You’ve been granted free access to this subscribers only article.
Editorial:Most of us may be guilty of oil speculation
By Merrill Matthews
In the midst of outrages like an $800,000-plus party scandal at the General Services Administration, the Secret Service prostitute scandal, and a recent Medicare fraud bust that netted 107 people scamming Medicare out of $450 million, what does President Obama want to do? Why, spend $52 million in taxpayer dollars cracking down on ... oil speculators.
Depending on how the administration defines “speculation,” the target could be half of the U.S. population -- including me, and probably you.
So let me ’fess up right here. I have a little money in a 401(k), and I have been known to put some of that into mutual funds that invest in the energy sector.
But I swear I’m not trying to bring the country down or drive up what you pay at the pump. Given that the Federal Reserve Bank has kept interest rates at near zero for years, and that none of the president’s or the Fed’s multiple economic stimulus efforts have worked, I was just looking for an investment that would be worth more when I sold it -- in other words, speculation.
And I’m not alone. About 70 percent of U.S. oil and gas company stock are held by pension funds, asset management companies (including mutual funds), and IRA and 401(k) plans. If I’m an oil speculator, I’m in good middle-class company.
Of course, Obama might claim he’s not talking about us, but those who are actually buying oil futures. Notice I didn’t include natural gas.
No one seems to care about natural gas speculators because the price of gas has tanked -- largely because of the huge supply, the result of new extracting techniques.
Conversely, long-running federal restrictions against new drilling on federal lands and offshore have limited the country’s ability to increase oil supplies. But when markets get spooked by potential shortages due to turmoil in, say, Libya or Iran, the administration doesn’t come to a corollary conclusion -- that a lack of supply is causing the price increases. It blames speculators.
Who are these speculators? Southwest Airlines might be one. Southwest has a fuel-hedging strategy, contracting for future fuel at a set price now in the hope of avoiding a higher future price. And that strategy has worked.
When the price of oil was going up in 2008, Southwest still managed to do well, in large part because it was getting its fuel for a previously contracted lower price. And now the Dallas Morning News reports, “Southwest said its first-quarter results were boosted by $170 million in ‘other gains,’ primarily linked to gains from its fuel hedging portfolio.”
Most people looking at Southwest’s strategy would think “shrewd business move”: Obama looks at it and sees one of those scurrilous speculators.
Or is it manipulators he’s after? While the president has been chastising speculators -- “We can’t afford a situation where some speculators can reap millions while millions of American families get the short end of the stick” -- his $52 million proposed crackdown appears to be targeted at market manipulation. They’re not the same thing. Southwest may be speculating; it is not manipulating.
Market manipulation is already illegal. For example, the Wall Street Journal points out: “In the past 35 years, the Commodity Futures Trading Commission has brought dozens of cases alleging manipulation in energy markets. It was successful in proving only one in court.”
Yes, some people around the globe will try to find ways to manipulate a fast buck. But the oil and gas industry is a huge global market, including about 7.7 percent of the U.S. economy (in 2009), according to a PricewaterhouseCoopers study. Manipulating global prices in a sector as large as energy is nearly impossible.
President Obama’s newfound interest in reining in oil speculators is nothing but a political move: He needs to claim he’s doing something to bring down the price of oil, especially since his restrictionist drilling policies -- the Congressional Research Service said in March that domestic oil production on federal lands has fallen by 275,000 barrels a day since 2010 -- have had exactly the opposite effect.
If oil prices begin to settle down and maybe even decline in the next few months, which seems likely, we won’t hear much more about oil speculators. And then maybe you and I and our 401(k)s will be safe, at least for a while, from a president running for re-election and desperately trying to find someone to blame for his lousy economy.
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas.
Your Opinions and Comments
Publius Valerius Publicola
June 6, 2012 2:45pm
Share your comment or opinion on this story!
You must be logged in to post a comment.
Section A: General News Archives
American Legion ceremony (May 25, 2016)
Annexation for fire services will be on November ballot (May 25, 2016)
Boy Scouts, Girl Scouts to honor fallen heroes (May 25, 2016)
Camino Real plans Open House events (May 25, 2016)
Chief Hull resigns from Poth police (May 25, 2016)
County sets sights on new tax (May 25, 2016)
Court Update (May 25, 2016)
Editorial: Grim choices have put America in a grave situation (May 25, 2016)
Editorial: On the other side of politics in a world of digital divide (May 25, 2016)
Fire, EMS services — Who’s got you covered? (May 25, 2016)
It’s okay to take control (May 25, 2016)
Letter: Free ride over hard work … a no-brainer! (May 25, 2016)
Letter: Housing Foundation expresses gratitude (May 25, 2016)
Letter: Mainstream media ‘brainwashing’ Hispanic/Latino voters (May 25, 2016)
Meeting Watch: Wilson County Memorial Hospital District (May 25, 2016)
Memorial Day office closures (May 25, 2016)
One viewpoint: Making Floresville marketable with recreational facilities (May 25, 2016)
Parish plans Cemetery Ceremony (May 25, 2016)
Police arrest man in case of burned body (May 25, 2016)
Police Blotter (May 25, 2016)
Police ticket six for violating cell phone ban (May 25, 2016)
Post 539 service (May 25, 2016)
Poth electric vehicle users could be in for a 'shock' (May 25, 2016)
Poth High School students earn awards (May 25, 2016)
Severe storms shred Wilson County (May 25, 2016)
SSCA ceremony (May 25, 2016)
Teacher salaries, student lunch prices on the rise (May 25, 2016)
Tejano music to fill the air during Labor Day event (May 25, 2016)
Turner: New businesses coming to Floresville (May 25, 2016)
Berger earns Ph.D. from Columbia University (May 18, 2016)
Brahma Happenings (May 18, 2016)
Burning body spurs murder investigation (May 18, 2016)
Can I negotiate? (May 18, 2016)
Court Update (May 18, 2016)
Editorial: Narrow views promote intellectual, moral dry rot (May 18, 2016)
Editorial: The political climate in America goes from bad to worse (May 18, 2016)
Falls City ISD’s new K-12 building almost complete (May 18, 2016)
Floresville parks master plan would relocate ball fields (May 18, 2016)
Floresville parks plan wins council approval (May 18, 2016)
Foundation awards $9K in grants (May 18, 2016)
Foundation opens health grant process (May 18, 2016)
Graco recalls booster seats (May 18, 2016)
Grass fires on the rise (May 18, 2016)
Letter: An open letter to Congress (May 18, 2016)
Letter: Illegal immigration: Who will laugh last? (May 18, 2016)
Letter: What Hispanic vote? (May 18, 2016)
Lone Star Greys to meet (May 18, 2016)
Meeting Watch: La Vernia City Council (May 18, 2016)
Meeting Watch: Poth ISD (May 18, 2016)
Police Blotter (May 18, 2016)
Police recover one of two stolen trucks (May 18, 2016)
Register for free watercolor lesson (May 18, 2016)
Stockdale campus to get upgrade soon (May 18, 2016)
Stockdale City Council approves electronic payment processing (May 18, 2016)
TAMU-SA matches student scholarships (May 18, 2016)
Time to make plans to attend Jubilee (May 18, 2016)
Want fire protection? Attend May 19 hearing (May 18, 2016)
Acme Gold Buyers marks fifth year in Floresville (May 11, 2016)
All Veterans Job Fair (May 11, 2016)
Cemetery group to meet (May 11, 2016)
Children’s Alliance enhances care services (May 11, 2016)
China Grove mayor, police chief trade barbs at meeting (May 11, 2016)
Commissioners lukewarm toward hot coffee at library (May 11, 2016)
Competency and integrity (May 11, 2016)
Court Update (May 11, 2016)
Coy to get Ranger Cross (May 11, 2016)
Cub Scout Roundup (May 11, 2016)
Donate blood in May (May 11, 2016)
Editor: Trump’s candidacy sets in motion affliction in future elections (May 11, 2016)
Editorial: The voters have spoken — well, some of them have! (May 11, 2016)
Former Sutherland Springs VFD considered as a substation (May 11, 2016)
Free caregivers class starts May 26 (May 11, 2016)
Information sought in Walmart theft (May 11, 2016)
Lack of super majority vote keeps Clean Water Rule flowing (May 11, 2016)
Leetter: The government is a terrible investor (May 11, 2016)
Letter: Injection well site is near river, creeks (May 11, 2016)
Letter: Stop being negative (May 11, 2016)
LV youths win new wheels at Bike Rodeo (May 11, 2016)
Meeting Watch: La Vernia ISD (May 11, 2016)
Mineral rights workshop set (May 11, 2016)
Miss LV Pageant, Bluebonnet Parade, graduation fill La Vernia calendar (May 11, 2016)
New Wilson County justice center nears completion (May 11, 2016)
Personalized brick for Veterans Memorial (May 11, 2016)
Police Blotter (May 11, 2016)
Precinct 3 primary runoff is May 24 (May 11, 2016)
Rangers to honor Lorenz (May 11, 2016)
Rohrs takes over Floresville athletics (May 11, 2016)
Tanneberger qualifies for Executive Club membership (May 11, 2016)
Voters respond: One bond passes, another fails (May 11, 2016)
Wednesday morning crash injures nine (May 11, 2016)
AACOG plans public meeting (May 4, 2016)
Accident injures two drivers (May 4, 2016)
AgriLife offers tips to protect from Zika, other mosquito-borne diseases (May 4, 2016)
Behind the lens: Solitary stillness (May 4, 2016)
Celebration Mass June 12 (May 4, 2016)
Cemetery association meeting (May 4, 2016)
Condos are fine, but do your research (May 4, 2016)
Court Update (May 4, 2016)
Crime Stoppers aids police anonymously (May 4, 2016)
DA, DPS bust nets 86 charges (May 4, 2016)
Debate over citizens comments dominates Floresville council (May 4, 2016)
Dwellings At Home offers lodge, ranch furnishings, more (May 4, 2016)
Editorial: Overbearing city council threatens boards’ independence (May 4, 2016)
Editorial: Taking personal responsibility will bring possibilities (May 4, 2016)
Editorial: Trump is the same old song with one more verse (May 4, 2016)
FEDC tables recommendation of master parks plan (May 4, 2016)
FELPS tornado repair continues as FEMA help stalls (May 4, 2016)
Floresville Chamber Luncheon May 18 (May 4, 2016)
Hall of Fame inductees: Joe Kotwig, Malcolm and Beverly Talley (May 4, 2016)
Letter: Alamo Colleges: A bust for Floresville (May 4, 2016)
Local nursing homes plan Senior Olympics May 9-13 (May 4, 2016)
Look twice for motorcycle riders (May 4, 2016)
Lyssy’s vault earns gold, sets records! (May 4, 2016)
Medicaid, CHIP application assistance (May 4, 2016)
Meeting Watch: Wilson County Commissioners Court (May 4, 2016)
National Day of Prayer May 5 (May 4, 2016)
Police Blotter (May 4, 2016)
Ramirez promoted to colonel (May 4, 2016)
Reserve a seat for SA Tea Party (May 4, 2016)
Tanneberger tops in sales (May 4, 2016)
Treviño prepares to take reins of East Central athletics (May 4, 2016)