We all know by now that the oil companies have been using Iraq as cover for a species of price-gouging that defies both law and custom by such a wide margin that the mind boggles. And we’re probably all wondering how they get away with it in the face of Congressional opposition and threats of hearings and new laws to stop them. Most seem to put the lack of action down to the standard Democratic cowardice when faced with actions that might displease corporate contributors. I did myself until I read this.
Seven years ago, Enron lobbyists sought to free their new experiment in electronic trading, “Enron Online,” from oversight by the principle regulator of energy futures and derivatives, the Commodity Futures Trading Commission. They managed to drop a loophole into an appropriations bill that has effectively exempted all electronic over-the-counter energy commodity markets from US regulation. Before this bill was passed, crude oil was under $25 per barrel and motorists enjoyed affordable gasoline.
Since then, energy commodity traders and hedge funds have poured billions of dollars into these “dark markets.” According to a bipartisan report published by the US Senate Permanent Subcommittee on Investigations, excessive speculation may be responsible for as much as $20-$25 of a barrel of crude oil. Between 50 cents to $1 per gallon of gasoline may be a direct result of irrational and unethical behavior in the commodity markets. Enron may be long gone, but its legacy remains.
Few Americans realize the extent to which futures trading on dark markets determines the price they pay for energy. Daily trading has an immediate impact on the price of gasoline, heating oil, natural gas, and other fuels. A large majority of futures trading — as much as 75 percent, according to experts — is conducted on unregulated dark markets, as opposed to trading on regulated markets, including the New York Mercantile Exchange.
Without first repealing that loophole, Congress actually has no legal basis for passing anti-price-gouging legislation since the oil companies can insist – as they have repeatedly – that they’re only responding to “market forces” when they raise their prices, leaving aside the uncomfortable little detail that they used their sockpuppet relationship with the Republican Congress to create that “force” in the first place. Fortunately, Democratic leaders are not unaware of the problem.
A bill called the “Oil and Gas Traders Oversight Act” would close this loophole and bring accountability to the dark markets. Congress should pass this bill, put an end to the real “price gouging,” and tell commodity market profiteers to stop playing with their constituents’ wallets.
Republicans will no doubt threaten to filibuster it.