Oil Watchdog

If I told you that Venezuela's crackpot leader Hugo Chavez is responsible for crude oil hitting $100 a barrel in futures trading today, would you believe me? I hope not. But the speculators who drove up the price are pointing wildly at Chavez's spat with Exxon, at a refinery fire in Texas and at OPEC. Meantime the hedge fund speculators are hauling in dough, with a big side benefit for oil company profits. You and I and the national economy pay the price.

We'll never know exactly how the trick was pulled off, or by who, because so much energy trading is done in unregulated markets created by the corporate criminals of Enron. Congress has in its hands a partial cure for the speculative excess. If lawmakers don't have the guts to act now, closing the loophole opened by Enron, they should have their heads handed to them by consumers.

Here, thanks to a tip from Tyson Slocum of Public Citizen, is an expert explanation by securities expert Jim Hamilton of how the legislation would at least shine enough light to see what's going on inside the unregulated "dark markets" of energy trading. The measure is part of the farm bill passed by the Senate. It was attached to the big omnibus bill after Sen. Dianne Feinstein and others failed to get the trading loophole closed in six years of effort.

The lack of regulation is due to what's actually called the "Enron Loophole." Enron Chairman Ken Lay and his market-manipulating buddies persuaded Congress and federal regulators in 2000 that electronic trading markets would be more "efficient" if they didn't suffer the weight of regulation. An attempt by a hedge fund in 2005 to corner the market in natural gas finally forced federal commodity regulators to quit denying the truth: speculation, not market conditions, was driving prices. Unregulated markets are not efficient, they're an invitation to gaming by big money and Big Oil.

Now we've got $100 oil. We've got gasoline above $3.03 a gallon nationally, up 2 cents in a day and certain to keep rising. Regular grade in California is $3.20 and diesel is a shocking $3.65, adding an ever-larger fuel surcharge to nearly every manufactured product and grocery item we buy.

Oil companies' dealings with corrupt and often despotic governments in Venezuela, Nigeria, Angola, Chad, Myanmar and elsewhere help keep these governments in power and destabilize whole regions. The companies are desperate to make deals in Iraq, where U.S. armed forces will be expensively on the hook to protect them, their employees and their shipping routes. But that doesn't translate to $100 oil today. U.S. and global demand are flat to down. There's no shortage of oil and no shortage of gasoline, except where oil companies and refineries have deliberately cut back on refining to boost retail prices.

The farm bill is in a House-Senate conference committee, where evil mischief often takes place. Sen. Tom Harkin of Iowa is leading the Senate side of the committee. Sen. Feinstein's office says there's so far no indication the Enron loophole amendment is in trouble. But conference committee is where these things get weakened, sometimes fatally, and energy regulation wold be easy to trade away in return for more favors to farm states.

We're working to make sure the final bill contains energy market regulation without further amendment. If it looks like the measure is in danger, OilWatchdog will be calling for your help.

For the record, here are the Senate members of the farm bill conference committee:

Democratic  members: Sen. Tom Harkin of Iowa, Sen. Max Baucus of Montana, chairman of the Senate Finance Committee; Sen. Kent Conrad of North Dakota, chairman of the Budget Committee; Sen. Patrick Leahy of Vermont, chairman of the Judiciary Committee; Sen. Blanche Lincoln of Arkansas; and Sen. Debbie Stabenow of Michigan.

Republican members: Sen. Saxby Chambliss of Georgia; former Senate Agriculture Committee Chairman Sen. Richard Lugar of Indiana; Sen. Charles Grassley of Iowa, ranking member of the Finance Committee; Sen. Thad Cochran of Mississippi, ranking member of the Appropriations Committee; and Sen. Pat Roberts of Kansas.