The Enron Loophole: An Orgy of Speculation and the High Price of Oil

Every time you pump a $4.00 gallon of gasoline, you put a $1.60 in the pockets of oil speculators.

"Excessive speculation on energy trading facilities is the fuel that is driving this runaway train in crude oil prices." That's what Mr. Gerry Ramm, Senior Executive, Inland Oil Company told the Senate Commerce, Science and Technology Committee on June 3^rd, on behalf of the Petroleum Marketers Association of America (PMAA). Mark Cooper, director of research for the Consumer Federation of America, told the Committee that speculation could account for about $40 a barrel, or roughly a third of the price. Hedge fund manager and billionaire George Soros, who also testified before the committee, said speculation could account for as much as $60 per barrel. Maryland Law Professor and former Director of the Division of Trading and Markets at the Commodity Futures Trading Commission (CFTC) from September 1997 to September 1999, Michael Greenberger goes further saying that "up to $90 of the present price of the barrel of crude oil has nothing to do with supply/demand, but, instead, is caused by unpoliced trader malpractices."

On June 6, 2008 when oil futures hit a record $139 per barrel, Congressman Byron Dorgan (D-ND) said that represented "a dramatic orgy of speculation and carnival of greed." He then went on to cite several experts on the price of oil. Stephen Simon, a senior vice president at Exxon, said: "The price of oil should be about $50 to $55 per barrel." The president of Marathon Oil, Clarence Cazalot, Jr., said: "$100 oil isn't justified by the physical demand in the market. Fadel Gheit, an oil analyst with 35 years of experience, said: "There is absolutely no shortage of oil. I am absolutely convinced that oil prices shouldn't be a dime above $55 a barrel. I called it the world's largest gambling hall. It's open 24/7. Unfortunately, it is totally unregulated. This is like a highway with no cops and no speed limits, and everybody is going 120 miles an hour."