Cantwell wants probe of petroleum market manipulation

Sen. Maria Cantwell (D-WA) inserted a provision in last year’s energy bill that gave the Federal Trade Commission the authority to investigate manipulation of the petroleum market, and now with gasoline expected to top $4 a gallon this summer, Cantwell wants the FTC to use it.

“Their response has been tepid,” Cantwell said in an interview. […] She said she expected the agency would “run out the clock” and leave the manipulation regulations for the next administration to write and implement.

“They didn’t ask for the authority and they’ve never been excited about it,” Cantwell said. “They say they want to work with us. Given the impact on the economy, they need to get started.”

Now I know you knee-jerk free-marketeers will tell me that this is merely the market in action, and that the invisible hand of God will sort everything out just fine as long as we don’t let those damn government regulators interfere. But with crude oil now hovering around $110 a barrel, the supposedly inviolable law of supply and demand appears to have been magically suspended:

Cantwell noted that crude oil prices have doubled over the past year despite adequate inventories, no major disruption in supply and a slight drop in demand in the United States as the economy has cooled.

At congressional hearings over the past several weeks, oil company executives and market analysts have been at a loss to explain the sharp increase in crude oil prices. Cantwell said an Exxon Mobil executive recently told a House of Representatives committee that he thought the price of crude oil should be about $50 to $55 a barrel, given current supply and demand.

It was Cantwell who also authored a law that banned manipulation of the natural gas and electricity markets, and ordered the Federal Energy Regulatory Commission to enforce it. Subsequent investigations have resulted in 15 settlements and nearly a half billion dollars in fines. I’d wager the FTC would find similar manipulations in the petroleum market… that is, if it ever bothered to follow the law.

Comments

  1. 1

    JT spews:

    She could check the world price of oil & global gasoline prices to see if US oil companies are engaged in nefarious acts. But that would be too easy and would not play well with the left’s “victimology.” It also wouldn’t generate her any press.

  2. 2

    spews:

    JT,

    “She could check the world price of oil & global gasoline prices to see if US oil companies are engaged in nefarious acts.”

    How would that work, exactly? I mean, the consumer price of a gallon of gas around the world ranges from about $0.20/gal to almost $8.00/gal. This among-country variation is primarily the result of government policies within countries—largely subsidies or taxes. Therefore, the simple comparison you suggest is entirely inadequate.

  3. 3

    Hannah spews:

    This is great! Wish it had been done about 2 years ago, when gas prices started rising sharply….yeah yeah yeah I know the rising price of oil is “due to the demand” and all the other nations (China and Japan specifically) are using so much more, therefore driving up the price. But get real, yes, we don’t pay nearly as much as England, Germany, France, Austrailia, Canada but we still pay way higher than Mexico and most the middle east.

  4. 4

    GS spews:

    Yeh the only ones making more than the Big Bad Oil Companies on a gallon of oil are the State of Washington Tax collectors.

    Where’s Cantwells outrage at the State of Washington’s outrageous profit per gallon of gas?

    Just Asking!

  5. 5

    spews:

    Demand may be down slightly in the U.S., but it’s up quite a bit in China and India. It’s a world market for oil. There may be manipulation going on, but saying “demand is down” isn’t a smoking gun.

  6. 6

    slingshot spews:

    We just returned from good old Europe: E1.48/ltr. x 3.8(ltr/gal) = E5.62/gal. x 1.56 (euro to dollar) = $8.76. Most folks are driving diesel rigs, and diesel is cheaper there than benzine, as it should be. Of course, a person can get by pretty well over there without a car because of the evil, socio-communistic disease of mass transit.

  7. 8

    spews:

    JT @1,

    So, what you’re saying is, it’s a bad thing to investigate? We shouldn’t look into it at all? Because there’s absolutely no possibility that an energy company would ever attempt to manipulate markets?

    Investigation = Bad

  8. 9

    Luigi Giovanni spews:

    David. have you been observing the value of the dollar as the price of oil increases?

    BTW, David, I don’t know about Adam Smith, but Milton Friedman was agnostic. David, only you take the expression “invisible hand” literally.

  9. 10

    Roger Rabbit spews:

    The Bush/GOP Economic Legacy

    ” … the worst job market in five years, the highest drop in home prices in more than half a century, record high gasoline prices and the worst credit crisis since the Great Depression.”

    http://seattletimes.nwsource.c.....onomy.html

    Roger Rabbit Commentary: Why would ANYONE vote for 4 more years of this? McCain is so weak on economics he doesn’t even talk about economics. Some 10th-graders can talk circles around him on economics. How can someone so ill-prepared to deal with the #1 problem facing average Americans even be taken seriously as a candidate, let alone become a party’s nominee for president? Because Republicans just don’t care about your economic problems, that’s how.

  10. 11

    Broadway Joe spews:

    This is what happens when you have oilmen running the country. I’m not saying that this wouldn’t have happened if Bush hadn’t been given the WH in 2000, but it’s simple as this – since George II took office, the price of gas has pretty much tripled. All we want is the truth, and someone to be held accountable.

    But of course, George II will never actually pay for the suffering he’s inflincted on his citizens, since he’ll likely leave the country when Obama or (ick) Hillary launch that probe that will show how corrupt and sociopathic George II and his cronies have been.

  11. 12

    GS spews:

    I don’t often agree with Ken Schram, but he’s dead on on this one.

    Make Sound Transit a Charity, they are a Charity case right now.

    So as Obama says we shall do! Change Change Change

    Give the whole Sound Transit Board Tin Cups, Put them on the freeway ramps, and let them collect enough to pay for one more foot of that massively overpriced go nowhere can’t get on anywhere can’t get off where I need or want to go Light Rail.

    We’ll even deploy some of the Surplus Self Cleaning, portable drug and prostitution dens to the top freeway ramps to add $$$ to the total guvment take

    That will take the Sound Transit Board 50 years, but unfortunately according to your savior Al Gore the Earth will be gone in another 7 Years, 9 Months, 12 days, 18 hrs, 27 minutes, and 33 seconds, so their efforts will be in vain and we are all doomed.

    By then the world will be replaced with Jetson flying cars!

    And Barney, Fred, and Wilma will be in charge

  12. 13

    Unkl Witz spews:

    Oh please Maria:

    Don’t waste our time with another “probe” of things you have no control over, nor any inclination to fight about. This is just another bit of political grandstanding that means nothing, and accomplishes less.

    Go vote against the Iraq war and make yourself useful.

  13. 14

    ByeByeGOP spews:

    I’d love to get the Dems to investigate how much money Dickless Cheney raked in from his so-called energy advisory council. You know that they paid in order to get the green light to rape the rest of us.

  14. 15

    Typical White Person (aka rob) spews:

    Has the economic genius Maria Cantwell noticed that while oil prices have gone up 100% the dollar has gone down 100%. Considering the fact that we import oil I wonder if there is any connection there? Duh

  15. 16

    Reformed republican spews:

    Gee- why should we investigate oil prices? Just because oil companies had record profits (Exxon made more than any other corporation in history in two of the last four years) and control production, refineries and distribution? You mean monopolies are good things and we should just trust the oil companies and the secret policy they devised with Dick Cheney…

    Investigate the heck out of them – they collude, they cheat and they ream us with prices thqt go up immediately and then slowly go down after the manufactured “crisis” or “scheduled” refinery closings. The two major oil companies set the prices and all the little dogs follow. there is not and has not been a free market for oil.

  16. 17

    Roger Rabbit spews:

    The oil market is extremely complex and is influenced by many factors. Without delving into the multifaceted details of production and consumption, suffice to say that many experts have argued for several years now that market fundamentals (i.e., supply and demand factors) support a crude price in the $40 to $60 range, and blame speculators for much of the runup above that level.

    Without question, speculation has driven crude prices higher. No one disputes that. The data show enormous growth in speculative crude trading with sharp increases in both dollar volumes and numbers of players. Hedge funds are in the forefront of this market, and there are now literally hundreds of oil hedge funds; but investment banks, mutual funds, and other financial institutions have also gotten into the act.

    However, speculators — like mosquitoes — need the right conditions to breed. And government policies are helping to create those conditions.

    For example, the Bush administration continues to fill the Strategic Petroleum Reserve at a rate of 70,000 bbl/day, despite high prices and the consequent cost to taxpayers, and even though the SPR is 96% full and “Days Inventory” now surpasses 40, compared to 15 in 1982. This may reflect U.S. government insecurities about the international situation and potential for supply disruptions, but the mere fact America is hoarding oil helps fuel the fears that are a major driver of speculation.

    Another factor encouraging speculation is the very low margin requirements on oil futures trading: Traders are required to put up only $7700 on a $110,000 contract, which means they are margined 15-to-1. In the stock market, the margin ratio is 1-to-1, a law dating from the Depression. In other words, our government today allows oil speculators to trade on margins similar to those that produced the 1929 stock market crash.

    Current government policies also contribute to the monetization of oil futures. What that means is that capital is flooding into oil traders’ hands because of excess liquidity and lack of attractive returns elsewhere in the financial system. With real estate and stocks falling, and bonds and Treasuries paying less than the inflation rate, there are few places where capital can earn a positive return. A reversal of the Federal Reserve’s wrongheaded policy of interest rate cuts is not enough, but is a requisite of, reversing this phenomenon and creating a desireable outflow of capital from crude speculation into more productive investments.

    In other words, the Bush administration has gotten it all wrong on all fronts of the policy end of things, and is doing more harm than good. I don’t think the Bushies are deliberately supporting speculation to drive prices higher, though. They’re not that competent. This is a result of clumsiness and stupidity, not conspiracy.

    Crude prices are now in a bubble, and like the housing and credit bubbles, this bubble is going to burst. I can’t tell you exactly when, or I’d be a rich fucking bunny! But I can assure you that all bubbles come to an end; and this one will, too.

    When it does, we’re going to have an additional crisis in our already severely stressed financial system. A rapid collapse in crude prices back to the fundamental level will leave enormously leveraged traders — nearly all of whom are institutions — with losses that could surpass a trillion dollars and which will ripple down through the entire financial system. Firms will fail; investments will lose their value; hedge funds will collapse; more banks, insurance companies, and pension funds will be imperiled.

    Some Democratic members of Congress are now calling for the administration to take immediate action to cool the speculative bubble in crude futures. But once again, Bush fiddles while Rome burns. The guy is so totally clueless the White House roof could crash down around his ears and he would stand there with the deer-in-headlights stare he has worn ever since one coke snort too many turned him into a Terri Schiavo back in his thirties.

    I’m not optimistic for a good outcome to this. My oilfield services stocks are rising rapidly now, and I’m looking at this as an opportunity to reduce my positions. While I think the long-term demand outlook for oilfield services is very strong and I’m not worried about the future profitability of my companies, I feel the stock prices are getting dragged along by the bubble, and I don’t necessarily want to be overweighted in the oil sector when the bubble explodes.

  17. 18

    Roger Rabbit spews:

    @3 You are making an apples-to-oranges comparison, Hannah. Gas prices in England, Germany, France, Australia, and Canada consist of taxes to a large extent; and Europe is in a totally different situation than we are, because they have a public transportation system that makes car ownership unnecessary for most people. America, on the other hand, stupidly made itself car-dependent.

    America’s institutional stupidity was made even worse by the personal stupidity of individual American consumers. What did they do when gas prices were low? They rushed out and bought gas guzzlers. Any idiot could have foreseen this would be followed by tightening supplies and spiking prices.

    Al Gore was right all along. If we would have slapped on a 50-cent-per-gallon federal gas tax to discourage wasteful behavior, we’d be paying $1-a-gallon less now. And the money would have gone into the Federal treasury instead of Arab treasuries. It could have been used to reduce deficits, strengthen the dollar, keep inflation low, and pay for medical care for our citizens.

    But the wingnuts hooted and laughed at Al Gore. Once again — as always — they were dead, dead, dead wrong. Now we should be hooting and laughing at them, except the consequences of their willful stupidity are so serious for the rest of us that nobody feels like laughing. Maybe we should kill them instead.*

    * Just kidding! Ann Coulter humor. Remember, she’s the one who started the concentration camp and genocide jokes. Those lines get her big laughs, so I thought I’d try to make some hay from death humor, too. These jokes are for entertainment purposes only.

  18. 19

    Typical White Person (aka rob) spews:

    RE: 15, I mispoke, the dollar has gone down 50% causing a 100% increase in the price of oil.

  19. 20

    Roger Rabbit spews:

    @5 Demand is up, but so is production. In fact, the demand overhang of 2002 (when Venezuelan production was disrupted) has been erased. (Click on the link below and scroll down to the third chart in the article.) Yet, crude prices are much higher today than in 2002, when demand exceeded supply. That has to be due to something other than a supply-demand imbalance.

    http://www.safehaven.com/article-3956.htm

  20. 21

    klake spews:

    Roger Rabbit spews:

    @3 Gas prices in England, Germany, France, Australia, and Canada consist of taxes to a large extent; and Europe is in a totally different situation than we are, because they have a fully developed public transportation system that makes car ownership unnecessary for most people.

    You bet Rabbit we need their socialist systems over here running our lives. They tax the hell out of gas just to get the poor on to light rail, trains, buses, and bicycles. Now you can take that light rail to the VA hospital for your next check up. You are right there is many reasons for high gass prices but lets not let the goverment off the hook. Maybe if you deploy more police officers to hand out parking tickets on I5 we could fund the light rail and not have to build parking lots. Yes just keep raising the taxes we can all afford to throw good money after bad ideas. Oh! I forgot those folks in Europe are buying cars faster than they can make parking spots maybe Diamond Parking should out source to Europe.

  21. 23

    Roger Rabbit spews:

    @14 It doesn’t matter how much money Dick Cheney raked in because he isn’t going to live long enough to enjoy it.

    Maybe I should say it doesn’t matter to him. It certainly affects the rest of us.

    What I don’t understand is why people who will soon be dead are so fucking greedy. The guy is being kept alive by AAA batteries and can’t possibly be much longer for this world. What is he going to do with all his clandestine oil profits? Try to spend them in Hell’s PX?

    It’s one of life’s enduring mysteries.

  22. 24

    Roger Rabbit spews:

    @15 “Has the economic genius Maria Cantwell noticed that while oil prices have gone up 100% the dollar has gone down 100%.”

    I’ll pay you 5 cents on the dollar for your American currency! That’s a 5% premium over the value you ascribe to your money, so you should jump at this opportunity!

    Why is it that wingnuts can’t say ANYTHING without getting the basic facts wrong? Is that a congenital defect found only in the offspring of Republican mothers?

  23. 26

    The Blatantly Obvious spews:

    Re: post 21

    It is odd, but even with the HA updates, Klake’s posts still come out completely indecipherable.

  24. 27

    Roger Rabbit spews:

    The declining dollar does NOT explain the huge runup in crude prices.

    “Effect of US dollar value on oil prices

    “The ‘price of oil’ is closely tied to the value of the US dollar because oil is traded in dollars. … In discussing the effect of the changing value of the US dollar on the real price of oil, however, it is important to include a calculation of effective exchange rates of the currencies in question, to separate the real and nominal values of those currencies.

    “This method accounts for the amount that a dollar can buy (of electronics or food for example) compared to the amount another currency, such as a Euro or Pound sterling, can purchase. While the US Dollar has lost nominal value to other major currencies from 2001 to 2007, its change in real value has not differed significantly from other currencies.

    “In addition, by comparing the price of oil in various currencies to the fluctuations in the exchange rates of those currencies it is clear that oil price is no more significantly correlated to the value of the dollar than to any other currency. … [S]ince the early 1970s, the price of oil has been negatively correlated to the value of the dollar, suggesting that the price of oil has more of an effect on the value of the dollar than vice versa. As developed economies depend heavily on oil for transportation, petrochemical feedstock, and industrial agriculture, this correlation would affect most currency values.”

    http://en.wikipedia.org/wiki/O.....oil_prices

  25. 29

    Roger Rabbit spews:

    @19 You didn’t get it right on your second try either, dummy. You should quit before you dig yourself into an even deeper hole.

  26. 31

    Roger Rabbit spews:

    It’s not my fault you wingnut jackasses evolved with flat feet instead of rabbit feet.

    I have better connections than you do.

    HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR HAR

  27. 32

    harley 'wrapped in the bloody flag' fouref spews:

    re 19: Is the tax on each gallon of gas, or, the dollar amount of each gallon? Think about it.

  28. 33

    michael spews:

    What are the righties all worried about. If the oil companies have done nothing wrong then they have nothing to fear…

  29. 34

    harley 'wrapped in the bloody flag' fouref spews:

    re 19: The Bush junta mandated an increase in the ‘strategic’ oil reserves, thereby artificially reducing the amount of storage space available for oil that can be refined. This creates an artificial oil shortage and an equally artificial increase in the price of gas in response to the ‘shortage’.

    Free market, my ass.

  30. 35

    michael spews:

    The oil companies, of course, may have done absolutely nothing wrong. We can’t know that until someone takes a look. All Cantwell is saying is that those people (the FTC, right?) who have the power to look into this should. It’s nothing earth shattering.

  31. 37

    What'sittoya spews:

    Why is Obama getting money from Big Pharmaceuticals? And why are two of his fundraisers oil company executives???

  32. 38

    Roger Rabbit spews:

    Why We’re Going To Have A Depression

    Because consumer spending is 70% of the economy, and the middle class is getting slammed from every quarter, so discretionary spending will vaporize. That’s why.

    $4 gas
    $4 milk
    $4 bread
    $1,000-a-month Rx co-pays
    30% credit card rates
    1/2% interest paid on savings
    falling wages
    rising unemployment
    higher property taxes
    declining stock prices and home values

    Everywhere you look, all you see is gouging of consumers and nickel-and-diming of wage earners. Americans’ pockets are being picked, and they have less and less spending money. So, they’re spending less. And, as the recession deepens, they will have even less to spend and will spend even less.

    As I’ve been saying all along, when businesses succeed in outsourcing all the good jobs, knocking down wages in the remaining jobs to nothing, and reaming consumers at the checkout register, no one will have any money. And then who the fuck do they think they’re going to sell their goods and services to? Each other?

  33. 39

    Roger Rabbit spews:

    37 Because the only way you can raise the $1 billion it takes to get elected president is by panhandling the corporations who give away that kind of money. They all do it. Every single politician depends on corporate money. Our government is a wholly-owned subsidiary of Big Bidness, and the public be damned!

  34. 40

    zip spews:

    Watch out for your 401k if Cantwell succeeeds in crucifying Big Oil. Exxon Mobil is only the largest corporation in the world. Just about every mutual fund owns a nice slice of XOM as well as other Big Oils.

    Oh and by they way I agree with you Roger @ 39. This is another reason Big Oil will not be crucified any time soon.

  35. 41

    Don Joe spews:

    @ 24

    Roger, the bloke at 15 is the same “economic genius” who still hasn’t figured out that quantity is on the horizontal axis of the demand and supply curves.

  36. 42

    Marvin Stamn spews:

    2 things democrats/liberals never talk about.
      
    1. The profit margin on a gallon of gas
    2. The oil companies are paying record taxes
      
      
    Why is that? Are democrats/liberals afraid of facts?

  37. 43

    Marvin Stamn spews:

    And a 3rd thing.
      
    3. The amount of “profit” the government makes off a gallon of gas without doing a thing to earn it.

  38. 44

    Mark The Redneck-Patriot spews:

    How many fucking times has price fixing been investigated? Feds do it coupla times per year and every fucking state AG has done it dozens of times. Every fucking time, the conclusion is that it’s market forces. LiarfuckingCantwell knows this. Why the fuck does she keep doing it? Does she like looking like a dumshit?

  39. 45

    Particle Man spews:

    Goldy, Goldy, Goldy you must know by now that Dino is not a detail guy, not interested in numbers (unless the numbers are preceded by a $ sign).
    Still, like you, I am holding my breath in anticipation of the BIG Rossi “progressive” roads plan.

  40. 46

    rhp6033 spews:

    What’s his name (Bob Brinker?) on his regular MoneyTalk show on KIRO last Sunday, said that all the big money was shifting to commodities, especially oil. He said that the big money managers were waiting until the general public jumped into commodities, which to the money managers is the signal that the bubble has peaked and it is time for them to get out, leaving the small investors as the suckers to be left holding the bag as the bubble bursts.

    (Spoken by someone who has been left with a couple of burst bubbles in his hands over the past several decades).

  41. 47

    rhp6033 spews:

    Off Topic, but too good to pass up.

    Bernie Peng, a fellow in Jersey City, New Jersey, reprogrammed his girlfiend’s “Bejeweled” game on her cell phone to pop a marriage proposal once she hit a certain score. She said yes. Now PopCap, the Seattle company which makes Bejewelled, will fly the couple to Seattle for part of their honeymoon.

    “Most video game companies would frown on people manipulating their games,” said Garth Chouteau, a spokesman for PopCap. “But it won him a woman. As a bunch of geeks we have to say, ‘Bernie, hats off to you.'”

    http://www.msnbc.msn.com/id/24126242/

    I thought Garth’s comments were so funny I almost spilled my coffee.

  42. 48

    Hannah spews:

    @47 – HILARIOUS and cute story! Thanks for sharing! I actually had coffee out the nose on that one! :)

  43. 49

    Kaka Maria spews:

    “Cantwell wants probe of petroleum market manipulation”:

    McCain wants amnesty from federal gas taxes. Which (it was reported today) exceed 18% of the cost of a gallon of petrol, and way exceed the obscene profit pilfered & pocketed by oil companies.