Obama Blames Speculators For Soaring Oil Prices
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.
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.