$5 a Gallon

It isn't Enron this time, but there are hands in American consumers' pockets as gasoline prices keep rising.

While politicians argue about offshore drilling, miracle batteries and the health benefits of bicycling, at least half of the increase is going to "petro- manipulators," as Timothy Egan dubs them in his New York Times blog, citing the phony energy crisis of seven summers ago:

"The price of energy spiked--tenfold, a hundredfold-- despite low demand. Californians became the most efficient users of power in the nation, and still suffered through dozens of rolling blackouts...caused by manipulation by Enron and other speculators who gamed a faulty system, sticking it to Grandma Millie while laughing at how easy it was to rob 40 million people."

Parallels to today? "Take away the excess speculators who are in the market purely for the ride, and oil prices could drop by half. That’s the view of Michael W. Masters, a hedge fund manager who’s been advising Congress this year.

“'There are no lines at the gas pumps and there is plenty of food on the shelves,' said Masters, whose testimony has been widely discussed in financial circles but rarely in the political realm. What has changed, he said, is the presence of big speculators making futures bets."

On the PBS News Hour this week, oil experts compared energy-price ballooning to the earlier dot.com market bubble, attributing half of it to hedge funds as well as "the doctor, the lawyer that has the disposable income that's plowing money into the index funds."

Without the commodities casino, one pointed out, Wall Street in December was forecasting oil in 2008 at $85 to $95 a barrel rather than the $135-plus of today. The difference is essentially a "speculative bubble."

As the White House and presidential candidates cluck about our pain at the pump and offer economic aspirins to ease it, voters should know where and how most of the real injury is being inflicted

$4 a Gallon

The pain at the pump is going political this week. The President and his wannabe successors are pushing pie-in-the-sky proposals--more drilling in Alaska (Bush), gas tax holidays (McCain) and new taxes on oil companies (Obama)--but Congress is taking aim at one of the underlying reasons for skyrocketing prices--speculation.

"(A)s gas reaches a national average of $4 a gallon for the first time in the nation’s history," reports The Hill, "some see the makings of a consensus on Capital Hill: making it harder for investors to buy crude on the commodity futures markets.

"Critics say the increased participation of non-commercial investors that don’t intend to use the commodity--as opposed to, say, airlines that also buy crude--has helped raise prices."

The focus of Congressional pressure is the government agency charged with overseeing the gambling on oil. According to a spokesman for the Senate Energy and Natural Resources Committee, “More and more senators are questioning the adequacy of the [Commodity Futures Trading Commission’s (CFTC)] regulatory oversight and...are bothered by the role that speculation and non-commercial, institutional investors are having in preventing energy markets from functioning properly.”

The quickest fix would be new curbs on pension funds, endowments and other institutional investors that pump money into commodities index funds, driving up demand and prices. The Goldman Sachs fund attracted $260 billion last year, compared to $13 billion five years earlier.

According to the McClatchy newspapers, complicating any effort to harness speculation is the 30 percent of trading in crude oil in "dark areas"--markets in London and Dubai--not regulated by the CFTC but could be by the President with "a snap of his fingers."

A former CFTC director of trading is quoted as saying, "Essentially this could be ended this afternoon if the Bush administration had the stomach to do it."

But with an army of oil company lobbyists besieging the White House and Congress, don't bet your gas money that it will happen.