It is as predictable as clockwork; whenever gas prices rise, the Obama administration and its political allies and supporters blame “speculators” for the price hikes. Neither good old supply and demand, nor OPEC’s status as a cartel ever get implicated by this administration as catalysts for higher gas prices.
So it is no surprise to see that the administration is seeking to revive its “oil speculation task force.” But in covering this effort on the part of the administration to look like it cares about the issue of higher gas prices, Dan Froomkin reveals why all of this constitutes nothing more than a political song-and-dance routine on the part of Team Obama:
But the task force, which Obama initially proposed last April when a big spike in gas prices sparked public outrage, has met only four or five times, mostly around the time it was created, and has not reported to the public on its activities, McClatchy News Service reported. Critics say the group has fallen short of its mission thus far.
Precisely what Obama has asked the group to focus on at this time remains somewhat unclear. Justice Department spokeswoman Adora Andy explained in an email to The Huffington Post, “At the President’s direction, the Attorney General -– through the Oil and Gas Price Fraud Working Group –- is aggressively focused on identifying civil or criminal violations in the oil and gasoline markets, and ensuring that American consumers are not harmed by unlawful conduct, which remains an important priority. With the recent increase of gasoline prices, the working group is monitoring the situation and if we find any evidence of criminal behavior or other misconduct we will respond immediately.”
[. . .]
Tyson Slocum, director of the energy program for consumer group Public Citizen, said the Obama administration “isn’t reconstituting this task force because this task force wasn’t even meeting in the first place.”
“He’s probably reminding Holder to remind people that they’re on the task force and that perhaps the task force should think about meeting at some point,” Slocum said. “It kind of shows that this is a bit of a farce.”
Slocum also noted that several agencies theoretically represented on the task force already have unilateral authority to investigate speculation. “It’s our opinion that none of them are doing it.”
You think? Froomkin tries to argue nevertheless that speculation is behind the increase in oil prices, but to say the least, the evidence is iffier than he thinks:
If raising the margin requirement—or downpayment—on silver contracts helped cool speculation in the metal this week, could it do the same thing for runaway oil prices?
Silver has plunged 20 percent in recent days, in part due to the sharp increase in the amount of money investors are required to put down to buy the metal.
The whole commodity sector, in fact, is going through a major pullback this week as worries about a slowdown in the global economy are prompting investors to scale back on risky trades.
But while the selloff in silver, at least, is being linked partly to higher margins, oil prices move on more fundamental reasons such as supply and demand. Oil was lower on Wednesday, for instance, because of a bigger-than-expected increase in US crude supplies.
So raising margin requirements on oil—which has been tried before—wouldn’t do much to bring prices lower.
And from the Federal Reserve Bank of Dallas:
Oil market speculation became an especially popular topic when the price of crude tripled over 18 months to a record high $145 per barrel in July 2008. Of particular interest to many is whether speculators drove oil prices beyond what fundamentals would have otherwise justified. We explore this issue over two Economic Letters. In this article, we look at evidence from the physical market for oil and conclude that fundamentals, and not speculation, were behind the dramatic rise and fall in oil prices. In our companion Economic Letter, we examine the futures market.
Don’t expect the White House to pay attention to any of these facts. It’s an election season, after all.