A recurring theme that Barack Obama has touted is that oil speculators are largely responsible for the current high gas prices. He sounded a note of it during his campaign for President back in 2008. He has returned to the issue during his time in office, speaking over the years about the problems wrought by oil speculators. Back then, his solution was to appoint a commission on oil speculation, a commission which has only met a few times since its inception. Recently, Obama has come back to this topic yet again, calling on lawmakers to increase civil and criminal penalties for manipulative trading. He has also called for more money to be directed toward the agency charged with policing the market and to have regulators set trading margins. However, Obama is wrong about oil speculation and wrong in the ways he proposes to address it.
First off, Obama’s commissions accomplish nothing beyond sounding good. House Speaker John Boehner has asked “Where is his Federal Trade Commission? Where is the SEC?” Boehner has further said that “he’s got agencies there, so instead of another political gimmick why doesn’t he put his administration to work to get to the bottom of it.” Senate Republican leader Mitch McConnell has been critical as well, noting that “it probably polls pretty well, but I guarantee it won’t do a thing to lower prices at the pump.”
Mitch McConnell is right. It polls well. Obama milks oil speculation like he has milked so many different issues. He is a demagogue who manipulates the public. Obama knows that the average American hears the words “oil speculator,” and he automatically feels repulsed. Obama demonizes certain groups such as the rich, companies, and oil speculators and engages in emotional appeals to satisfy his own ends. He harps away against the oil companies, saying “ I know that if you’ve got a limited budget and you just watch that hard-earned money going away to oil companies that will probably make record profits this quarter, it’s pretty frustrating.” With charged phrases like “hard-earned money” and “record profits,” Obama makes sure that many of his listeners come away emotionally changed.
Besides being a demagogue, Obama is also fundamentally misunderstanding how speculation works. In an old article in The Freeman, Walter Block clears away this kind of misunderstanding by pointing out the benefits of speculation. Block first notes that speculators seek to buy when prices are low and sell when they are high. By buying in the low price periods and selling in the high price periods, speculators increase prices in low price periods and decrease them in the high price periods. In other words, speculation tends to dampen the price oscillations which occur in the market, not make them worse, as Obama would argue.
Interestingly, Obama’s plan to have regulators set trading margins would quite possibly have the effect of increasing price oscillations. The Commodity Futures Trading Commission would have the power to determine how much speculators would need to pay to trade U.S. crude oil futures with the ability to increase it when prices move too far. However, this power would push out smaller investors, leaving only Wall Street banks and hedge funds able to put up enough money to trade. Broker Jay Levine stated that that “reduced liquidity often means increased volatility,” meaning Obama’s plan could increase rather than decrease volatility in the crude oil futures market.
The price is mainly due to other factors besides oil speculation, including Mideast tensions and the fundamentals of supply and demand. Republicans have argued rightly that supply obviously has an impact on price and that an expansion of supply would definitely bring prices down. John Boehner has sought votes on domestic oil and natural gas exploration, a freeze on refinery regulations, and approval of the Keystone Pipeline XL which would have run from Canada to Texas. Of course, these solutions are those which Obama and the Democrats are loathe to do. They just cannot face that the solution involves reducing government regulation instead of increasing it.
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As an individual that has taken the time to educate myself about business and economics I am appalled at the flagrant abuse of our economic interests in this nation by Obama and the Democrats. They show that they do not even have the rudimentary knowledge of a novice or a 3th grade school girl when it comes to economics, they always push any perceived injustice onto business which only brings about decreased competition and higher prices to all of us.
It is simple economics, if someone cannot make a profit providing the good or service it will simply disappear from the market place along with the jobs that service these industries. We are now in a downward spiral since only 1/2 of the nations citizens pay any taxes, as Democrats continue their economic destruction of the economy more and more jobs and industries are eliminated, leaving fewer taxpayers to pay for their burgeoning federal programs.
We will simply collapse under this weight if this madness is not stopped in the near future. Our entire Nation will resemble Detroit in short order with Obama and his minions as petty rulers and tyrants over a wasted landscape and economy, it is our duty to bring this abuse of the American Citizens to an end.
Even the CEO of Exxon agrees that speculation raises the p[rice of crude oil and gasoline Republican Eric Cantor has told oil speculators……republicans have their backs. Who is looking out for the backs of Americans?. Every business wants to make a profit, but when grredy Wall St firms like Goldman Sachs and Morgan Stanley manipulate the market for their own profits off the backs of over 300 million Americans…..it becomes immoral. Why is the data on oil future bids kept secret from the American people? These are not national secrets, the people deserve to see just who is bidding up oil futures and eventuall the price of gas.
Al Halbert says Democrats are destroying the economy and eliminating job growth. Al should realize that consumer demand creates jobs and the middle class with their stagnant wages over the last 30 years just cannot drive the economy as they used to with their spending. That is why , in a recession, the government should be putting money into the economy to stimulate it and keep it going until a recovery. This is the opposite of what republicans propose with their budget cuts for low and middle class and more tax breaks for the well off. How many Obama jobs bill, bills that would have created jobs by building new bridges, improving roads, new buildings, have republicans blocked? These jobs would have put construction workers back to work and created more jobs down the line with their paychecks.Republicans blocked them. In Sept. 2010 republicans blocked a bill by democrats that would have cut off tax breaks to companies outsourcing American jobs. That shows how republicans feel about American jobs. Republicans supported big business over American workers.
From the Article above:
He harps away against the oil companies, saying “ I know that if you’ve got a limited budget and you just watch that hard-earned money going away to oil companies that will probably make record profits this quarter, it’s pretty frustrating.”
But what is even more frustrating is the government dipping into my paycheck taking taxes by force, then giving that money from my taxes to companies like Solyndra who not only get my tax money up front, but then fail to return anything. After which they go bankrupt after paying off all of their executives and stockholders leaving the tax payers holding the bag, all by govenmental design.