Pure Speculation

Along toward the end of August, I received an email from my state’s junior senator, Bernie Sanders (I).  I look forward to these because a) Senator Sanders is even more PO’ed about the state of the nation than most of his constituents (although right-winger politicians can say the same) and b) he’s not beholden to corporate interests (which NONE of those right-wingers can say).

The outrage addressed in the August missive was Wall Street banks driving up the price of gas by reckless oil speculation.

“There is no more debate. Excessive speculation is a major reason oil prices have risen so sharply,” he wrote, referring to U.S. Commodity Futures Trading Commission data he recently released. “The data reveals Wall Street speculators played a major role in driving up the price of a barrel of oil to $147 in 2008. During the rampant oil speculation, regular unleaded gas in Vermont hit a record $4.09 a gallon, causing financial hardship for many Vermonters.”

“This report clearly shows that Goldman Sachs, Morgan Stanley, and other speculators on Wall Street dominated the crude oil futures market causing tremendous damage to the entire economy,” he wrote

Bernie Sanders is right.  It’s hard enough to bump up against the fact that the easily recoverable oil is gone, that coaxing anything new out of the ground will be expensive and (even more!) damaging to the environment, but the fact that the same jerks that destroyed the housing market and sent the global economy to the intensive care unit are keeping their boot on our necks and still getting rich off us is more than any of us should be willing to stand.

The same week Sen. Sanders emailed, Kevin Drum wrote in Mother Jones about the work of University of San Diego economist James Hamilton.  Professor Hamilton notes that 10 of 11 recessions since the end of World War II have been preceded by a rise in oil prices.

All the more reason to resent the speculators, right?  Right, but there’s more to it than that.  For most of those years, we as a society were able to increase oil supply almost at will, by drilling more holes in the places where we know oil to be.  Not so easy any more.

Not only are the giant oil fields beginning to peak, but the new sources of oil – like Alberta’s oil sands or the arctic fields the corporations are so recklessly eager to get their paws on – take years of slow development before they can be turned into gasoline down at the corner station.

Now throw in political instability in places like Libya, Iran and Venezuela and things get even shakier.  Supply begin to run close to demand or there’s rampant speculation in oil futures – or both – the price shoots up, a recession is born, the economy tanks, demand drops, price drops, the economy picks up again, raising the price of oil, sparking another recession, etc. etc.

This all fits under the rubric of “peak oil.”  Peak oil doesn’t just mean the oil’s running out.  It also means that when it gets so difficult and expensive to bring to market – and becomes so vulnerable to the vampire squids of society – then it’s another reminder that we should have listened to Jimmy Carter 34 years ago.

© Mark Floegel, 2011

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