By Carl Gibson / Reader Supported News
Oil prices are currently down by 40 percent from where they were in June, and the economies of oil-exporting countries like Russia and Venezuela are tanking. Coincidence? A simple case of more supply than demand? Cunning moves in a global chess game between a desperate empire and its rivals? Maybe. But even if current geopolitical situations are temporarily causing oil prices to drop, the U.S. government may be about to implement new regulations that would stick it to oil speculators while helping ordinary Americans keep more money in their pocket, and wants to hear from you on whether or not reining in Wall Street is a good idea. If you’re not sure, think back to six summers ago, when oil prices were at an all-time high.
In the summer of 2008, I drove my grandpa’s pickup truck to my unpaid internship at an NBC affiliate in Lexington, Kentucky, five days a week. It was an hour-long round trip in a vehicle that got less than 20 miles per gallon, and gas was around $4.25 a gallon then, and even higher in urban areas like Chicago and the Bay Area. The fuel needle came close to E every few days, and it cost right around $70 every time I filled up. Almost all the money I made working on my grandpa’s farm during those long, hot summer days went right back into the tank. So why was gas so expensive back then?
In 2011, a report from the Commodities and Futures Trading Commission (CFTC) found that a large reason for the high gas prices that summer was that oil speculators were dominating 80 percent of the market; they controlled just 30 percent of the market in the late 1990s, when gas was a little over a buck a gallon. ExxonMobil CEO Rex Tillerson and Goldman Sachs both admitted that speculation on Wall Street caused oil prices to rise by as much as 40 percent. During the record-high oil spike of 2008, Saudi Arabia told the Bush administration that roughly $40 of every barrel of oil was the result of speculators driving up the price. It’s also worth noting that unlike airlines and trucking companies, who buy oil in futures, speculators don’t actually contribute to the economy, as they don’t use a drop of the oil they bet on – they’re just out to make a shitload of money in a short amount of time. Their jobs don’t need to exist.
So what exactly does a speculator do? One textbook example can be found in Cushing, Oklahoma, during the first quarter of 2008. Five big energy traders, three of them from outside the United States, bought up actual crude oil for sale in Cushing, which is a major junction point for oil delivery, then turned right around and “shorted” it in sales to other investors between January and April of that year. This made the price of oil fluctuate rapidly in the process, and those speculators pocketed the profit. The market was mobbed by speculators like those in the Cushing scheme, all of whom wanted to make a quick buck by manipulating oil prices. By the time summer came around, oil was at $147 a barrel.
In July of 2010, two summers after the one where speculators mugged Americans at the pump, the Dodd-Frank Act, which was intended to rein in the financial industry, was signed into law. One of the provisions of Dodd-Frank intended to cap speculators’ share of the market at 10 percent, which Wall Street fought tooth and nail. In December of 2011, the International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) sued the CFTC for trying to write regulations that would comply with the Dodd-Frank law’s mandate for tighter rules on speculators. To put that in plain English, a bunch of casino gamblers who make money off of other people’s misery sued the government for trying to do its job. And the first time, they won.
In September of 2012, a federal judge sided with Wall Street and ruled that the CFTC’s proposed rules on speculation had not been proven necessary under the law. The ISDA and SIFMA, who represent some of the big banks responsible for the global financial crash of 2008 like Goldman Sachs, Morgan Stanley, and JPMorgan Chase, celebrated the ruling and hoped it would establish precedent to stop any future attempts at reining in their destructive greed. However, U.S. District Judge Robert Wilkins wrote in his ruling that the decision didn’t invalidate any future attempts to more closely interpret the law and write new rules. As recent history shows, the CFTC didn’t back down from the fight. It appealed the decision, and vowed to try again.
In November of 2013, the CFTC voted 3 to 1 to pass a new set of rules that would limit speculation on 28 core markets, including crude oil, fuel oil, gasoline, and natural gas. So far, the CFTC has received 13,000 public comments on the proposed rules. And in December of 2014, regulators re-opened the public comment period for the new speculation limits. Comments can be submitted on the CFTC’s website, and all will be considered until the January 22, 2015, deadline. If public comments are overwhelmingly supportive, it’s likely the CFTC’s rules will become official in the spring, making the prices for everyday needs like groceries and gasoline drop as a result.
Obviously, everyone is happy that filling up the tank doesn’t cost as much. We can celebrate that new, sustainable forms of energy are becoming more prevalent, and that our economy has become less dependent on fossil fuels. But keeping speculators in check is exactly what our government is intended to do. If the CFTC’s new limits on speculators go through, it’ll be a big victory for working people, and that should be celebrated more than anything.
Carl Gibson, 26, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. You can contact him at firstname.lastname@example.org, and follow him on twitter at @uncutCG.