Tuesday, May 27, 2008

When You Pay For Gas, Think Enron

Listening to Washington Journal this morning I heard a rather riveting explanation for the high price of the gas you're putting in your car. I must admit I hadn't seen that oil speculation had been taken offshore, too. I found a rather good explanation and give it to you below.

The fiction that high prices are the fault of supply and demand, a fiction promoted by your thieving oilmen which includes the occupied White House, is a ruse to pressure congress to drill in ANWR.

The Commodities Futures Trading Commission, which regulates the trading of contracts for future delivery of oil — called futures — believes big pension funds and other institutional investors may accentuate a trend but are not the cause of high prices.

"If the fundamentals weren't strong, you couldn't play on the margin [speculate] in any event," said Frank Verrastro, director of energy programs for the policy research group Center for Strategic and International Studies.

Others, including U.S. Sen. Carl Levin, D-Mich., believe the so-called Enron Loophole is to blame. This is a legislative loophole won by the now-defunct energy giant in 2000 that removed from regulation the electronic trading of oil futures by large traders.

Some experts believe oil traders are pushing trades into less regulated overseas markets where they can build up higher concentrations in their investments and escape direct scrutiny by U.S. regulators.

These big positions can move markets. Exhibit 1 is the spectacular 2006 crash of Amaranth Advisers, a hedge fund that pooled investments from ultra-wealthy investors to take huge positions in futures contracts for natural gas. In doing so, it drove up the price for Americans of heating and cooling their homes.

Last summer, federal regulators, well after the fact, accused Amaranth of manipulating prices and fined it almost $300 million.

Q: What's being done about this loophole?

A: A farm bill passed by the Senate last week by a veto-proof margin includes a provision to close this loophole and bring greater record keeping and scrutiny to electronic trading of oil futures.

Democratic presidential candidates Barack Obama and Hillary Rodham Clinton want the loophole closed. A top adviser to GOP candidate John McCain said the candidate has no position on the issue.

The Enron Loophole came to be thanks to the efforts in 2000 by Texas GOP Sen. Phil Gramm, who today is McCain's closest economic adviser and close personal friend. Gramm's wife, Wendy, was once the top U.S. commodities regulator and an Enron's board member.(Emphasis added.)

Michael Greenberger, who was the CSpan guest this a.m., said that banks and big investors are not just buying futures, but they are hoarding the gas as well. He explained that they would prefer not to sell an appreciating asset, gasoline, for a depreciating one, the U.S. dollar. Recently, I find, the same testimony was given in an NPR interview. He will be testifying before a Senate committee later and I will be fascinated by the effect of his testimony.

Labels: , ,


Post a Comment

<< Home