True Story

I'm not great at math.  I wish I was, because I would like to have taken Economics just so I could understand the numbers behind my gut feelings, which - I must say - tend to be right.

Back in 2000, I argued that California was being gouged on energy prices.  There was no sensible reason for California to be having the energy crisis it was.  Someone who has great knowledge of the energy markets claimed I was flat wrong.

I wasn't.

Back in 2008, I argued that the extraordinary spike in gas prices was because of speculation.  The Econ teachers at my school patiently explained that this was impossible.

It wasn't.

This interesting piece by actual Socialist Bernie Sanders speaks to my point.  Now, whenever a politician speaks you have to be very wary.  Truth is a matter of perspective in DC.  But Sanders has survived (have I mentioned he's a Socialist) because he rarely strays from the facts.  Here are the important paragraphs (emphasis added):

A decade ago, speculators controlled only about 30% of the oil futures market. Today, Wall Street speculators control nearly 80% of this market. Many of those people buying and selling oil in the commodity markets will never use a drop of this oil. They are not airlines or trucking companies who will use the fuel in the future. The only function of the speculators in this process is to make as much money as they can, as quickly as they can.

I've seen the raw documents that prove the role of speculators. Commodity Futures Trading Commission records showed that in the summer of 2008, when gas prices spiked to more than $4 a gallon, speculators overwhelmingly controlled the crude oil futures market. The commission, which supposedly represents the interests of the American people, had kept the information hidden from the public for nearly three years. That alone is an outrage. The American people had a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today.

Even those inside the oil industry have admitted that speculation is driving up the price of gasoline. The CEO of Exxon-Mobil, Rex Tillerson, told a Senate hearing last year that speculation was driving up the price of a barrel of oil by as much as 40%. The general counsel of Delta Airlines, Ben Hirst, and the experts at Goldman Sachs also said excessive speculation is causing oil prices to spike by up to 40%. Even Saudi Arabia, the largest exporter of oil in the world, told the Bush administration back in 2008, during the last major spike in oil prices, that speculation was responsible for about $40 of a barrel of oil.

I mean... Holy Crap, Batman.

Domestic production is at an all time high and demand is falling through better gas mileage in the US auto fleet.  Europe is not spending a ton on gas and while China's demand grows, it cannot account for what we are seeing at the pump.

This is the act of speculators.

When crude oil leaves Whereverstan on a tanker, it is bought and sold as it crosses the ocean on commodities markets.  Because the final product HAS to be bought when it arrives in the US, it's a uniquely well suited product to forcibly create a bubble.  When this particular game of musical chairs ends, it's the oil companies that are left standing there with an awkward expression on their faces.  Of course, that quickly passes when they can pass the costs on to consumers.

If the evidence is what Bernie Sanders says it is, I am mystified by something.

Why is Obama not railing against Wall Street speculators who are gouging the average American and adding more filthy lucre to their ermine lined pockets at a time when the Dow is at 13,000?  Can you - off the top of your head - come up with a better campaign issue?

Obama has two big problems with his base.  First is his embrace of Bush Era security state excesses.  (Not torture or Gitmo, which he tried to close, but the surveillance state and the drone war.)  Second is his cozy relationship with Wall Street, via Geithner and Summers.

If he were to pick a fight with the speculators, call them out for inflating the price of gas and win, well, that would be the perfect issue for him.  Because you know that R-Money and the GOP will freak out and attack him if he does.  They can't help themselves.  They will reflexively put themselves on the wrong side of the public just because Obama favors something.  Don't believe me?  Look at the contraception debate.

And - again if the evidence of speculative price increases is as strong as Sanders says it is - he will win.

People already favor Obama on the "Cares for people like me" metric.  But ultimately his electoral prospects are tied to the economy.  The primary threat to the economy is oil prices.  We already know that Wall Street - despite the mollycoddling Obama has engaged in towards them - hates Obama because he won't let them pillage quite as freely as they used to.  You can easily make a case that Wall Street is deliberately sabotaging the recovery to help Mitt Romney.

Yes, Fox News will hyperventilate about class warfare.  Pundits will clutch their pearls and retreat to the fainting couch.

But that's how you know you are winning.