As the improving economy has
robbed conservatives of their chief
talking point against President Obama, they’ve turned to rising gas prices as the next problem to pin on the
Speaker John Boehner (R-OH) “instructed
fellow Republicans to embrace the gas-pump anger,” while Rick Santorum conspiratorially claimed Obama is intentionally pushing up
prices to cut carbon emissions. Not to be outdone, Newt Gingrich released a
30-minute video today about how “the Obama administration is so anti‑oil” that
they’ve forced the price of gas to go up.
But there’s little truth to claims that
Obama has curbed U.S. oil production and driven up gas prices in the process.
As NPR noted this morning, the number of drilling rigs in U.S. oil fields has quadrupled under Obama and domestic oil
production hit an 8-year high in 2011. For the first time in
60 years, the U.S. is now a net fuel exporter.
Oil demand was actually down 4.6 percent
last week over last year, while the supply of gasoline has actually increased
slightly since a year ago. So why are gas prices so high? As
Kevin Hall explains today, there is a systemic problem:
Energy futures markets serve
a legitimate role in helping
producers (like oil companies) and big end users (like airlines) hedge against
price volatility, but lately, they’ve been taken over by Wall Street speculators who
never intend to actually use the fuel they’re betting on. As Hallreports: Historically,
financial speculators accounted for about 30 percent of oil trading in
commodity markets, while producers and end users made up about 70 percent.
Today it’s almost the reverse.
A McClatchy review of the latest Commitment
of Traders report from
the Commodity Futures Trading Commission, which regulates oil trading, shows
that producers and merchants made up just 36 percent of all contracts traded in
the week ending Feb. 14 while speculators who will never take delivery of the
oil made up 64 percent.
Many experts, lawmakers (Democratic and Republican), and government regulators have expressed similar warnings.
Finally, after many delays, the
government board responsible for
regulating commodity futures markets finalized a rule in October to limit speculation, a
power it was given by the Dodd-Frank Wall street
reform law. However, the rule won’t go
into effect until next October, as the Commodity Futures Trading Commission
(CFTC) needs to collect “one year of interest data” first. The financial
industry is fighting the
new rule, but just today, the CFTC took action against a
company in different market, providing an example of how the energy regulation
can effectively work.