AMAZINGLY, are Republicans blocking 15-40 percent declines in gasoline prices by obstructing the CFTC?

[ProgressiveEconomist]

The laziness and incompetence of the high-circulation media on economic issues never ceases to amaze me.

A recent anti-Obama rant on gas prices by Willard Romney got the attention of tens of millions of voters. Romney said the President was trying to "blame others" for his own shortcomings. See, for example, http://www.washingtonpost.com/blogs/election-2012/post/romney-accuses-obama-of-deflecting-blame-for-gas-prices-economy/2012/04/03/gIQA6H2MtS_blog.html .

But how many people know that Republican defunding of the Commodity Futures Trading Commission has blocked since January 2011 economists' best recommendation for bringing down gasoline prices immediately?

The Dodd-Frank financial reform authorized the CFTC to impose position limits on speculative trading. Non-producers and non-consumers of massive quantities of oil increased their share of oil futures trading by 2000 percent from 2004 to 2008. (See http://research.stlouisfed.org/publications/es/article/9179 for a research summary. More detail can be found at http://research.stlouisfed.org/publications/es/12/ES_2012-03-12.pdf and http://www.hsgac.senate.gov/download/062408masters .)

This massive "financialization" of the oil futures market increases gasoline price volatility and sensitivity to rumors of war in the Middle East.

Here are snippets from a Yahoo article today on the opinions of Leo Hindery, founder of a private equity firm and former advisor to President Obama:

WHAT'S YOUR OPINION?

From http://finance.yahoo.com/blogs/daily-ticker/oil-speculation-imposes-most-insidious-tax-americans-leo-123627041.html :

"Oil Speculation Imposes â  oethe Most Insidious Tax on Americans: Leo Hindery By Aaron Task; Thu, Apr 19, 2012.

A day after President Obama called for increased oversight of speculation in energy markets, House Republicans struck back, at least indirectly. On Wednesday, the House Financial Services Committee voted on budget legislation that would, among other things, repeal the Resolution Authority granted the Federal Reserve in the Dodd-Frank legislation and subject the Consumer Financial Protection Bureau to the annual appropriations process.... the Commodity Futures Trading Commission (CFTC) was given authority in the Dodd-Frank Act to impose position caps on oil traders, beginning in January 2011.

These limits have not yet been implemented because the CFTC's budget was slashed ahead of Dodd-Frank's passage, says Leo Hindery, founder of InterMedia Partners, a private equity firm, and a former economic adviser to President Obama. ... Unable to stop Dodd-Frank from becoming law, Hindery says its opponents ... are now trying to 'gut' the legislation. Hindery is particularly outraged to the cuts made to the CFTC's budget, arguing high gasoline prices represent'the most insidious tax" on middle class Americans.

Hindery believes over 80% of oil trading is by speculators (vs. end-users) which adds as much as 40% to the price of crude, citing Congressional testimony by commodities specialist Michael W. Masters and former Exxon CEO Rex Tillerson. A recent report from the St. Louis Fed reached a similar conclusion. ... While singing the praises of CFTC chairman Gary Gensler -- 'an excellent steward of the public's interest' -- Hindery lauds proposed legislation such as the Anti-Excessive Speculation Act, co-sponsored by Reps. Rosa DeLauro (D-CT) and Peter Welch (D-ME), as well as Iowa Senator Tom Harkin's efforts to impose a financial transaction tax. ... Hindery says of the financial transaction tax. 'But if you put just a little squeeze on the margin of the speculative trader, they disappear.' ..."

[annabanana]

1. They've all but announced that causing Americans economic pain is their

plan to retake the White House. This should surprise no one, but enrage everyone.

You are right about our supine, captured media.

[ProgressiveEconomist]

7. Maybe President Obama is waiting until after Labor Day

to get tough with Republicans on how they've obstructed economic growth.

I've heard only one Obama speech charging republicans with keeping unemployment up by a full point with their astounding obstruction of transportation and other infrastructure spending for YEARS.

[saras]

15. It seems to be their plan AFTER they retake the White House, too. Do they have ANY other plan?

[freshwest]

23. +1,000

[aquart]

2. Republicans believe we will blame Obama if gas is high.

So it's a no-brainer for them. Screw the suffering millions.

[Rambis]

3. Bush blamed Clinton when gas was less than 2.00$ a gallon

then when gas was 4$ Bush said the president doesn't have anything to do with gas prices.

[ProgressiveEconomist]

6. The 20-fold increase in speculation from 2004 to 2008

(see the OP) may make today's oil markets quite different from those of the days of Clinton and of Bush's first term.

When the vast majority of oil futures traders have no intention of ever taking delivery of thousands of barrels of oil, it's much easier for rumors to spike prices than before.

Executive and legislative action and sensible regulation may have much more of a chance to change the situation now than before 2004.

Why doesn't anybody ever blame obstructionists in Congress for rising gasolline prices?

[DefenseLawyer]

26. That part's gravy

Their bosses make billions of dollars in basically unregulated commodities markets; that's what guides their vote.

[ProgressiveEconomist]

28. Absolutely!

[hifiguy]

4. When they're bought, they stay bought.

And the oil companies know it.

[ProgressiveEconomist]

18. You are so correct. Compared to

to the benefits for oil companies of elevated prices the Republicans are protecting, the direct government subsidies Republicans also protected for them are just a drop in the bucket.

[Uncle Joe]

5. Kicked and recommended.

Thanks for the thread, ProgressiveEconomist.

[ProgressiveEconomist]

9. Thanks for the K&R

I googled to find the references hinted at in the Yahoo article quoted in the OP. Tnen I decided to share what I'd found with DU. One of my fastest-rising posts ensued (17 recs in the first hour or so).

[liberal N proud]

8. This, they think is their ticket to owning the White House.

[ProgressiveEconomist]

22. Then why don't Democrats

expose them for their sneak attacks on the economy? What is the Obama campaign waiting for?

[freshwest]

24. This bit of news was let out, but it has no legs because GOP owned media refuse to tell the public.

They've even cut or refused to carry SOTU addresses, Obama's news conferences and won't talk about any substantive issue or initiative.

Instead they talk about fluff and Ann Romney's SATH mom lies, and how Obama was given dog meat to eat unknowingly as a child in Indonesia.

No one is holding anything back. But they are talking about it on the campaign trail. That's the only place the corporate media can't censor him.

We've got a communications breakdown in this country that is organized by these interests. Do you really think the mainstream media that is owned by these corporations are going to let it be discussed?

Even when Obama has tried to get the word out about what he's doing by Twitter, the paid trolls shut down the lines by posting garbage. It's been reduced to youtube and the internet.

[ProgressiveEconomist]

30. "Won't talk about any substantive issue"--True dat

But is it WON'T or CAN'T?

Fox in particular chooses "reporters" based on looks not on ability to command issues of the day or interview relevant experts. My favorite Fox "reporter" is named something close to "Ainslee Airhead"!

There seem to be no more Ed Murrows or Walter Cronkites inn the age of "infotainment". Even the NY Times and Washington Posts are pale imitations of the thorough investigative newspapers they were years ago.

[freshwest]

31. Those former years had employees of news organizations who saw their jobs as careers in journalism,

Not crumbs thrown from the table of arrogant bosses. They had an identification with working people, because they had a sense of camaraderie with those in the news room.

There were people who did nothing but investigation, and to get ahead was not based on appearance or even attitude, but hard work ferreting out facts and degrees in Journalism. I actually went to college in the late sixties and early seventies who had that as their major. Not in learning how to sell something and close the deal for the corporate interests, but studying history and finding out the truth.

They were the 'truth shall set you free' type of people. The Founding Fathers wrote of having a well-informed public who would then make the right decisions to guide the nation. Instead we have seen the size of the workforce in media reduced to mouthpieces who know they aren't qualified, who will say whatever is written. It was not always this way.

The talking heads are overpaid for what they are doing, shilling for dollars, and they know there are hardly any jobs out there and they can removed for daring to cross the boss's views. So they self-censor, those of them who want to stay on the air; the ones on Faux are reputed to have dragged up from the depths, totally unqualified except that they can stand upright, take a bath, comb their hair and dress like tarts or pseudo business men.

So they fawn over anyone who actually held a real job in the world for that reason, no matter how wrong they are. They don't have the critical thinking skills to understand the effect of what they are saying and how it harms people. They just want that paycheck.

[ProgressiveEconomist]

32. IMO the main reason for the shift was simple GREED

It's the same reason "reality TV" takes up so much airtime. Profits are boosted when carefully selected amateurs replace professionals who might not be as young or as telegenic.

I remember reading that investigative news was a financial loser for networks. Then somebody decided to try light "infotainment" Roger Ailes perfected the model by introducing flashy graphics and relying on Republican Tuesday morning talking-points for most content. Dumbing down the "news" paid off handsomely in relatively huge Nielsen ratings.that drove up per-minute advertising revenues. Republican-appointed FCCs threw out the "Fairness Doctrine" and Republican-tilted USSCs reversed longstanding law to support such propaganda posing as "fair and balanced" news.

Unfortunately, Democrats seem to have way too much respect for facts to emulate the Republican establishment's "mighty Wurlitzer" of disinformation.

[liberal N proud]

25. Who would tell their story?

FOX?

[ProgressiveEconomist]

27. You MIGHT be right in another year when

there was no President running for re-election. But in 2012, IMO even Fox "News" cannot always ignore something the President and his surrogates repeat time after time after time. If the Obama campaign chooses to get tough with Republicans over their sneak attacks on the economy, what the Ra are doing won't stay unknown until November. That's why I asked, what are they waiting for?

Maybe they believe voters don't really start paying attention to the issues until Labor Day.

[just1voice]

10. I don't get what's so "amazing"? Of course corporate whores are blocking the CFTC

The mainstream media are also nothing but corporate whores so they will not be reporting the truth, EVER.

[ProgressiveEconomist]

11. Give me another example that's

as persuasive as this about blatant Republican hypocrisy NOT reported anywhere, even by Rachel Maddow, and I might take you seriously.

I can think of only one other of unreported Republican mischief: the "Reciprocity Act" that would force all other states to honor Florida's "right to carry" law. With such national legislation, George Zimmernans could murder Trayvon Martins in every city and town. For this reason, one of the suvivors of shooting victims at Monday's Columbine anniversary demo at the Capitol called the proposol "the George Zimmerman Vigilante Act", That was the first I'd heard of it--I just happened to channel-surf CSPAN at the right moment.

[OnlinePoker]

12. Why would anyone want lower gas prices?

If you believe in AGW, then the idea should be to get people out of cars and onto public transportation to limit the generation of green house gases. Gas prices should be higher to discourage people from driving.

[ProgressiveEconomist]

13. Price changes have two effects:

the substitution effect and the income effect.

You did a great job of explaining the substitution effect. But you ignored completely the income effect.

The income effect leaves the gasoline consumer with less money to spend on other things. In the case of gasoline price changes, income effects on middle-class families can amoun t to thousands of dollars a year.

The best policy solution I ever heard about for getting the favorable substitution efffects of gasoline price increases without unwanted income effects was proposed by 1980 Independent presidential candidate John Anderson. He advocated a 50-cent a gallon gasoline tax whose proceeds would be rebated in their entirety to consumers, perhaps as refundable annual federal income tax credits. But that idea was apparently way too smart for the American electorate, who were and still are by the millions as dumb as a bag of hammers. See http://en.wikipedia.org/wiki/John_B._Anderson .

[juajen]

17. Hey, a bag of hammers is not dumb They can hammer many things, but a bag of nails is another matter

[hay rick]

14. There are good high prices and bad high prices.

High prices generally discourage consumption, but not all high prices are the same.

Good high gas prices = lower cost of crude, no premium paid to financial speculators, and high taxes which can be reinvested to build a greener infrastructure.

Bad high gas prices = higher cost of crude including a premium for speculators, and low taxes which do not raise enough revenue to allow sufficient investment to break the chains of oil dependency.

[eggplant]

16. don't forget LP gas, though

It is a byproduct of gasoline refining, and as such, is tied to the price of gas. Quite a lot of people use it for heating and cooking. And while one might be able to wean oneself off of their car, food and shelter are a bit less flexible.

Natural Gas, on the other hand, is cheap cheap cheap these days. If only we had access to it here.

[99th_Monkey]

19. Just say NO to "THE PARTY OF NO"

Needs to be THE message from Dems to voters ... pointing all the perfectly good policy
proposals made by Dems and Blocked by ReThugliCons. I'm sure the list would be
simply staggering to see in one place.

PLUS, the fact that DESPITE all this obstructionism, Obama STILL managed to improve
on what he inherited from the Bush Cabal, adding jobs steadily, saving the US auto
industry, etc. etc.

[ProgressiveEconomist]

29. Maybe Democrats can bring back a "Truth Squad"

with a constant on-camera staff (Bill Clinton?) running a new national ad every week. There ate just so many outright Republican lies and so many Republican obstructions for wich THEY blame the President.

Just the unprecedented number of filibusters Republicans have inflicted on Senate procedures is worth several ads. They've made filibustering so commonplace that it seems a Senate majority has become defined as 51 under Democrats and 60 under Republicans!

[99th_Monkey]

33. One would hope

but what's so frustrating is it seems like the GOP lies just willy nilly to the point of goofy shit
that is easy for them to say (because they are mostly all world class liars) but then it takes
an inordinate amount of time and resources to counter the lie, to get the truth out there.

And of course this is because the M$M has apparently lost all interest and motivation to actually
find out the truth and make sure the "record is set straight"; so the Dems have to do their
job for them in that regard. And all the while, the GOP lies have set up the narrative, rather
than Dems putting forth good policy, and having that be the discussion..

I do have an abiding faith that there will be a tipping point where the general public sees
through all this crap, which OWS epitomized, which is why I love Occupy.

[Zalatix]

20. Much as I hate to be contrarian (yea, right!) CFTC won't lower gas prices much.

Sure, there'll be an initial drop in price, but then American DEMAND will skyrocket. Perhaps even global demand. This will inevitably drive prices right back up.

At that point gasoline prices will be right back where they are now... because of shortages.

[ProgressiveEconomist]

21. Estimates already take into account

the factor you are citing, along with several others. Did you read the references linked in the OP? Sure, demand is a relevant factor. But remember, demand for gasoline is "inelastic"--not very sensitive to price changes, up OR down.