A nascent jobs recovery is starting to boost optimism among Americans, but persistently high gas prices could greatly dampen business growth in the coming months.
That’s why politicians are stepping up their efforts to clamp down on oil speculators operating in commodity markets.
U.S. Sen. Amy Klobuchar, D-Minn., announced this week that she is co-sponsoring legislation to limit the activities of individual speculators.
Her colleague, Sen. Bernie Sanders, a Vermont independent, described the problem in a nutshell.
In a recent commentary, he wrote: “A decade ago, speculators controlled only about 30 percent of the oil futures market. Today, Wall Street speculators control nearly 80 percent of this market. Many of those 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.”
Sanders and Klobuchar are among dozens of lawmakers who wrote to the Commodity Futures Trading Commission (CFTC) earlier this month to implore the body to use position limits to address excessive speculation.
Klobuchar said in a Thursday news release that she’s carried her message of cracking down on speculators directly to CFTC Chairman Gary Gensler.
Leaning on commission
The politicians are leaning on the Trading Commission because there is a disconnect between the law of supply and demand and the price that consumers are paying at gas pumps.
In the letter to the Trading Commission, Sanders and his peers wrote that the supply of oil and gas is “higher today than it was three years ago, when the national average price for a gallon of gasoline was just $1.90.” The Energy Information Administration reported Wednesday that the average price of regular gas this week was $3.83 per gallon in the United States. That was 26 cents higher than a year ago.
Airlines for America, the industry trade group for the nation’s largest airlines, is pushing Washington’s politicians to curb speculation in the oil futures market. Fuel is the industry’s No. 1 expense and many airlines have restructured their businesses to cope with relatively high fuel prices. But many consumers don’t have the ability to absorb substantially more fare increases if oil prices continue on an upward spiral. So the airlines are lobbying to gain some restrictions on speculators.
In a Gallup poll conducted in early March, Americans, on average, indicated they expect gas prices to rise to $4.36 a gallon. Nearly half of those polled expect gas in their area to break $4 a gallon.
The price of gas could be a more potent threat to President Obama’s re-election than the campaign the GOP nominee will wage against the president.
While many small business owners abhor what they perceive to be excessive government regulation on their companies, the oil price issue might be viewed through a different lens.
High oil and gas prices could become a key issue on Main Street.
Businesses are spending more money to cover their fuel costs, yet it’s tough to pass all of their extra expenses along to consumers who have less discretionary money. That dilemma could result in a bad financial squeeze for small businesses.
Big corporations, pressured to meet shareholder expectations on Wall Street, may cope with higher gas prices by slowing their rate of new hires.
High gas prices already are causing financial pain among consumers and businesses. So the line of politicians taking aim at oil speculators will grow as the November election draws closer.
Fedor can be reached at email@example.com.