Should we outsource elected official jobs to Saudi Arabia?

It's scary when the Saudi's are more protective of the US economy than US elected officials. Saudi Arabia is taking steps to punch a hole in the hedge fund trading bubble by increasing oil production. While our elected officials play the same old games, nothing happens to help energy consumers. If there were no other evidence, the run-up of $11/barrel in one day is proof beyond a reasonable doubt of an energy futures trading market gone bad.

Oil prices, and anything made from or makes use of a barrel of oil in getting to their respective market places, are drastically impacted by current oil prices, and the businesses and consumers who have to deal with the fallout are bankrupted. Yet, the U.S. Senate continued to do nothing this week on two energy-related bills. The only recent action on the problem (if you can call it action) is that the Commodity Futures Trading Commission (CFTC) finally began to investigate energy market trading for manipulation and now sees the need for a task force. Just what we need -- another task force! The Bush Administration owes it's continuing existence to the delays Senate task forces bring to any actual truth finding mission.

Yet Senator Dick Durbin (D-Ill) wants to give the CFTC even more money to continue thinking about the problem. "I don't pretend to have all of the answers as to why gas prices keep going up, but I certainly see a problem that needs to be addressed," Durbin said on the Senate floor Monday. "It is time to give the CFTC the resources it needs to collect and analyze all of the relevant data, so that it can really understand what is causing these huge spikes." Prehaps Durbin didn't catch the Senate Commerce Committee hearing on energy markets chaired by Sen. Maria Cantwell (D-Wash) last week.

Dick may not have all the answers, but the Senate hearings last week revealed a solution that promises to quickly halt run-up in energy prices. It's a simple solution that costs nothing. Just remove the "Enron loophole" put in place in 2006 that allows unregulated commodity futures trading in the US. The House of Representatives has introduced legislation to do just that.

Rep. Bart Stupak, D-MI, chairman of the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations, said a lack of regulation has contributed to the meteoric rise of crude oil prices: "You can certainly see manipulation of the price in the market that you never saw before." Stupak's bill would require the Commodity Futures Trading Commission to oversee U.S. crude oil futures even if they are traded on overseas exchanges. "This is Enron all over again, just a little bit more sophisticated.

Instead of throwing our good money after bad at a do-nothing federal agency (and continuing to confirm Bush Administration do-noting appointees to federal agencies), Senator Durbin could lend his support to Representative Stupak's legislation by going on all the airways and lobbying to the public about this much needed legislation. So far, the news blabbers on the airways haven't blabbed a word -- they're still on the "use less, drill more" mantra. Maybe Senator Durbin could even show up for the June 23 House hearing on CFTC oversight to see what he can learn without throwing more money at the CFTC. Maybe some of the others Senators running for re-election this year will want to do the same and then hit the airways. As Congressman Stupack has said, "We don't have time for studies. We need solutions now."

What can we, the tax-paying energy consumers, do? Well, there is the impeach Bush movement underfoot that will let you vent some of your frustrations. I'm more for a movement to impeach our entire do-nothing government by voting for term limits in November. Maybe you will want to vote your pocketbook this year as well! Unless you just want to outsource all our elected official jobs to a country who seems to care about our (one of their best customers) economic well-being -- like Saudi Arabia?

Why are gasoline prices so high? Would you believe the folks behind Enron are behind it again?

Why are gasoline prices so high? Well, it seems there's plenty of oil coming out of the ground. The problem is that commodity traders are trading "oil futures" and every time a barrel of oil gets traded on the futures market, the price goes up. Between the price of a barrel of oil coming out of the ground and the refinery that will turn it into gasoline are numerous unregulated trades that drive up the price.

F. William Engdahl in a recent Global Research post explains the situation and argues that at least 60% of today’s $130 per barrel price of crude oil comes from unregulated futures speculation by hedge funds. Engdahl says that through a regulation exception granted by the Bush Administration in January 2006, trading of US energy futures by ICE (Intercontinental Exchange) Futures in the United States is not regulated anymore.

If you'll recall, the U.S. Commodity Future Trading Commission - CFTC - exempted over-the-counter energy futures trading at Enron's request in 2000 and, even knowing what happened then, did it again in 2006 to the benefit of ICE Futures. You, of course, are again the biggest looser in this deregulation game.

In his detailed article, Engdahl identifies the giant financial institutions leading the current oil trading: "Goldman Sachs, Morgan Stanley, JP Morgan Chase, Citigroup, Deutsche Bank or UBS. The key exchange in the game is the London ICE Futures Exchange (formerly the International Petroleum Exchange).

ICE Futures is a wholly-owned subsidiary of the Atlanta Georgia International Commodities Exchange, founded in part by Goldman Sachs which also happens to run the world’s most widely used commodity price index, the GSCI, which is over-weighted to oil prices."

What's an immediate solution to the current crisis? Engdahl suggests that it's simply to re-regulate energy futures trading in the U.S. and anywhere else within the long-arm of U.S. laws. Is the solution to driving down gasoline prices really that simple?

It's definitely worth a try. We're all smart enough to know that instant answer is not drilling new wells that will take 5-10 years to come online, it's not agri-fuel that soaks up about as much fuel as it generates, it's not nuclear until someone deals with waste disposal, it's not oil shales for the same reason as agri-fuel, it's not fuel efficient engines in 10 years, but it may be electric cars and "transportation stamps" (aka food stamps) for use on public transportation.

In short, we need an instant solution to a problem that is driving business in the US out of business, that is, every business except hedge fund trading. Yes, we need all those "someday" sources of energy, and we need to work toward those goals, but we need to stop speculative trading now. That's a real simple solution that costs the taxpayers nothing.

Is that likely to happen? Maybe, if you stay on the ball. Seems our Senate is studying the issue as are regulators, which means we won't get any immediate relief unless there are some loudly yelling constiutuents. Why will it take yelling? Well, the big guys still have friends and lobbyists in Washington.

It seems the same guys who gave us Enron and the recent mortgage crisis are in the middle of our current energy crisis. The Enron exemption was a present from Senator Phil Graham who managed to get regulatory exemptions for electric commodity trading included in 2000 Commodity Futures Trading Commission legislation. Recently, Phil has been renamed Foreclosure Phil, and he is currently helping Republican Presidential candidate McCain, who admits to knowing little about the economy, figure it out in a way that continues the rape and plunder -- what's was that pledge to get rid of lobbyists? What was that about getting rid of political influence by big campaign donations?)

Are our regulators aware of the problem. Sure. But the CFTC is pretending they're just becoming aware of the problem and beginning to begin to think about regulating. That's only because of public outcries and because elections are coming. Right now, all they're doing is talking about new rule making. The reality is that new rules are not needed. Rule making is just the Bush Administration's way to run out the clock at the expense of gasoline and fuel oil consumers. Ending exemptions to existing regulations and enforcement of speculative trading laws will go a long way to cure the instant problem.

A former CFTC regulator explained it well in a Senate hearing this past week. A recent New York Times article explain how the market manipulation happens -- "these funds have become an increasingly large player in the commodity futures markets, rising from a stake of roughly $13 billion in 2003 to an estimated $250 billion this year. Unlike traditional commodity investors or balanced hedge funds, these index funds do not both buy and sell commodity futures — they only buy, reflecting investors’ desire for a stake in a rising market." The more trading, the faster oil prices rise.

The current Commissioners of the CFTC appointed "by the President, with the advice and consent of the Senate," to serve staggered five-year terms are: Acting Chairman Walter Lukken -- (who's for him); Commissioner Michael Dunn; Commissioner Jill E. Sommers; Commissioner Bart Chilton -- (who's for him). Jill E. Sommers and Bart Chilton were sworn in as CFTC Commissioners in August 8, 2007. Give them a ring or send them an email to let them know you care.

Is energy market manuplation illegal. Yes, sure is. Here's the law. Insist your Commissioners refer any suspicious trading immediately for criminal investigation.

Who in Washington is actually looking over the shoulders of CFTC to try to force them to do their job? Not many, most are still doing the Republican vs. Democrat dance of "drill more" vs. "alternative fules" and ignorning an instant solution to the problem. However, Sen. Maria Cantwell (D-Wash.), chair of the Senate Commerce Committee, is overseeing a hearing on the issues. -- I happened to catch it on C-Span about 2:00 am. You can watch a video of the hearing here: http://video.aol.com/video-detail/senate-commerce-cmte-hearing-on-energy-market-manipulation/1833408978 or here http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=205797-1.

Senate hearing testimony came from:

1. I. Michael Greenberger, now a Law Professor but Former Director of the Commodity Futures Trading Commission Trading Regulations group, explained how banks control the market. He says:

We're paying, some believe, as high as a 50% premium to the pockets of speculators that are operating in markets that are completely unpoliced.

At least 70% of the US crude oil market is driven by speculators and not people with commercial interests.

Goldman Sachs and Morgan Stanley, control the price of oil and natural gas through the ICE futures market. Morgan Stanley currently owns 27% of natural gas futures.

The "Enron loophole" in the Commodity Futures Modernization Act of 2000 legislation, allows oil futures to be traded electronically in unregulated markets outside the US, resulting in the inability of the CFTC to regulate futures trading outside the US, which contributed to the Enron crisis, the recent CDO-subprime crisis, and current energy market crisis.

Current attempt to close the Enron loophole by Senator Levin through the Farm Bill will not work because it leaves the government the constant burden of proving manipulation and can only be enforceable on domestic market manipulators and not international ones.

Closing the Enron Loophole with a broader, international scope would stop market manipultion and would cause oil prices to plunge over 25% overnight.

Congress should impose increased margins for oil traders and regulate hedge fund owners' public speculation on oil prices.

Immediate action is required.

2. Gerry Ramm, representing Petroleum Marketers Assn. of America -- Ramm, now president of Inland Oil of Ephrata, Wash., was plain-spoken.

Excessive speculation on energy-trading facilities is the fuel that is driving this runaway train in crude-oil prices.

Oil-market activities are making speculators rich, while the retail side of the industry is getting squeezed.

Last year, gasoline dealers and heating-oil retailers saw profit margins from fuel sales fall to their lowest point in decades as oil prices surged. Most station owners make their profit by selling drinks and snacks.

Retailers are near the limits on their credit lines because of the high petroleum prices. This creates a credit crisis with marketers' banks, which creates liquidity problems and may force petroleum marketers and station owners to close up shop.

If you think it's bad now, try buying fuel oil this fall!

3. George Soros, Founder and Chairman, Soros Fund Management, told the committee that speculation, "reinforces the upward pressure on prices" and is "distinctly harmful" to the economy... "The rise in oil prices aggravates the prospects for a recession."

4. Senator Cantwell's position:

There are four things wrong with the CFTC’s weak approach [to regulating hedge fund trading].

First, there is still no large speculation limits that are critical to preventing fraud, manipulation and excessive speculation.

Second, the CFTC will not collect the same kind of information that it would collect from other fully regulated exchanges. The information will be unaudited and unverifiable.

Third, unlike fully regulated U.S. exchanges like NYMEX, there are no enforcement mechanisms.

Fourth, the CFTC approach [to study whether or not regulation is needed] is partly just an agreement to agree – there are no firm commitments – so all of these measures may not even be put in place.

The CFTC’s announcement appears to be nothing more than a ruse to deflect criticism for its serious abdication of oversight responsibility. We look forward to hearing a formal response to our letter insisting the CFTC fully regulate all trading of U.S. energy commodities and close the “London-Dubai-Oil-Loophole.”

If the CFTC does not act, I am planning to introduce legislation that will force them to. For those of us who suffered Enron’s manipulations, we have plenty of perspective to share with the CFTC. We want federal oversight agencies to do their job.

We expect federal oversight agencies to actively police the oil markets for fraud, manipulation, and excessive speculation.

If you believe Senator Cantwell is on the right track, as I do, let Senator Cantwell know you support her Senate action and expect quick follow through. Let the other members of the Senate Commerce Committee hearing this matter, Senators Snowe, Dorgan, Kerry, Boxer, Klobuchar, and McCaskill, know that you support their efforts and expect follow through. Demand from Senator Clinton and Senator McCain and Senator Obama immediate action to force the Bush Administration to rescind the Enron loophole-- in oil market trading, in the farm products trading, in mortgage market trading, in all markets trading.

It's time our regulators regulate again. Our elected officials need to act quickly. It's an issue that will make or break both this country's economy and candidates in the next election. Maybe it's time Obama and McCain took it on as a bi-partisan campaign issue. Maybe it's time our Congress and Senate representative spent their five minutes of opening remarks addressing this hedge fund trading of energy futures. It's either that, or be blamed with doing nothing! When the bubble bursts, it will be a big burst for our economy. If it doesn't burst, you'll be freezing in the dark come November.

What else can you do? Remember, you have the power to communicate your will to your elected officials and you have the power to vote for term limits again in November if they don't listen to you. This year, vote your pocketbook and not your prejudices or party!