always the highest in the nation) rose from an average of $1.63 per gallon in 2001, the beginning of the Bush Error, to a peak of $4.59 a gallon in Bush's final year before the economic crash that took the prices briefly back to 2001 levels. The industry is now in the process of cranking them back up.... Dave Satre If you missed the 60 Minutes piece on the price of gas (Jan. 11th, 2009) you can View It Here on the Web. |