Oil Prices Are All Speculation

The Administration says oil's runup is due to shortages, but the evidence points to manipulation

by Ed Wallace

"The problem you had in California was caused by a combination of things: an unwise regulatory scheme, because they didn't really deregulate. Now they're trapped from unwise regulatory schemes, plus not having addressed the supply side of issues. They've [Californians] obviously created major problems for themselves." —Vice-President Dick Cheney, May 17, 2001, on PBS's Frontline

"Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices. There is no evidence that we can find that speculators are driving futures prices for oil." —Secretary of Energy Sam Bodman, June 21, 2008, on MSNBC

Today, while energy prices are crushing American families, I think we'd all benefit by reflecting on what happened with energy in 2001. Seven years ago, Enron was fleecing California, extorting its people for electricity to the tune of billions of dollars. As is true today, some voices in the Administration claimed that supply shortages, not manipulation, formed the core of California's soaring electricity prices. Yet, now that we know the whole story of Enron's criminal manipulations, many menbers of the media have forgotten how in 2001 the White House deflected any blame for California's suddenly stratospheric electrical costs away from their Houston friends.

Likewise, our Energy Secretary has a real problem discussing issues with facts. Like a broken record, he continues to maintain that in no way has speculation had anything to do with today's high oil prices. No, to hear Sam Bodman tell it, they are now and always have been caused by too many buyers chasing too few barrels of oil. But, while that might have been true in 2004, things have changed. And so I give you just one week of news from the oil market. To be more exact, it's the oil news from the seven days preceding our Energy Secretary's comments about supply and demand.

It Was Printed in English

"[U.S.] demand for oil over the first five months of the year was off 2.5%* from last year." —American Petroleum Institute, June 18, 2008, Associated Press Online (*Translation: We are using approximately 525,000 fewer barrels of oil per day.)

"Iran has 15 [oil] supertankers idling in the Persian Gulf capable of storing more than 30 million barrels of crude." —Bloomberg, June 16, 2008

"Thunder Horse started pumping from a single well on Saturday…and on schedule to have the field online by yearend. Thunder Horse alone will increase overall U.S. oil and gas production by 3.6%. Add British Petroleum's Atlantis platform that started up last year, and the boost grows to 6.4%." —Houston Chronicle, June 16, 2008

"Asian refiners cut West African crude oil imports in June. Asian imports will fall 36%* to 830,000 barrels a day this month from May's 1.3 million barrels per day." —Bloomberg, June 17, 2008 (*Translation: Another 470,000 barrels a day of mostly light sweet crude rejected by the market.)