Gas prices are up? People are pissed about paying $5 per gallon? Let’s see if we can’t blame the speculators on Wall Street, says the President.President Obama announced yesterday that he’s putting a team together to study whether or not Wall Street commodities traders (speculators, in his words) are illegally manipulating gas prices.
After accusations that President Obama’s Washington is in the pocket of Wall Street, and public outcry that gas prices are rising, this investigation seems like an obvious attempt to win public favour.
“The attorney general’s putting together a team whose job it us to root out any cases of fraud or manipulation in the oil markets that might affect gas prices, and that includes the role of traders and speculators.”
“We are going to make sure that no one is taking advantage of American consumers for their own short-term gain.”
Interestingly, this move comes directly after Dan Rather’s huge report on the spike in gas prices, Dan Rather Reports: Gas Pains, which aired on HDNet on April 19th. Rather in part blames the spike on speculative commodities trading and on failed congressional efforts to regulate the market.
Rather said in his report:
“Why the big jump? Don’t blame supply and demand… There’s plenty of oil. And you can’t blame the tensions in North Africa or the Middle East. The oil is still flowing. But some analysts believe ou can blame it, at least in part, on one of the hottest ways to make big money on Wall Street… commodities trading.”
“Despite Congressional attempts to regulate this market, investors continue to rake in huge profits while the average driver can only wince at prices that were, not so long ago, unthinkable.”
“[The big players, Goldman Sachs– go down the line] are central to the story. Because they are the financial intermediaries behind the scenes and the more they can promote commodities to institutional investors– the higher they can effectively drive the price.”
And adding later –
“Goldman Sachs made a recommendation to sell crude to their clients [last week]. And crude fell the most its fell in several months. It fell about eight dollars a barrel. And what’s more interesting is the price fell without any supply and demand changes.”
UPDATE: Michael Masters has an agenda.
Rather agreed with him, reporting, “Over the past decade, Goldman Sachs and other Wall Street firms have promoted commodities futures like oil to investors as an alternative to stocks and bonds. Masters says that a recent surge in speculation has thrown the oil market out of balance… making prices at the pump rise and fall at the him of Wall Street.”
That’s quite an accusation! Of course Rather also admitted that most economists agree that some speculation brings stability to commodities markets.
Adam Sieminski, the chief energy economist at Deutsche Bank AG (DB) in Washington, told Bloomberg the Obama administration’s announcement “seems like a political action.”
We think he’s right.
The entire transcript of Dan Rather’s report on commodities speculation is embedded below.