It wasn't always like this. From the 1930s through the 1980s, the commodities market was strictly regulated by the Commodity Futures Trading Commission (oil is a commodity, just like tin or corn or copper); there were limits placed on speculators in order to stave off market manipulation unrelated to real supply and demand. Only a small percentage of commodities could be bought and sold by "paper traders;" the rest was reserved for people who were actually dealing with tangible stuff — growers, producers, consumers.
But in the early 1990s, the CFTC granted a number of clandestine exemptions to those limitations, which allowed Wall Street traders to flood the markets. "By 2008, at least three quarters of the activity on the commodity exchanges was speculative," Rolling Stone scribe Matt Taibbi wrote in his 2010 must-read article, "The Great American Bubble Machine" (really, go read it now: tinyurl.com/taibbispeculators). "It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices."
Translation: The same people who screwed us into this recession mess, who got their big bailouts from the government — they're behind high gas prices, too. At least now, when you're cursing the $40-plus it takes to fill up your tank, you know whom to be shaking your fist at.
While politicians may think we're too dense to digest this information in soundbites, they know the problem exists. To that end, on April 17, the White House proposed a five-part piece of legislation that would "crack down" on manipulation in oil markets. The plan includes increasing surveillance and enforcement staff at the CFTC; upgrading monitoring equipment; increasing civil and criminal penalties for manipulation in oil futures markets; raising the "margin requirements" on oil futures (i.e., the amount of real money behind a trade); and expanding presidential advisers' access to CFTC data.
But while enforcement is great, USM's Feiner doesn't think Obama went far enough. "The only way to get speculators out of futures markets for petroleum products is to revoke the exemptions," she says. Seeing as how those exemptions are held by the financial behemoths (or their subsidiaries) who run Washington, that prospect is unlikely.
And it couldn't hurt to increase public awareness. "There really hasn't been a public discussion about what is going on," she adds. Shocking, huh?