Aug 30, 2004
Gasoline prices have fallen slightly over the last couple of months. But they are still at near record highs. Meanwhile, crude oil prices continue to fluctuate wildly, dropping suddenly before hitting new record highs.
The newspaper headlines pretend that these high prices are due to unsolvable problems, such as the high growth of demand for oil in China, or terrorist attacks on pipelines in Saudi Arabia or Iraq, or OPEC production running flat out and no longer able to meet increasing demand. In fact, all these stories are nonsense. International agencies estimate that the world has a buffer of spare oil-pumping capacity of at least one to two million barrels per day, or one to two% of daily consumption.
Instead, one of the biggest factors driving these recent price hikes has been the frantic speculation on crude oil by the biggest financial groups in the U.S. and the world. According to the Wall Street Journal, "Oil has become a speculator's paradise." With oil companies increasing oil prices for at least the last two years, big speculators have been trying to get in on the action, madly buying up crude oil anywhere they can get their hands on it. They expect then to sell it for more than they paid, thus driving prices even higher – to their great profit.
The big financial companies, like Citigroup and Morgan Stanley, have been making big profits off oil speculation while playing several roles. They set up their own oil trading departments, taking a cut while acting as middle men buying and selling crude oil. These same financial companies also provided financing and big loans to other speculators.
Not to be left out of this game are the big oil companies themselves. They have also been carrying on a big trade in buying and selling oil contracts, trying to boost their already humongous profits even farther.
If this sounds a lot like the California electricity crisis of a couple of years ago, that's no coincidence. Enron may not be playing a key role this time around, but most of the very same companies and people are. Just as they engineered the fake electricity crisis in California a couple of years ago in order to justify huge increases in electricity prices, they are at it again – this time on a far bigger scale – and raking in even more money off the backs of the population of not just one state, but the entire world.