Speculator Crackdown Won't Cure Oil Prices

Energy: President Obama's promised "crackdown" on speculators is another example of his using government to strangle markets and increase control over the private economy. Worse, it won't cut gas prices one bit.

President Obama knows that soaring gasoline prices are hurting his political chances in November. How else to explain his sudden decision to go after "speculators" - that is, investors - in the oil and gasoline markets for driving up prices?

Under his watch, gasoline prices have soared from $1.89 a gallon to nearly $3.90 a gallon - a 106% rise in just three years. No wonder he's in a political panic.

Standing with Attorney General Eric Holder, President Obama said Tuesday he wants to put "more cops on the street" to nab speculators who profit from rising oil prices. Cops? For people investing legally?

After ripping Congress for not imposing new taxes on oil companies, as he wanted, Obama on Tuesday called on lawmakers to spend $52 million to give bureaucrats expansive new controls over oil trading markets.

Specifically, he wants to increase penalties for market manipulation and give regulators power to require energy traders to have more collateral. But, as even Obama admits, it "will not bring down gas prices overnight."

Actually, it won't bring prices down, period.

What it will do is whip up the Democratic base, which seems to believe evil Simon Legree-types are sitting at their trading terminals, pushing oil and gasoline prices steadily upward at the expense of Average Joes.

As the AP put it: "At issue is the increasing role of investment in oil futures contracts by pension funds, mutual funds, hedge funds, exchange traded funds and other investors. Much of that money is betting that oil prices will rise. Analysts say it is possible that such speculation has somewhat inflated the price of oil."

This is pitch-perfect, left-liberal thinking. As it turns out, "speculators" are investors - like pension funds. And speculators don't cause higher prices; supply and demand do. At least, that's the conclusion of the Institute of International Finance, which looked at a number of studies on speculators and oil prices around the world. Speculators are political scapegoats.

Even left-wing columnist Paul Krugman recognized this in 2008, calling the claims "speculative nonsense."

In the U.S., we've had repeated federal investigations of speculators' role in driving up prices - in 2003, 2005, 2006, 2008, 2011 and again this year. Not one has found evidence of pervasive market manipulation.

So why are prices rising? Simply put, we're using more, and investors fear Obama has closed off so much of the nation's oil wealth to development that prices eventually must go up. And they're right. Output on federal lands fell 14% last year, the biggest drop in a decade.

As noted here recently, the U.S. has nearly an estimated 1.8 trillion barrels of oil in a variety of locations - offshore, onshore and trapped in oil sands and shale.

We have more oil reserves than any nation on earth - contrary to Obama's repeated false claim the U.S. uses 20% of the world's oil, but has only 2% of its reserves.

Obama even rejected the Keystone XL pipeline, which would have brought an extra million barrels of Canadian oil to the U.S. each day. Snubbed by Obama, Canada's now making plans to sell that oil to Asia.

This is all part of a worrisome pattern of Obama using crises to criminalize normal market activity and seize control of America's economy, as he did with the auto industry, housing, health care and Wall Street.

One recent example: Obama quietly signed an executive order last Friday to set up "a high-level task force charged with coordinating federal oversight of domestic natural-gas development," according to the Hill.

This is a major power grab. Natural gas prices have plunged, but only because they've avoided government "oversight" so far. Once again, the White House will use the controversy over "fracking" to control an entire, successful industry.

Higher prices? Don't blame speculators. Don't blame oil companies, either. Blame those in the White House who are disrupting our free energy markets.