Energy prices

by Mary

Recently I read that gasoline prices had gone up around 2 dollars in the past two years. It seems to me that big chunk of that was in the past month. Starting just before Memorial day, I saw it shoot up over sixty cents in my neighborhood (now running at $4.61 for regular).

So today, we had the guy who twiddled his thumbs about energy conservation suggest another brain-dead solution to the problem after he wasted more than seven years that could have been promoting using our resources wisely and driving down demand. But Bush and his VP insisted that energy is a supply problem and have been trying for years to drill and mine the country to increase supply.

Today, Bush (and his doppelgänger, McSame) declared that we can drill our way out of the problems of dwindling energy supplies by lifting the ban on offshore drilling. Just like opening ANWR, drilling off the coast does almost nothing except enrich a few of his buddies because the supply is peanuts and the time it would take to get something useful will be years.

But our high gasoline costs are more than just a supply problem. It seems that it is also a speculation problem which ironically (or not) seems to have beeen bequeathed on us by Enron.

Ryssdal: Why is it so hard to figure out what's going on in commodities markets -- oil specifically?

Greenberger: Well, the reason it's hard to figure out is about 30 percent of our crude oil energy futures are traded in what is called a dark market -- that is a market that was deregulated in December of 2000 at the behest of Enron. Prior to that legislation being passed, all energy futures traded in the United States or affecting the United States in a significant fashion were regulated by United States regulators under a very careful regime that had been perfected over about 78 years and many observers believe that because those markets are not being policed, malpractices are being committed and traders are able to boost the price virtually at their will.

Ryssdal: You're not really telling me that seven years on, we're still paying the price for Enron, are you?

Greenberger: Well, this has been called the "Enron Loophole" and there are many legislators working very hard to close that loophole.

So, Bush's good friend, Ken Lay, is at the bottom of our latest speculation scandal. Why is that not surprising?

What could Bush do if he really wanted to help the country with the out-of-control energy prices?

Greenberger: From my own experience as a commodity regulator, I believe that if the Bush Administration were serious about its regulation, we could begin seeing prices drop within a month. If we don't get the kind of regulation that has been done for decades and the market proceeds along the pace its proceeding, we will have to go through a very, very serious recession. The question is do you want to deflate the bubble by that kind of suffering or do you want to deflate the bubble by applying tight U.S. regulatory controls?

And we know that this administration never has to admit it is wrong so it is easy to chart which course we will be condemned to take.

Speaking about McCain, we mustn't forget who was the little sneak that put forward the Enron Loophole. Why, it is his old friend and economic guru, Phil Gramm, who helped set up the speculative markets that have been such a blessing for us all.

In June 2000, Senator Gramm co-sponsored the Commodity Futures Modernization Act, a measure aimed at deregulating certain kinds of futures trading, but not energy futures. That bill never made it to the floor, and thus quietly died. Six months later, on December 15, Gramm curiously turned up as co-sponsor of a bill with the same name, the Commodity Futures Modernization Act, which did deregulate energy futures and which, without undergoing the usual committee hearings and preliminary votes, was immediately attached as a rider to an 11,000-page appropriations bill. It passed and was signed into law by President Bill Clinton six days later. Few lawmakers had likely perused the rider carefully, if they even knew it was there. And at any rate, Enron had given to the campaigns of over 200 legislators.

That's not to say no one opposed Enron's aims. An economics advisory group to Clinton—with representatives from the Federal Reserve, SEC, and Commodity Futures Trading Commission—had come out against deregulated energy trading. They argued the market was ripe for manipulation. Yet the bill passed, setting Enron free to run what amounted to an energy auction, which Public Citizen claims "gained control over a significant share of California's electricity and natural gas market."

Don't forget to tell your friends that McCain believes Phil Gramm would be a good Treasury Secretary. He'd certainly be a good candidate if you thought there was no need to protect the public good.