BURLINGTON, Vt

Sanders said the Commodity Futures Trading Commission should use its emergency powers – which include the authority to impose speculation limits, increase margin requirements, and suspend trading – in order to ensure that oil prices accurately reflect supply and demand.

“I hope you will seize this opportunity to redefine the CFTC as a strong regulator that will do everything within its power to benefit consumers,” Sanders said in a letter to Gary Gensler, the commission’s new chairman.

The price of crude oil rose to more than $65 a barrel yesterday. The price has vaulted 70 percent higher since mid-January. The run up in prices is happening despite dropping demand for gasoline, jet fuel and other oil products. According to the federal Energy Information Administration, demand for gasoline over a four-week period that ended May 22 averaged about 9.2 million barrels a day, down 0.4 percent from the same period last year. The International Energy Agency predicts global demand for oil will drop this year to its lowest level since 1981.

Last summer, the commission that oversees commodity markets failed to exercise its powers to oversee energy markets as oil prices soared to a record $147 a barrel and the pump price of gasoline rose to more than $4 a gallon. Experts said speculation accounted for about 50 percent of the price of crude oil last year as consumer prices skyrocketed for gasoline, heating oil and diesel fuel.

“The failure of the CFTC to take strong steps to limit speculation was one of the contributing factors to the current financial crisis, and played a significant role in precipitating not only the present economic recession, but also the largest taxpayer bail-out in the history of the world,” Sanders wrote.

In his letter to the commission chairman, Sanders also suggested imposing strict speculation limits on bank holding companies such as Goldman Sachs and Morgan Stanley, companies that Sanders said “These companies are clearly engaged primarily in speculation when it comes to futures trading, including their operation of index funds (such as GSCI), and should be treated as such.”

The commission should do a better job policing conflicts of interest that exist in the energy market, he added.  The trading division of companies like Goldman Sachs and Morgan Stanley, the senator said, should not be allowed to make windfall profits on oil while analysts in other divisions of the same firms are driving new buyers into the market by forecasting higher prices.

The senator also suggested that the commission post online quarterly reports describing the role derivatives trading activities have in influencing prices for each major energy commodity, including crude oil and home heating oil.  He noted that the Federal Energy Regulatory Commission recently published a report for natural gas and electricity which concluded that excessive speculation by financial services outfits played a significant role in high prices.

For a copy of the senator’s letter to the commission chairman, click here.

On Monday morning, news spread that 158 year-old investment bank Lehman Brothers was closing shop, following the pain that already hit Main St. when Bush came to office.

John McCain, who Democratic Vice Presidential nominee Joe Biden aptly calls Bush 44, defiantly said the “fundamentals” of the U.S. economy are strong.  Workers in America have known for some time now that something is fundamentally wrong with the way the U.S. economy has been mismanaged and ignored.

Eight years of protecting inflated CEO salaries and record oil company profits without radical reinvestment in renewable energy has resulted in a Republican Party known for ignoring rising gas prices.

A losing record in football never results in a renewed contract for the head coach.

Note: Author Wade Munday is the news communication spokesperson for the Democratic Party.

In 2007, 115 US plants produced 7 billion gallons of Corn Ethanol – the energy equivalent of 132 million barrels of oil using about 15% of corn production. While this sounds large, it is tiny in the context of the US economy. This is equal to only 1.6% of the energy from from oil in 2007 used in the US. But the situation is worse than this because it takes 1 unit of fossil fuel to produce 1.3 units of corn ethanol. The net energy produced was only 0.5% of the energy from from oil – while consuming 15% of the US corn crop!

Vast sums of taxpayer and consumer dollars are funding an ineffective solution to the real problems of global warming and energy independence. While the country does not sufficiently fund what can be real solutions.

The Federal corn ethanol policy is extremely costly to working people in the US and the world’s poor (through higher food prices). The ethanol equivalent of a gallon of gasoline costs far more than a gallon of gasoline. Fueling your car with corn ethanol makes the world grain shortage worse and increases food prices to the world’s poor. 15 gallons of ethanol in your gas tank uses enough corn to feed one person for a year. Higher grain prices, from corn ethanol subsidies, have a big impact on grain feed beef, chicken, milk, and egg prices for hard working Americans.

US politicians love heavily subsidizing corn ethanol because it makes great politics because of the many subsidized winners from this policy – farmers, farm states, companies and workers that make fertilizer, seed, agriculture equipment; banks and venture capital; towns wanting new factories and jobs, construction workers and mis-informed green voters. By supporting Corn Ethanol, politicians can present themselves as Green and pro-energy independence.

There is a major economic boom in US grain farming from the massive government subsidies to corn ethanol from direct payments, credits and mandates for ethanol use – while the rest of the economy is likely in a recession. Oil companies benefit from Corn Ethanol, as it does little to reduce demand for oil and therefore keeps prices up. Big agriculture is more powerful than big oil, as big agriculture is powerful in most states while big oil is concentrated in a few states and many more people work in agriculture and supporting industries than the oil industry.

Another big interest group in the way are politicians who advocated corn ethanol, who now may be better informed that this was a bad policy – but are afraid to change for fear of “flip flopping” charges. Maybe as part the new politics, Democrats can have the courage to say as John Maynard Keynes said, “When the facts change, I change my mind ? what do you do, sir?” Then again there will be others who will do the same as Hillary Clinton did to preserve her reputation by – holding fast to the Iraq war – when it was recognized as bad policy.

It will take political courage to oppose Corn Ethanol’s powerful interests – while the rest of the public are not interested in “policy details.”

About the author

Nextstep, the author is a diarist with the Daily Kos web site.

In the market, prices are ideally determined by the law of supply and demand. This can be represented graphically on a coordinate plane where units of product are on the x-axis and price is plotted along the y-axis. On this, a supply (S) and a demand (D) line are drawn. The supply line will start at the origin (0 units, 0 price) and increase going to the right (this makes logical sense: the more you can charge for something, the more you’re willing to sell). The demand line moves in the opposite direction starting high on the left and decreasing to the right (again this makes sense; the more of something there is the less we want to pay for it). Since the lines have opposite slopes in the same plane, they intersect. At the point where they intersect (E), the market is said to be in equilibrium, or, at the price indicated at the intersection, supply of something and demand for it are exactly equal to one another. Thus, one would hope, any reasonable person will realize that a change in either of these two lines will affect the prices you pay for a product.

Now, why the detour into the central dogma of economics? Because, that dogma dictates that prices for gasoline will continue to rise. The supply of gasoline is essentially fixed at the current point (or rather, the supply won’t be increasing. It could decrease, but let’s be real here). There’s one basic reason for this: oil companies are unable to produce oil at a rate higher than they have been. Exxon recently reported that its production will not be up this year from last year, despite the opening of several new fields for production. They cite two primary reasons for this:

1. Hugo Chavez’s seizure of the entirety of their production capability in Venezuela (which, by the way, accounted for 15% of all consumption in the United States) and the significant losses incurred because of that action.
   
2. The maturation of old oil fields. Oil fields eventually run dry and the company has to replace them. Exxon takes large capital outlays to replace its lost production and attempt to grow, but Exxon also states that locating new oil fields is becoming increasingly more difficult in the face of environmentalist driven legislation.

Given that Exxon is the largest such company in the world, one could reasonably expect other private companies to be in the same boat. So, let’s go back to that graph discussed earlier and make the supply line vertical (which, the astute person will realize implies that supply is constant, which isn’t strictly speaking true).

This now means that demand (which consumers’ control) is the price determining factor. Simply put, if more is demanded, the price is going to go up because consumers are bidding against other consumers for a limited resource. Of course, demand is increasing, astronomically as a matter of fact. China, and especially India, have rapidly expanding middle class populations who are entering the marketplace for gasoline (and other petroleum products). The respective governments around the world are buying stockpiles of petroleum in mass quantities, and, of course, the US military is buying it in droves (what do you think engines run on, half-baked invasion plans?). For the foreseeable future this doesn’t look to change. So, go back to the graph and take the demand line and shift it up and to the right. As you can see, the market equilibrium point is now at a higher price.

Now that you know the secret to rising gas prices, what can you do about it? The honest answer is virtually nothing. You’re stuck with petroleum until a viable replacement enters the market. In the United States a hard look is being taken at bio-fuels, which create their own problems. Hydrogen is being looked at as another alternative, although the capital outlay necessary for the infrastructure development needed is prohibitive in the current market (in other words, gas isn’t expensive enough that people are willing to pay for hydrogen yet). Your best bet is to buy a fuel efficient vehicle if you’re trying to save money on your gas bill. Toyota and Kia lead the market on this with Toyota offering vehicles in the $20k range with better than 40mpg and Kia offering vehicles in the $11k to $15k range with mid to upper 30s in mpg estimates. Happy hunting and safe driving.

Clarksville Online began checking downtown, where prices hovered below that psychological punch of $3.00 a gallon, but once a driver moved from College Street toward St. Bethlehem, the price inched upwards to $3.03, $3.05 and finally topped out at $3.07 just north of I-24. Wal-Mart always discounted gas rested at $2.99, pennies shy of their competition.

We’ve been watching the price of oil and gas for months, noting that the price (for regular) always seemed to stop shy of $3.00 a gallon. Tonight our city joins others around the country in a collective gasp of sticker shock even as executives at places like Exxon are jumping for joy over record setting profits, an announcement that dovetailed neatly with the rising cost per barrel of oil.

If you are driving a Ford Explorer SUV, it will now cost you $69.07 to fill that tank (@$3.07/ gallon). Something to think about.

Today, though there is no longer a single state where Bush enjoys majority support and his foreign policy failures abound, Bush still claims to have created a robust economy. Let’s look at some comparisons:

• Seven years ago, you could buy a Canadian dollar for $.59 — now it costs you $1.07.
• Then, you could buy a Euro for $.97 — now it costs you $1.43.
• Then, you could pickup a gallon of milk for $2.87 — now the price has risen to around $4.18.
• Then, a gallon of regular gas cost $1.44 — now it’s over $3.00 (and rising fast).
• Then we had a balanced budget and a surplus. Since then, Bush has raised the national debt ceiling five times and we are now drowning in red ink.
• Then, home foreclosures were at record lows — now they’re at record highs.
• Then a barrel of oil was $36 — now it’s $97.
• Today, 15% fewer Americans have health care than did back then.
• Then we were at peace — now our brave young women and men are dying in two wars (and Cheney’s itchy trigger finger is aiming for a third.) We have money now for body bags and Blackwater but no money to fund health care for poor children.
• Then, the dollar was the world’s preferred currency — now other countries can’t dump their dollars fast enough.

This is an economic boom? This is peace and prosperity?

To paraphrase Ronald Reagan: “Are we better off today than we were seven years ago?” Not hardly. Being good at stealing elections hasn’t translated into any other skill necessary for and worthy of our great nation.

Bush’s illegitimate nightmare cannot end soon enough.

Editors Note: Price of Milk added by Clarksville Online Editorial Staff, and not the author. Year 2000 price of milk based off of chart included in http://www.ams.usda.gov/dyfmos/mib/rtlprc_rpt_2000.pdf.