When all else fails, blame “speculators.”
Or at least that’s the answer the Obama administration has settled on (again) as the reason why gas prices are so high. And it intends to go after these shadowy creatures with all the tools at its disposal:
Obama’s plan this time calls on Congress to:
— Increase six-fold the surveillance and enforcement staff of the Commodity Futures Trading Commission to better deter oil market manipulation.
— Increase spending on technology to provide better oversight and surveillance of energy markets.
— Increase civil and criminal penalties against firms that engage in market manipulation from $1 million to $10 million.
— Give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.
The last one is rather interesting. Gold bugs scream when commodity exchanges increase margin requirements, seeing it as an attempt by the powers that be to undercut the metal’s price. And it kind of does, in the short-term.
Applying higher margins to oil traders, then, might achieve the same result — with the price decrease lasting just long enough (maybe) to make gas prices less of a drag on the President’s poll numbers.
At least it’s a more honest approach to political price manipulation than, say, selling oil from the Strategic Petroleum Reserve. But not by much.
Of course this is not the first time the current administration has sent the regulatory hounds chasing after phantoms. A recently concluded Federal Trade Commission investigation into rising oil prices ended with a whimper. It turned out that old bugbear, supply and demand, was behind high oil and gas prices.
There have been other investigations along the same lines. As Robert Bradley wrote last year:
In 2005, Congress directed the FTC to spend “no less than $1 million” rooting out miscreants in the oil industry who supposedly were using Hurricane Katrina as pretext to raise prices. When the FTC couldn’t find any, the government doubled down on a new task force in 2006, and then again in 2008.
Guess what the reports found: limited supply plus growing demand equals higher prices. Amazing! Or as the FTC curtly noted in its 2005 report, “The vast majority of the FTC’s investigations have revealed market factors to be the primary drivers of both price increases and price spikes.”
As the dates in that snippet show, the urge to blame speculators is bipartisan — neither party, particularly the one holding the White House — wants to look powerless before Mr. Market.
