Scapegoating oil speculators–Obama counts on public’s economic ignorance to shift blame for high gas prices
Icould pretty much stop there and say the title tells you the story. Obama knows high gas prices are not good for his re-election campaign. He also knows his energy policies have actively worked against ameliorating or lowering the price of gas.
Therefore, it is necessary to find a scape-goat. Someone or something he can shift the blame too and demonize. In other words, the usual disingenuous attempt at distraction.
David Harsanyi explains what “speculators”, otherwise known as commodity traders, do:
Let’s start by being thankful for oil speculation — no matter what the motivation of those involved might be. To begin with, speculation allows companies with exposure to fluctuating commodity prices to hedge against rising costs by locking in. Sometimes the bet pays off; other times it doesn’t. But risk and profit are not yet crimes.
Oil speculation also offers consumers and investors information about the future that can help them make informed long-term decisions. Speculators trade commodities based on the information available in the marketplace. They reflect reality; they don’t create it.
But sometimes, unfortunate as it is, prices will rise. "Gouging," the close scaremongering cousin of "speculation," helps persuade consumers not to use what they don’t need. It incentivizes to modify behavior — our driving habits or the size of our cars. We conserve more when prices are higher, so we avoid shortages, and producers intensify their production. (Funny how Democrats get this concept when writing energy policy designed to artificially spike fossil fuel prices.)
In reality, this sort of trading helps moderate the market. And, being a zero sum game – i.e. if you make money someone else loses it – it is done carefully. As Harsanyi explains, they “reflect reality; they don’t create it”. In essence you’re seeing a relatively free market work as it should.
Of course, what Barack Obama wants to do is have government intrude on that market because politically he doesn’t like the reality it is reflecting because it is politically damaging to him. So:
Speaking from the Rose Garden, the president announced a proposal to spend $52 million to fund increased government oversight of oil futures market trading in addition to harsher civil and criminal penalties for manipulation in energy markets. “We can’t afford a situation where some speculators can reap millions, while millions of American families get the short end of the stick,” Obama said. “That’s not the way the market should work.”
Or, said another way, if you make a profit based on your foresight, you’d be considered a criminal. If you lose money, I suppose, that’s ok in Obama’s world.
Of course, it’s all nonsense (I mean how would Mr. Obama regulate oil trading in foreign exchanges?). It is a calculated attempt to use ignorance of how these markets work to cause voters to shift their rage from him to his designated target. Successful scapegoating means one less issue the opposition has to use against him (not that he doesn’t provide a target rich environment anyway). He’s counting on this sort of populism to work.
David Kruetzer asks some questions I’d like to see the press ask:
If speculators are making unconscionable profits on energy, why are they only doing it occasionally and not all the time? Why are there only speculators in oil, not natural gas (whose current price is about half of what it averaged over the last decade)? And given how the petroleum market works — for every speculator who makes money on a trade, somebody else will lose money — the president’s theory “requires an endless string of chumps to take the other side of the speculators’ deals.”
And Kreutzer points out the basics of any commodities market, again something of which Obama banks on your ignorance:
For speculation to drive up prices, the speculators must either cause oil production to slow down (which they haven’t) or to pull oil off the market. If the flow of petroleum and its products remains unchanged, the price at the pump will not change. If petroleum is pulled off the market, which can happen even though there are limits to what can be stored, it will eventually come back on the market.
The question becomes, ‘When the oil comes back on the market, is the price higher or lower than when it was pulled off the market?’ The price will only be higher if the amount supplied at that time is lower or the demand is higher. In either of those cases, speculators have helped moderate price fluctuations and will be rewarded with profits. If the price is lower, then the speculators did a bad thing and will be punished by losing money.
So those are the basics of the issue as it concerns such trades and markets.
As can plainly be seen, Obama hasn’t a leg to stand on. But that doesn’t stop him from claiming that government is the answer to this made up problem.
Why? Well other that it is his political nature, he can’t sell the nonsense without some sort of “action”. It becomes much more believable to those who don’t know better if he’s going to spend millions to regulate the contrived problem out of existence.
Of course he knows his actions will not have any positive effect on gas prices, and, in fact, may actually have a detrimental effect, which is why he couches this attempt at scapegoating the problem via government with “none of these steps by themselves will bring gas prices down overnight”.
But he can claim to be taking action while continuing to blame speculators for the problem and counting on general economic ignorance to carry the day for him.
Pretty typical of the man, I’ve come to learn.