In Search of a Sane Government

What's Really Driving the High Price of Oil?

By RALPH NADER

What factors are causing the zooming price of crude oil, gasoline and heating products?
What is going to be done about it?
Dont rely on the White Housewith Bush and Cheney marinated in oilor the Congress
which has hearings that grill oil executives who know that nothing is going to happen on
Capitol Hill either.
Last week the price of crude oil reached about $130 a barrel after spiking to $140 briefly.
The immediate cause? Guesses by oil man T. Boone Pickens and Goldman Sachs that the
price could go to $150 and $200 a barrel respectivly in the near future. They were referring
to what can be called the hoopla pricing party on the New York Mercantile Exchange.
(NYMEX)
Meanwhile, consumers, workers and small businesses are suffering with the price of
gasoline at $4 a gallon and diesel at $4.50 a gallon. Suffering but not protesting, except for
a few demonstrations by independent truckers.
A consumer and small business revolt could be politically powerful. But what would they
revolt to achieve? Their government is paralyzed and is unable to indicate any action if oil
goes up to $200 or $400 a barrel. Washington, D.C. is leaving people defenseless and
drawing no marker for when it will take action.
Oil was at $50 a barrel in January 2007, then $75 a barrel in August 2007. Now at $130 or
so a barrel, it is clear that oil pricing is speculative activity, having very little to do with
physical supply and demand. An essential productpetroleumis set by speculators
operating on rumor, greed, and fear of wild predictions.
Over the time since early 2007, U.S. demand for petroleum has fallen by 1 percent and
world demand has risen by 1.3 percent. Supplies of crude are so plentiful, according to the
Wall Street Journal, traders of physical crude oil say their market is suffering from too
much supply, not too little.
Iran, for instance, is storing 25 million barrels of heavy, sour crude oil because, in the words
of Hossein Kazempour Ardebili, Irans oil governor, there are simply no buyers because the
market has more than enough oil.
Mike Wittner, head of oil research at Societe Generale in London agrees. Theres various
signals out there saying for right now, the markets are well supplied with crude.
Historically, oil has been afflicted with the control of monopolists. From the late nineteenth
century days of John D. Rockefeller, and his Standard Oil monopoly, to the emergence of the
Seven Sisters oligopoly, made up of Standard Oil, Shell, BP, Texaco, Mobil, Gulf and Socal,

to the rise of OPEC representing the major producing countries, the free market price of
oil has been a mirage. Despite the breakup of the Standard Oil company by the
governments trustbusters about 100 years ago, selling cartels and buying oligopolies kept
reasserting themselves.
In an ironic twist, the major price determinant has moved from OPEC (having only 40% of
the world production) and the oil companies to the speculators in the commodities markets.
What goes on in the essentially unregulated New York Mercantile Exchange (NYMEX)
without Commodity Futures Trading Commission (CFTC) enforced margin requirements,
and, unlike your personal purchases, untaxedis now the place that leads to your
skyrocketing gasoline bills. OPEC and the Big Oil companies reap the benefits and say that
its not their doing, but that of the speculators. Gives new meaning to passing the buck.
Deborah Fineman, president of Mitchell Supreme Fuel Co. in Orange, New Jersey, summed
up the scene: Energy markets have been dictated for too long by hedge funds and
speculators, who artificially manipulate the numbers for their own benefit. The current
market isnt based on the sound principles of supply and demand but it is being rigged by
companies and speculators who are jacking up prices for their own greed.
Harry C. Johnson, former banker who worked for many years inside Big Oil and ran his own
small oil company in Oklahoma, blames the CFTC, the Department of Energy, the
Administration, and Congress, as asleep at the switch on an issue that is probably costing
U.S. consumers $1 billion per day.
He cites some industry experts, who profit greatly from the high price of crude, and have
stated openly that the worldwide economic price of crude, absent speculators, would be
around $50 to $60 per barrel.
Imagine, our government is letting your price for gasoline and home heating oil be
determined by a gambling casino on Wall Street called NYMEX. The people need regulatory
protection from speculators and an excess profits tax on Big Oil.
In addition, a sane government would see the present price crises as an opportunity to
expand our passenger and freight railroad capacity and technology.
A sane government would drop all subsidies and tax loopholes for Big Oils huge profits and
other fossil fuels and promote a national mission to solarize our economy to achieve major
savings from energy conservation technology, retrofitting buildings, and upgrading efficiency
standards for motor vehicles, home appliances, industrial engines and electric generating
plants.
Those are the permanent ways to achieve energy independence, reduce our trade deficit,
create good jobs that cant be exported and protect the environmental health of people and
nature.
Those are the reforms and advances that a muscular consumer, worker and small business
revolt can focus on in the coming weeks.
What say you, America?
Ralph Nader is running for president as an independent.