By on June 23, 2008

vera-ribbon.jpgBloomberg reports that Democratic presidential candidate Barack Obama is proposing new rules to increase government interven… err… oversight in energy markets. He wants to "require the U.S. Commodity Futures Trading Commission to regulate trading in energy futures contracts and direct the commission to investigate ways to lessen speculation, such as increasing margin requirements." As oil takes an extended sojourn in the neighborhood of $135/barrel, Obama joins the growing chorus blaming high oil prices on greedy speculators. While Sen. Obama rails against the "Enron loophole"– allowing energy speculators to speculate without Uncle Sam riding herd– he's also busy promoting ethanol. And ethanol is promoting him. According to the New York Times, one of Obama's advisors, Tom Daschle (yes, that one), identifies himself as a man who spends "a substantial amount of time providing strategic and policy advice to clients in renewable energy." (That's a lobbyist, to you and me.) Obama's also traveled on a corporate jet owned by "Archer Daniels Midland, which is the nation's largest ethanol producer and is based in his home state;" not-so-coincidentally the nation's second-largest corn producing state. In fairness to Senator Obama… no, that's all I got. 

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33 Comments on “Obama Hates Oil Speculators, Hearts Ethanol...”


  • avatar
    shaker

    This relationship will be his undoing…

  • avatar
    skor

    I really wanted to believe that Obama was an outsider and this time it would be different. I guess I was wrong. If this type of populist douche-bagism is actually implemented, it may well decrease the price at the pump, except there won’t be anything to pump. When any commodity price is forced below it’s market level, you get shortages — see economics 101.

    BTW, Obama, like McCain, refuses to point out the elephant in the room. “Evil” speculators are bidding up the price of crude in anticipation of a disastrous American/Israeli attack on Iran.

  • avatar
    psarhjinian

    He’s in politics. He’s bought and paid for to some degree; you cannot make it in office without selling out to someone(s), regardless of your affiliations.

    And we’re surprised by this?

    Until we get a “perfect storm” candidate of sufficient independent wealth, respectable popular appeal and no unstated baggage, this is always going to be the case.

  • avatar
    mel23

    I’m disappointed in some of what Obama does too, but how far would a candidate get who told the truth, the whole truth, etc.? NOWHERE. The only way to get done what has to be done is to lie in order to get elected and then do what’s right. Of course such a candidate would get crucified for that too.

    It’s amazing, with all the informed opinion about climate change, and lots of evidence, that we still have politicians blubbering about the cost of dealing with it. Like the alternative is cheap or even viable.

  • avatar
    marc

    The only reason we have ethanol is because Iowa is the first state that votes in primaries/caucases. Every candidate that hopes to start their campaign has to take the pledge to support ethanol. Maybe Obama will back down once he wins in November. Course there’s always the fear that he would have to run in Iowa again in four years.

    West Wing did a good episode about this, I think it was called “The Pledge.” The candidate (Jimmy Smits?) knew in his heart that ethanol was a joke, but i think he ended up supporting it to win the state, and that proved he was willing to do whatever it took to get elected. It was the real start of him taking his campaign seriously.

  • avatar
    sean362880

    Well, Obama’s half right. The Enron loophole is real and needs to be closed. The CFTC has dropped the ball on energy markets for years. Anybody who is interested should read Michael Greenberger’s testimony on energy market manipulation.

    http://commerce.senate.gov/public/_files/IMGJune3Testimony0.pdf

    As for ethanol, he and every other politician are on the wrong side of that coin. Sad, really, that the corn ethanol lobby has so much power, and that the taxpayer has to foot the bill.

  • avatar
    improvement_needed

    speculators are not the problem. they’re good for the main stream media to complain about (it’s easy to pick on fat cats on wall street or guys in their mother’s basement), but, speculators play with ‘paper oil’, not real oil…

    eventually, that oil futures contract will result in ACTUAL oil being delivered. The final sale on the commodity market, to an actual entity that will take delivery, is sold at a true price that somebody actually will pay…

    for a better write-up on this, see:

    http://www.economist.com/opinion/displaystory.cfm?story_id=11454989

  • avatar
    OldandSlow

    I love the reference to ADM.

  • avatar
    Alex Rodriguez

    McCain dropped the ball on the speculator issue, he should have been out in front on that. Obama picked it up and ran, and is right in the fact that the laws regulating the commodities markets are so big, you could drive a starship though them. It’s fantasy land over there, you can do what you want and manipulate the market all day and twice on Sunday and make boatloads of cash. You want $1 billion worth of oil futures? 4 bucks and a few loose coins and you have yourself 10 million barrels. And you can purchase those shares at the Jakarta Stock exchange from some guy named Hashish.

    Now if he can just pick up the ball on domestic production and pushing hard for other alternative energy sources, he might do something if he wins.

    McCain’s idea for a $300 Million “X-Prize” for battery breakthrough is a great idea, but that’s a whole different matter.

  • avatar

    The bashing of oil futures trading is pretty bizarre.

    Suppose I want to hedge the value of my stock portfolio against rising oil prices by buying an oil future. Is the government going to disallow this? And leave me exposed to rising oil prices?

    The truth is futures are derivatives. Without genuine concern about future oil supply, they wouldn’t be a problem.

  • avatar
    Alex Rodriguez

    EJ_San_Fran

    Problem #1 is that you can buy oil futures for pennies on the dollar, and that a million “hedgers” are now using a commodity to hedge their portfolio. In fact, the market designed to mitigate risk between the actual buyers and sellers of product has become “The 2008 California Gold Rush” for millions of people, at the consumers expense.

    The buyers and sellers of the product, who actually make the product and take delivery of the product don’t even constitute a tiny percentage of the market now.

  • avatar

    and people AREN'T speculating in corn? Give to me a break, Mr. Obama. I knew ethanol was a bad idea when I saw footage of George Jr. with his hand on an ethanol pump, saying something like "this is the future right here". In retrospect, he did not say that is was a good future. Bush and all of his oil cronies are for ethanol because they know that they will not sell one drop less of oil since the production of this new alternative "green" fuel requires as much oil to produce as is gained. This unsustainable ruse is unstoppable now as it is so entrenched with the farmers (who do not need more subsidies with their record profits). You want change, Mr. Obama? Get rid of the ethanol and buy your own lunch instead of eating with the corn people (Midland), the oil lobby, and the farm lobby. Good luck to you sir.

  • avatar
    red60r

    At least, his website mentions an interest in cellulosic ethanol development, not just further exploitation of the corn crop.

  • avatar

    Ethanol is just a big subsidy for farmers, as if they weren’t getting enough of a welfare check from the government.

  • avatar
    d996

    Skor is right on the money that most of the speculation is due to a possible Israeli attack in Iran. Whether that would be disastrous is too complicated to figure out, but appeasement hasn’t worked with the mullahs, maybe force would. George Carlin had a lot of life figured out, more than most, he claimed much of what annoyed society was caused by religous superstition which sadly is rife in the middle east. Can’t they just fight over whether domestic cars are just as good as imports?

  • avatar
    folkdancer

    bidding up the price of crude in anticipation of a disastrous American/Israeli attack on Iran.

    How much longer and how many more dead soldiers before we get to steal Iraq’s oil?

    The sad thing is that many Iranian people are well educated, sophisticated, and cosmopolitan and they LIKE us.

    How do we escape from the religious crazies on both sides and the oil companies?

  • avatar
    GS650G

    I bought a mutual fund specializing in the oil and energy biz and it’s up 10% in two months. I made enough there to cover all my fuel bills.

    Thanks God for capitalism.

    Obama the savior would probably like to see that sort of profiting reeled in. Fine. Let’s see him try. Maybe the country needs more stupid pet tricks from the politicians to convince them we need to take power away from these people instead of trusting them with more.

    Pols are good at taking your money and giving it away, they know little about economics and nothing about science, engineering and chemistry.

  • avatar
    monsenor

    Ethanol. Windfall profit tax. Control of those evil oil speculators.
    If these are ideas to lower the price of gas at the pump…the candidate is clearly out of ideas.
    Obama is beginning to look as bought and paid for as anyone else.

  • avatar
    romanjetfighter

    I think Ron Paul was the only one “indepedent” enough, really. Obama’s the same crap in a different wrapper.

  • avatar
    WildBill

    I think my wife had the right idea: “Kill em all, take their oil”! Sounds like a T-shirt or bumper sticker.

  • avatar
    essen

    Obama’s latest bit of brilliance is that he is against offshore oil drilling because “it would take 5 years or more to see any results.” So what! Do we need immediate gratification so badly that a five year wait in the course of our national history is too long to wait? If Jimmy Carter had addressed this back in the 70’s we’d be in much better shape.

  • avatar

    Aw, c’mon Obama! Ethanol isn’t the answer, and you should know that.

    If Obama weren’t in the pockets of the ethanol producers, he’d know that solar is the wave of the future.

    I wanted Bill Richardson. Energy secretary under Clinton, diplomat, fiery politician but smart guy and runs my state well. I guess America’s ready for a black President but it’s not ready for a good President quite yet…

    Edit: PCH101, you’ve got a point. But I sure hope his campaign trumpets other alternative energy sources too. With solar, geothermal, hydroelectric, wind, nuclear, plug-in hybrid electric cars, and hydrogen there are a lot more ways to help energy consumption than just corn-based fuel.

  • avatar
    Pch101

    Iowa and Michigan are both battleground states for this presidential election. 24 of the 270 votes needed to win are located there.

    Anybody who wants to have a chance at winning those states, and the entire election, this November would be an idiot to not give a little love to the (sub aquatic) corn farmers of Iowa and our unified auto workers of Michigan. So I guess this proves that when comes to corn, Mr. Obama is no idiot.

  • avatar
    psarhjinian

    essen,

    It’s not so much that it’d take five years, its that, even if it was done, it might not have been worth doing in the first place because of:
    a) Immediate environmental damage
    b) Money diverted from energy conservation
    c) It’s still more unlocked carbon
    d) It just puts off a problem that we’re going to have to deal with eventually.

    There’s a theory that we can drill and research alternative fuels, but I don’t think that’s as ready an option as people want to believe. Necessity is definitely the mother of invention, and if we take away the need for reduced consumption, we take aware much of the pressure to innovate.

  • avatar
    Lumbergh21

    “Immediate environmental damage”

    I’ll put my faith in the US companies over those of the other Gulf (of Mexico) nations to drill responsibly.

  • avatar

    Alex Rodriguez: “at the consumers expense”

    I beg to differ. Futures trading provides a service to us all. It creates price discovery and exposes the fragile supply/demand balance years into the future.

    Why don’t oil companies and OPEC countries sell massive amounts of futures if prices are so inflated?

    Apparently either they don’t want to or they can’t. Maybe OPEC is aiming for even higher prices? Maybe the oil producers are really tapped out?

    What we need is alternative energy and some serious demand destruction.
    Complaining about futures is not helpful with that.

  • avatar
    skor

    @d996

    At this point, we can all agree that the US occupation of Iraq has been a complete failure. What do you think would happen if the US/Israel attacked Iran? A much more populous country with highly educated people. The Iranians have the will and ability to shut down a large portion, if not the majority, of Mideastern oil production in response to an attack. They have managed to put together a very scary dead man switch(fail deadly version).

    So what’s driving oil speculation? How about:

    A loss of the majority of US military forces currently in the Mideast.

    Shut down of Mideast old production/shipping.

    World economic recession.

    A greatly strengthened Russia.

    All of the above are very real risks associated with an Iran attack. The people on Wall Street know it.

  • avatar
    97escort

    Obama is right about Iraq and he is right about ethanol.

    Too bad he is wrong about speculators. Peak Oil is the problem not speculators who are just reacting to a real oil shortage in the export market.

    He is still going to be the next President. The old man doesn’t have a chance. Too confused and confusing. But that is what happens when senility sets in.

  • avatar
    50merc

    skor said “At this point, we can all agree that the US occupation of Iraq has been a complete failure.”

    Well, if “we” is defined as Code Pink and World Can’t Wait types, I suppose that’s right. If “we” includes me, then there’s no agreement.

    One U.S. objective (dating back to Clinton) was removing Saddam from power. Done. As for Iraq generally, following the surge the situation has improved dramatically, as even the NYT has recently acknowledged. You may not think the gains have been worth the price, but there definitely have been gains.

  • avatar
    Qwerty

    So what’s driving oil speculation?

    The same thing that drives all bubbles: Money chasing easy returns. We have gone from a stock bubble to a housing bubble to a commodities bubble. The business of America is no longer business, it’s bubbles.

    Uranium went from $7 to nearly $140 and is now back to $60. It was not because of Peak Uranium.

  • avatar
    bluecon

    12 dollars a gallon for gasoline in England.
    Baracks socialist buddies no how to cut consumption. I am gonna make a lot of money off Barack.

  • avatar
    Lumbergh21

    Uranium went from $7 to nearly $140 and is now back to $60. It was not because of Peak Uranium.

    Are you certain? I’ve been hearing about some sort of nucular* program in Iran.

    * Intentional misspelling, I know that its spelled nukeyalar ;-)

  • avatar

    So forgive me but did the housing bubble just burst? And did the speculators in Wall street not have a major role in this? And finally, do we not have a Oil traders bubble now? Hold your answer and lets talk in 12 months. Then we should look at what happened to Housing and Oil and see if by chance deregulation and speculation had anything to do with it… I can be wrong just like the next guy.

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