Obama Blames Speculators For Soaring Oil Prices
President Barack Obama has hit out at rampant speculative interests for artificially driving up the price of crude, heating oil and gasoline for US consumers. (image: timesonline.typepad.com)
President Barack Obama has blamed financial speculators for driving up the price of oil amid warnings spiraling prices could damage the US economic recovery.
Speaking Tuesday in Virginia, Obama said world oil supplies were plentiful. Traders bidding on commodities markets were responsible for recent price spikes in crude, gasoline and heating oil.
It is true that a lot of what’s driving oil prices up right now is not the lack of supply. There’s enough supply. There’s enough oil out there for world demand.
The problem is … speculators and people make various bets, and they say, ‘you know what, we think that maybe there’s a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we’re going to bet that oil is going to go up real high’. And that spikes up prices significantly.
Crude and heating oil prices hit two-and-a-half year highs last week amid fears of supply disruptions in Libya and the Middle East and growing oil demand as world economies recover from recession. But there are new fears that soaring oil prices could undermine the recovery. Higher oil prices slow growth by increasing the cost of transportation, food and most consumer goods.
Echoing International Energy Agency concerns voiced as crude hit near record highs this month, US Energy Secretary Steven Chu said on Tuesday that he feared rising crude oil and gasoline prices could undermine the US recovery.
Obama told his Virginia audience he sympathized with US citizens whose hard-earned income was being siphoned filling their cars and heating their homes as big oil companies cruised towards record profits. The White House is worried about the impact of rising fuel on the economy and on voters’ wallets as Obama runs for re-election, Reuters reporters.
Soaring oil prices mean US motorists are now paying near record prices at the pump. (image: www.atg.wa.gov)
Following the 2008 financial crisis, the Commodities Future Trading Commission (CFTC) was charged with introducing regulations to reign in rampant speculation by slapping “position limits” on big traders. But the CFTC faces huge opposition from powerful Wall Street financial interests and the reforms are mired in delays. Referring to the CFTC, Obama said the government was in a position to investigate unfair speculation. He also indicated that authorities would look into possible price gouging by local retailers.
We’re going to be monitoring gas stations to make sure there isn’t any price gouging that’s taking advantage of consumers.
Last month he signaled a desire to make the US less reliant on crude oil imports by increasing domestic oil production and investing in renewable energy sources like biofuel. He also wants to encourage demand for electric cars to boost production and make them cheaper, he said yesterday.
The problem is we only have about 2 to 3 percent of the world’s oil reserves, and we use 25 percent of the world’s oil… And that means we’ve got to find some replacements.
Writing for Bloomberg Businessweek on Wednesday, Ed Wallace goes one step further. As well as speculators, he blames the US Federal Reserve for lending huge amounts of cash to big banks at virtually no interest to stimulate growth. This, Wallace says, allows investment firms even more liquidity with which to bid on commodity markets and drive up prices.
The ability of markets to function properly, based on real supply and demand equations, has been destroyed by allowing ridiculous leverage and the unlimited ability to borrow the leverage at historically low interest rates.
The biggest culprits are the speculators gaming the futures markets to line their own pockets. We know all that. What might come as a shock is that they are being enabled by the Federal Reserve.
Watch a video of Obama’s town hall meeting in Annandale, VA below.
Pobres especuladores « O Insurgente says: says:
[...] não bastava levarem na corneta quando os preços sobem, agora também levam na corneta quando os preços [...]
Gene Guilford says: says:
Speculation is a symptom of the disease, not the disease. The underlying causes of the disease are a combination of ruinous monetary policy and an indifferent domestic energy policy - both the fault of Washington.
After the Federal Reserve initiated QE1 and QE2 and pumped $2.3 trillion into the money supply the value of the dollar tanked and everything priced in dollars goes up in price. Hedging against the decline in the value of the dollar, the financial community steers hundreds of billions into what has been rising in value - commodities - further inflating their price beyond what the decline in the value of the dollar is doing.
A ruinous monetary policy added to an energy policy that could best be characterized as “No Will To Drill,” adds negative signals to a marketplace already nervous over internal insurrections in 11 North African and Middle Eastern countries.
Where our energy comes from does matter. What’s more, what our federal government sends for signals to the world about our indifference to adding domestic production instead of the 13% decline in production out of the Gulf of Mexico since 2010, matters. Look at natgas on the NYMEX - barely moved throughout the past year while oil goes up 70% - as an example of what is perceived as a domestic fuel [natgas]is largely insulated from the magnitude of price increases seen in oil, of which we import 40% of our needs.
Where our energy comes from does matter. The Fed’s monetary policy does matter. The federal government’s actions on restraining massive non-commercial investment flows into commodities could matter.
Jodi Lewis says: says:
Speaking of oil prices, the last I heard they were down by $2.50 a barrel. Why isn’t the gas price’s dropping? No they keep getting higher!!! I beleave you have the power to freeze the price’s so that American People will not have to choose between gas or food!!! Without people getting gas they can’t eat, then you have our own people starving to death. Do you plan on doing something about it? Or are you going to sit back and just watch? You don’t even pay for your own gas, we do!!
J R Uland says: says:
Mr. Guilford
Let’s stay on point, shall we? Oil on the world market should be trading at about $80-85. This being the opinion of industry, financial, and consumer experts. The source of U.S. oil is really immaterial if it can be obtained at reasonable and predictable prices. The villain here is rampant speculation that creates enormous profits for a group that really produces nothing for this country. Wall Street is allowed to move huge sums of money out of consumer pockets an into their own with a few key-strokes. Those same financial wizards are the very people who fund and influence Congress. Until we, the voter, turn out at the polls in such vast numbers that we overwhelm the lobbyist dollars America is doomed to suffer the results of this economic treason. Harsh words, perhaps, butif the shoe fits…
Gene Guilford says: says:
If this guy had any worse handle on energy issues he’d fail a Boy Scout merit badge exam.
Mr. President, the US uses 25% of the world’s energy because with 5% of the world’s population - THE UNITED STATES PRODUCES 25% OF THE WORLD’S GROSS DOMESTIC PRODUCT. It’s called, “American Exceptionalism,” Mr. President, look it up.
The United States also has the world’s largest hydrocarbon deposits. The problem is YOU WON’T LET ANYONE RECOVER THEM. Remember your speech in Brazil? Let me refresh your memory Mr. President….
“We want to help you with the technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers.”
Which is it Mr. President - reduce reliance on foreign energy or become foreign energy’s best customers? Yes or no - on or off - where are we headed today?