A Unique Solution to the Current Energy Cost Crisis
In a previous post I explained how the current cost of gas and diesel has little relationship to the supply being produced by the OPEC nations, they are pumping lots of oil, and the price at the well head has not increased in relation to the current outrageous prices at the pump.
The high cost is being caused by greedy speculators in the commodity trading markets. These speculators are driving up our costs, and recently I was reading that our government apparently has little regulatory power over the commodity traders. And I thought the SEC had power to regulate these markets as they are certainly looking like Investment Securities to me.
However if we had anyone in government who had the intestinal fortitude [read gonads] to go against the powerful speculators and big oil companies there is a workable solution albeit a sort of crazy one, but it would work.
The speculators purchase futures contracts for crude, unleaded, diesel, etc all of the basic fuel products. They promise to purchase the product at a specific price at a future time. These instruments keep changing hands as people speculate the price will rise and that actually causes the price to rise.
We have strategic reserves of crude oil that are just being stored for a future crisis. If the price gouging causes people to have to choose between having fuel to get to work and having food on their table, that sounds like a crisis to me.
I propose the government should sell some of the strategic reserve at a price of something like $60 a barrel, but not to everyone, just to one strategic partner, a refiner who will pledge to cut their refinery profit [now a little over $1 per gallon profit] to a fixed profit of say 50 cents a gallon. The output of this refinery partner is only to be sold to retail outlets that will charge no more than $2.50 a gallon at retail pump price. There will need to be enforcement at all levels to assure that the partners do not become greedy and try to sell it for more.
The partner refinery and retail outlets will then depress the ability of those greedy speculators to sell their futures contracts which will put them in the position of having to sell at a loss or take delivery of overpriced crude and other fuel and then figure out what to do with it.
By doing this for a period of six months, the allure of big profits will be taken out of the commodity futures market for energy products. Some of the greedy speculators will lose big time, but that is the chance they take and part of the definition of speculation.
Most of the future contracts should be expired in this six month period and after this spanking perhaps the speculators will learn their lesson and the market can return to a normal supply and demand pricing. If our government is powerless to suspend futures trading in energy products this would be a viable method to restore sanity to the market.
I challenge Barrack Obama and John McCain to work together using their positions as legislators to stand up to the greedy speculators and take control of this insane price gouging which is driving our economy into a recession.
The cost of everything we consume is being increased due to the rise of the cost of fuel to transport the products we need everyday.
Those who live from pay check to pay check are the ones being hurt by this. It really does not bother most of our law makers as they have large reserves of cash plus they often have government allowances or vehicles at their disposal for transportation.
It is hurting the average American more than any other single economic factor at this time. We need to have our voices heard, or perhaps we need to have a revolution to put people in power who will actually represent the little guy.