Crude Awakening
A few months ago, we posted on a study that predicted the price of oil would continue to fall–not just because economic activity was slowing, but because the massive orgy of speculation in commodity markets was officially over. At the time, a barrel of crude oil was trading for about $80 bucks, down sharply from its peak of over $140 only weeks before. That same unit costs about $50 today.
Now comes news that Congress is planning to nose around a bit into what made gasoline cost as much as Remy Martin before it slipped back down to Pabst Blue Ribbon territory again. From the SF Chronicle:
“This will remain an issue,” said Sen. Byron Dorgan, D-N.D., who introduced oil market legislation this year. “Because when the price of oil has gone from $50 to $147 and back, it’s clear to me and everyone else that this has nothing to do with supply and demand. It has to do with speculation.”
…
“The entire move from $70 (per barrel) to $147 was people fleeing the dollar and looking at oil as an asset class,” said Amy Myers Jaffe, an energy research fellow at Rice University’s Baker Institute. “It was speculators, so when they exited the market, we went right back to $70.”
What took so long? You might ask. Why is Congress acting now, when gas has dropped to $2 bucks again, instead of back when we were laying out half our paychecks just to get around? The same reason it didn’t act on subprime mortgage bonds and credit default swaps and other deadly economic poisons until every canary in the coalmine went beak-first into the abyss: the investment banks who larded their campaign warchests didn’t want them to get in the way.
“The banks are in a much weaker position right now, and they were the ones really fighting this,” said Tyson Slocum, director of the energy program at the Public Citizen watchdog group.
Consider this: since 2000, the financial sector has poured about $1.5 billion into politicians’ pockets. All that cash was the same as a speakeasy paying off the local beat cop–they wanted to keep the party going and the easy profits flowing. Now that the good times are over, Congress might be talking tough but the same con artists are sucking up trillion-dollar bailouts from the Treasury. In other words, they snookered us all twice. Once on the way up. And now, on the way back down.
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