The reason for the increased gasoline and natural gas prices
is the lack of Sarbanes-oxley-type reform of the energy industry.
Beginning in 2000, oil and natural gas companies have
exploited energy deregulation to engage in one of the largest consumer rip-offs
in history. Despite only moderately rising demand, natural gas prices increased
245 percent from January 1999 to January 2001. This rip-off was not justified
by so called free-market conditions: adequate supply matching moderately
growing demand. This is clear manipulation of the market whereby the energy
industry refuses to let the market work in favor of consumers.
Congress has refused to top this market manipulation by not
reforming the rules that allowed the manipulation to occur. The political
leadership in Washington, through energy deregulation, has allowed the energy
industry to rip off small businesses and consumers with the highest gasoline
and natural gas prices in U.S. history. The political leadership in Washington
has so weakened regulation over the energy industry that the CFTC (Commodity
Futures Trading Commission) and the FERC (Federal Energy Regulatory Commission)
have been allowed to be negligent in policing these energy markets, in order to
prevent this price-gouging of small businesses and the consumer. The reason for
this lack of oversight is the 2000 Congressional Deregulation Act.
The bottom line is that futures trading is causing
speculation in energy markets.
Using natural gas as an example of future trading leading to
speculation in energy markets, consider the fact that futures trading in
natural gas only began in November 1989. Since then we have seen consumers
gouged by natural gas prices as a result of futures trading.
In order to prohibit federal oversight of their corruption
in ripping off the consumer with price-gouged natural gas, the natural gas
futures trading has been moving off regulated exchanges to unregulated OTC
exchanges. The Bank of International Settlements estimates that in 2003 there
was a 150 percent increase in natural gas futures trading in the OTC
unregulated exchange. Energy companies, investment banks and hedge funds
continue to manipulate the energy market in favor of the rich and to the
detriment of small businesses, consumers and the poor.
TO LOWER THE PRICE OF GAS we must take the
speculators out of the equation. As stated, deregulation of the energy industry
has caused speculation in the futures trading of energy.
No one is talking about the role of speculators in the
energy markets, which is the real reason gas and natural gas prices are rising
to unaffordable levels.
When you watch the financial programs on TV, all you here is
supply and demand. They’re putting out the nonsense that price is driven by the
textbook theory of supply and demand, and it simply isn’t the case.
That’s like saying no one over speculates on stock. However,
we all know that speculators created the internet stock bubble that caused the
market to crash in 2000, which hurt so many people.
So-called momentum investing drove up the price of stocks in
the late 90s and early 2000. This was speculation at its worst. Speculators
(that is, momentum speculators) are behind the high price of gasoline and
natural gas using the vehicle of deregulated futures trading in commodities.
The solution is to re-regulate futures trading in oil and
natural gas. It’s obvious that deregulation has not worked for the benefit of
the economy at large.
ACTION TO TAKE. Call your congressman and U.S.
senators at (202) 225-3121 and demand a repeal of the 2000 Congressional
Deregulation Act, and email us at
