Independent Bernie Sanders rightly focuses on Oil price manipulation

US Senator Bernie Sanders (I-VT)

The cost of a gallon of fuel is one of the largest factors that impact the standard of living in 2,211-square-mile Park County, where I live, but it applies all around the country.  Not only is it felt at the gas pump when you fill up your tank (if you can afford to fill up), but fuel costs relate to so many other areas in our day to day lives. Think of the impact on Sheriff Department patrols or on the price of food delivered to the supermarket, the cost for road crews or delivery of medical supplies. 

So it might be with some degree of surprise that you need to drop your political leanings ever so slightly and see just what Vermont Independent US Senator Bernie Sanders did during the August recess to try and help all of us.   Sanders had the unmitigated gall to “leak” confidential U.S. Commodities Futures Trading Commission (CFTC) data on extensive oil futures positions that show how (and who) helped dramatically push up all of our fuel prices in 2008.  The data also supports arguments of how speculators keep those prices artificially high.

Notice how these oil futures prices bottomed out dramatically at the end
of the Bush Administration, then headed up shortly after the inauguration
of Barack Obama in 2009.  Sanders uncovered how the prices were
manipulated during 2008.

Sanders usually caucuses with the Democrats in Congress and is also the only member of the Senate to have membership in the Congressional Progressive Caucus. The CPC is the largest group within the Democratic Caucus and Sanders was its first chair when he was a member of the House in 1991.

Given all of the other news of the past couple of years about how Wall Street greed helped create an environment that led to the recession we are all now suffering in, the usual suspects won’t be a surprise.  According to a press release from the Senator, "This report clearly shows that in the summer of 2008 when gas prices spiked to more than $4 a gallon, Goldman Sachs, Morgan Stanley, and other speculators on Wall Street dominated the crude oil futures market causing tremendous damage to the entire economy," Sanders said. "The CFTC has kept this information hidden from the American public for nearly three years. That is an outrage.”

And it should be to everyone.

Congress created the CFTC in 1974 as an independent agency mandated to regulate commodity futures and option markets in the United States.  The five-member board of commissioners each serve for staggered five year terms and are appointed by the President, then confirmed by the Senate.  Current Chairman Gary Gensler was appointed by President Obama and sworn in in 2009.  Prior to joining the Treasury, Gensler worked 18 years for Goldman Sachs, where he was selected as a partner.   Three of the other members of the CFTC were appointed under George W Bush.

The same speculators that drove up prices to record highs during the final year of the Bush Administration are playing the same game again, Sanders says, and heating oil prices in the northeast are predicted to be 33 percent higher this winter than last.

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How do these speculators drive up prices?  In this scene from the 1983 movie, "Trading Places" with Dan Aykroyd and Eddie Murphy (Valentine and Winthorpe), you get a compressed version.  In the movie, the two are getting back at Randolph and Mortimer Duke, successful commodities brokers who took advantage of the pair.  The Duke brothers thought they had inside information related to a poor crop report meaning higher prices for Frozen Concentrated Orange Juice futures.   But our heros had substituted a fake crop report earlier, leading the Dukes to the wrong conclusion.  On the commodities trading floor, the Dukes commit all their holdings to buying frozen orange-juice futures contracts; other traders follow their lead, driving the price up. Before the real crop report is made public, Valentine and Winthorpe sell futures heavily at the increased price. After the forecast that the orange crop will be normal, the price of orange-juice futures plummets. Valentine and Winthorpe cover their short sales, turning an enormous profit. The Dukes are ruined, being left owing hundreds of millions for futures now worth a fraction of what they contracted to pay.  Change the movie plot to Oil  instead of OJ, and replace the trading floor with computers - and the concept is the same.

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A Democratic Congress passed laws in 2010 to start to actually regulate the financial industries, and gave the CFTC until Jan 17 of this year to impose strict trading rules; yet, the right-leaning body has yet to do so.

In June, Sanders introduced the “End Excessive Oil Speculation Now Act,” which is designed to force the Chairman of the CFTC to impose strict limits on the amount of oil that speculators can trade in the commodity and futures market.  It’s clearly aimed to help all of us by requiring action that otherwise depends more on rules than politicians. 

Thus far, eight Democratic Senators have signed on to co-sponsor the bill:  Bill Nelson (D-Fla.), Richard Blumenthal (D-Conn.), Jeff Merkley (D-Ore.), Al Franken (D-Minn.), Sheldon Whitehouse (D-R.I.), Ben Cardin (D-MD), Barbara Mikulski (D-MD), and Jay Rockefeller (D-WV). 

Regardless of which party you support, or if you're unaffiliated, we can only benefit from the courageous work Sanders has undertaken.  In Colorado, we should urge Senators Mark Udall and Michael Bennet to sign on to the legislation as well.


This column was originally published in the September 2, 2011 edition of The Flume, the paper of record for Park County, Colorado.  It has been updated to include additional information.  The monthly column is titled "Democratically Speaking"