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The biggest cause is not OPEC, or increased demand from China. Instead, it’s that same fun bunch that brought us the collapse in today’s housing market: rich speculators, working through global investment banks and hedge funds.
Most Americans who find themselves being robbed at the pump have no idea that faraway commodity traders are manipulating the price of crude using a mischievous mechanism known as the “Enron Loophole.” This creates an electronic casino game, allowing global speculators to bet on the future price of oil, using a few facts, wild guesses, and chicken entrails as the basis for their bets, which artificially drive up the price of oil. Hedge funds at Goldman Sachs and Morgan Stanley, for example, own huge amounts of these oil futures, and they’re already accepting bets as high as $200 a barrel – a price completely unattached to the real cost of producing oil or to such niceties as supply and demand.
Worse, their gambling on our prices is done with no public oversight. That’s because a special loophole says that electronic trading of such commodities as oil is not subject to the normal government rules that prevent price distortions. This loophole was written by Enron lobbyists, rammed through Congress in 2000 by then-Senator Phil Gramm, and signed by Bill Clinton. The resulting speculative oil bubble has jacked up our pump prices by a third, costing you and me about $1,500 each over the past two years – with much more to come out of our pockets as speculators raise their bets.
By the way, John McCain’s top economic advisor is Phil Gramm, who recently convinced McCain to oppose efforts to close the Enron Loophole.
“Speculators help drive up gas prices, experts say,” Austin American Statesman, June 4, 2008
“Experts Tell Senate Committee How to Burst Energy Price Bubble,” Press Release of Senator Cantwell, June 3, 2008