Remember back in 2008 a barrel of oil was upwards of $147 and gas was sky-rocketing past $4 a gallon? The progressives were calling for the reining in of Wall St. speculators back then, but George Bush and the GOP did nothing. In fact the Saudis even told the former President that demand for their oil wasn’t that high and it was speculation that was causing the spike at the pump.
Thanks to Wikileaks and reporting by McClatchy, President Bush called the Saudis asking them to increase oil production in hopes that it would flood the market with a new supply of oil and drive the price down. The Saudis agreed, but gave a stern warning to President Bush that this will not solve the problem. At that moment demand was extremely low for Saudi crude oil and they were actually discounting the stockpile already. The problem was Wall Street speculators according to the Saudi oil ministers.
Saudi Oil Minister Ali al Naimi even told U.S. Ambassador Ford Fraker that the kingdom would have difficulty finding customers for the additional crude, according to an account laid out in a confidential State Department cable dated Sept. 28, 2008, “Saudi Arabia can’t just put crude out on the market,” the cable quotes Naimi as saying. Instead, Naimi suggested, “speculators bore significant responsibility for the sharp increase in oil prices in the last few years,” according to the cable.
An embassy cable from 2007 recounted a meeting the U.S. had with an Aramco planner, Yasser Mufti, “The Saudi analysts indicated a link between higher oil prices and the influx of investor funds into the oil markets,” it read.
The cables also show that the Saudis urged the Americans to enact regulations to rein in Wall Street, calling for speculative limits etc. Wikileaks also showed that some Saudi officials believed that speculation added as much as $40 to the oil price during the height of the 2008 oil surge.
Another document, from Sept. 2, 2009, offers an eerily accurate prediction of today’s high prices, made by Sadad al Husseini, Aramco’s former executive vice president.
“In his view, the bearish energy analysts arguing that the oil price shocks of last summer are not likely to be repeated anytime soon are making inaccurate assumptions,” the cable said, warning that the former Aramco executive saw political uncertainty and a perception of tight supplies as fuel for speculators.
The cable said that “al Husseini predicted that another oil price shock would likely hit sometime in the next year or two.”
Unfortunately for Main Street nothing was done back in 2007-08 by the Bush Administration and today those who are calling for tighter regulations on speculators, like Senator Bernie Sanders, are meeting extremely high resistance by their peers. Also conservatives have been circling the wagons to protect Wall Street speculators at Goldman Sachs and other investment banks, all at the peril of the average American.
Until recently the 70% of the speculators that were in the market actually took possession of the commodity, these speculators are called end users, they represent airlines, trucking companies and refineries as they tried to hedge against price fluctuations.
Now according to McClatchy, 70% of the futures traders are people or organizations that will never hold a barrel of oil in their actual hands. Corporations like Goldman Sachs and hedge-fund managers are manufacturing this spike in oil pricing. It is far beyond a fundamental supply and demand issue.
The spike in oil prices today are due to the same players as it was back 3 years ago. President Obama and a few members of Congress are calling for investigations and speculative reform, but with a heavily conservative House of Representatives don’t expect much done in terms of protecting the interests of middle class Americans.