…the word of the d[ecade] is: SPECULATE.
spec·u·late
[spek-yuh-leyt]
5. to engage in any business transaction involving considerable risk or the chance of large gains, esp. to buy and sell commodities, stocks, etc., in the expectation of a quick or very large profit.
—Synonyms 1. think, reflect, cogitate. 2. conjecture, guess, surmise, suppose, theorize.
Ahem… now that we have that out of the way, on a day where the price of oil broke a PAIR of all-time records (record high $139/barrel and record one day SUPER-SPIKE of $10/barrel), I wanted to bring my point home…
Reading that Washington Post story early this morning concerning what is clearly developing into our newest economic crisis (the skyrocketing cost of crude oil) and the brewing likelihood of federal intervention into Crude Oil Trading — reminded me very clearly of two earlier crises this decade where consumer prices JUMPED off the scale, the government stood there doing nothing while Joe Public was raped, and we were all made to believe that the good old “free market” was to credit/blame:
1. The California Energy Crisis of 2001: Remember the brownouts? Remember us all watching helplessly as people sweltered in the heat while being forced to pay 2, 3, 4 even FIVE TIMES their normal electricity bill?
Remember one year later when Bush’s good buddies over at Enron hit the front pages for helming what was at the time the biggest cratering of an American corporation? Remember finding out that it was ENRON and their energy future trading speculators (guys paid to buy/sell kilowatts on the phone) who were actually behind all those “shortages”? Well if after the endless series of crimes, scandals you don’t happen to know what became of ENRON, it turns out, they were calling up California Power plant operators and telling them to GO OFFLINE DURING PEAK HOURS.
2. The Housing Bubble cum Crisis of 2003-07: We’re still in it, yeah, I know. But since the housing/mortgage conflagration actually set an even bigger worldwide fire last summer (the Global Credit Crisis), it’s even easier to see what happened in the rear view mirror.
The easy-money policies of the Greenspan/Bush duo (tied in part to defending the market against the Enron collapse, 9/11 and Worldcom) ushered in an era where it was no longer chic to own just ONE piece of the American Dream (a house). Instead, keeping up with the Jonses new required concerned Americans to own at least TWO pieces of that dream in order to claim they were doing their consumer duty. With the promise of short-term gains so tempting, real estate became the poor-man’s Enron — where normal, every day Americans gave themselves a much-needed promotion; advancing from the working class directly to tycoon status overnight.
This new class of speculators bet on (and invested in) in their 2nd and 3rd “homes” like 15-million robber-barrons freed from the jail space in a game of Monopoly. They hit the market running, buying up everything in sight (with aplomb and a sub-prime loan of course) in relative outskirts like Florida, Ohio, Michigan, Las Vegas, Phoenix and points farther west — each operating under the fatal but foregone conclusion that real estate would simply, automatically and irreversibly appreciate, no matter what happened to them, their jobs, their neighbors or the banks that made the whole dream (nightmare) possible.
Back in the here and now, during the next few months, we are going to hear lots about the cause(s) behind the run-up in crude:
On the right, you’re going to be subjected to the baseless rants of capitalist coneheads as they claim that about the “demand”; that China and India (but not 5-car having, SUV-driving Americans) are doing to the oil market what was done to real estate … buying too much of it and that the answer is to loose the chains of regulation, march up to Alaska (and/or beyond) and unleash the ravages of our knock down, drag out, oil addiction onto ANWAR, or the California coast, or whatever the next Middle Eastern nation is that we deem worthy of “liberation”…. anything but check into economic rehab and KICK THE HABIT.
Over on the left, you’re going to hear all sorts of theories, some wild and conspiratory, some honest and spot on (come on Barack, let ‘em have it!!): That the evils of corporate-driven foreign and domestic, right-tilted political and economic policy-making and the larger problem of the global oil market effectively being controlled by ten families, really have all somehow combined into a market effect not unlike the vast right wing conspiracy once described by a certain New York senator.
As always, the truth lies somewhere right in the middle — but even still will create an even more painful reality for everyone on the planet than the picture either of the blowhards on each side of the ideological divide want to deal with.
Professional Speculators, individuals and institutions with the deep pockets to buy up Oil 1, 2, 3 months (and beyond) in advance, are staking a claim on tomorrow’s oil — and they are doing at prices that say they believe you, me and the rest of the world have no choice but to continue squandering our retirement money, our kids’ college money — even our grocery, clothing and housing money on what they have to resell — not because we want to, but because — by way of our grudging acceptance of perpetual wars for oil, the election of an oil-services political administration and a government that we could force to serve our best interests (by investing in new technology and setting a wiser more economically sound example for American car companies, for example), but won’t — we have in fact chosen to bankrupt ourselves and run our great system onto the rocks.
Before the oil even sees the light of day, it’s been bought and sold 2-3 times. The Saudi (or Iraqi, or Russian, or Iranian or Mexican, or Texan…) receieves a sum just over the previous middleman’s offer for for every barrel, but he/she is buying by the millions so each $1 really adds up.
After a few more transactions, Exxon or Shell buys it and offers it for sale to 1-2 other speculators (who each bet on a markup) while the tanker is still crossing the Atlantic. By the time it gets here, the price we pay is equal to the cost of pumping the oil, plus the cost of every super-rich speculater that took a bet that you, me and our federal government would be willing to pay for it at the pump — even it that’s $50/gallon.
Corrupt? Yes. Destructive? for some (most). Perfectly and totally legal? Ohh yeah.
If you saw the movie Syriana (and payed attention)… you may remember the following exchange, which has a ring of both truth and irony. This will go on as long as we let it.
Finally, I’ll leave you with one, last frightening stat:
Taken together, the Airline industry will spend FOUR BILLION DOLLARS MORE FOR FUEL TODAY THAN THEY DID YESTERDAY!!! And that’s MINUS about 3,000 cancelled flights/routes.
Between this and the prospect of a black president, it’s gonna be a longggg hotttt summer.
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