The End of High Oil Prices don’t Count on it

Concern over energy prices, and indirectly, food prices has reached critical levels across the world. Here in the United States, more and more of us are scraping by and doing without essentials. Food bank participants have reached record numbers and a recent story from ABC News shows that many former middle-class families are failing to keep up with the rising cost of energy. As economic defenders continually refute the facts, looking for loopholes and pontificating rebuttals, the cold facts are that America’s formerly middle-class are suffering. And they have been watching the total unconcern of Congress as political infighting between and even within both parties relegates the seriousness of the situation to the back burner. A burner many lower and middle-class Americans can’t afford to keep lit.

As partisan media attempts to place blame on one party or the other, it is obvious to the informed observer that today’s energy crisis is the result of several factors, mostly inter-related. First is the loss of jobs creating sustained recession in the upper Midwest, primarily due to outsourcing due to NAFTA and GATT. This loss has resulted in wage reductions and a corresponding loss of buying power among the formerly middle-class. While the economy as based on marketplace factors shows gains, albeit miniscule, these are gains seen primarily by those with stock portfolios heavy in energy and banking investments. Those gains have come at the price of negative returns on the 401(k) balances of those who have saved diligently among the middle class. For those who live paycheck to paycheck, which is most Americans, the loss of purchasing power impacted retail long ago. Now the lack of cash reflects the rising numbers that cannot afford to drive to work or pay for heat and lights.

Second is the increased demand for oil from China, India, Indonesia and South American Countries. Ironically, the same outsourcing that relieved the middle class of so much of it’s disposable income has driven the engines of manufacturing in the Third World. Now that increase in demand threatens to devour the very market it developed to feed-we can no longer afford to transport the goods or buy them.

Another party deserving of blame is the obvious bias exhibited by government for the profits of Big Business, not just the oil companies, but big box retailers, agri-biz and global financial concerns. Their machinations have kept these businesses profitable at the expense of small business and wage earners.

Fourth is de-regulation of financial markets and failure to update rules to oversee electronic trading in commodities. This is a huge issue, one that has been missed by most commentators. The truth is, much of the rise in oil prices is due to market speculation among futures traders. Although it is popular to blame OPEC, or the Texas oilmen in Washington, speculators have been the driving force pushing prices into the clouds.

There is plenty of blame to go around here-within both parties. And the current situation, where each party uses the suffering of the tax payer as a stick to beat the opposing party with, has not been lost on middle-America. The citizens are angry-and mostly being studiously ignored by politicians as the usual suspects manipulate the issues to engage in one-upsmanship. The taxpayers’ obvious anger may actually prevent both major parties from maintaining the status quo long enough to use the issue as leverage in the November election.

Ironic as it may seem, it appears that taxpayer small-business action finally gained this issue the prominence it deserves. We must thank the small-business truckers who staged loosely-knit protests and selected articulate and well-informed spokesmen to state their case. But, we can readily believe their true impact lies within hundreds of air horns disturbing the luncheons paid for by lobbyists and the obvious show of force and unity of purpose behind hundreds of non-union independent businessmen with no organization except their shared concern, threatening that they could not longer haul the freight that drives the economy under the current situation. Many small independent work stoppages at ports on both coasts brought home the urgency of the situation and the guaranteed impact on the continued high profits based on an import economy. The activity of Congress is similar to the joke about the mule that was famous for its hard work -the mule only worked if hit with a board “to get its attention first”.

It is thus with some trepidation that we view the efforts of Congress to finally address the situation with something concrete as opposed to rhetoric. As reported today, both the House and the Senate expect to pass legislation directing President Bush to temporarily halt purchasing oil at record prices to fill the Strategic Oil Reserves. Bush’s insistence at continuing these purchases when prices paid with tax payer dollars are at record highs appears to be sheer stubbornness and needs to end immediately. Forcing an end to this might bring oil prices down a few cents, but will not solve the entire problem in the long term.

Ending Strategic reserve purchases is a start-and only a start. We have to wonder why the more permanent fix, that of increasing regulation of speculators, has never been attempted. In fact, the Senate Permanent Subcommittee on Investigations has issued several reports sounding the alarm that, if speculators and oil companies were not reined in, exactly the scenario we now face would happen. Sen. Carl Levin, D-Michigan has worked tirelessly to correct the situation and has shown genuine public non-partisan spirit in his investigations of the Enron scandal and Enron’s part in the current oil situation. His statements regarding Bill Clinton’s relaxation of commodities trading rules to benefit Enron have been just as critical as his complaints of Bush’s short-sightedness in continuing to purchase Strategic Oil Reserve supplies.

Levin has again addressed the Senate this week regarding the need for more oversight in the oil futures market. This will be another speech relegated to the unread annals the Congressional Record-unless we, the People, blow our horns. True, we may not have air horns and a big truck to clog the streets of Washington DC. But we do have a voice-and a right, an obligation to inform our elected representatives that we want something done-and we want it NOW! The Senate Subcommittee report, although two years old, delineated exactly what needed to be done to correct the situation. We need to demand that action be taken on this as soon as possible, special interests and financial free-trade gurus be damned. The facts are clear-unregulated rampant speculation in the oil commodity market has destroyed the ability of market forces to regulate oil prices. As Levin says, “It’s time to put the cop back on the beat in our major energy markets,”

Call, write, email your representatives at the federal level. Do it today. It is there that this particular affront to the people’s well-being was wrought and there that it must be corrected. Make it clear you have read the Senate Subcommittee’s report and Levin’s speech and you want these pieces of legislation enacted no sooner than yesterday. Make it clear you don’t want to wait for political bickering and partisan add-ons; you want a clear non-partisan bill that will guarantee oversight of speculators in the oil commodities markets. If you only have the money for one long-distance phone call this month, this is the one to spend it on. To Contact your two senators and your representative in the House, call the U.S. Capitol switchboard at (202) 224-3121 and provide the operator with your home zip code. The operator will connect you with the offices of your elected representatives. You can find both the email addresses and the snail mail address at the following website: Demand that Congress act now to support the middle-class.