Bring back necessary regulation
Milwaukee Journal Sentinel November 4, 2008
Dear Mr. President-Elect:
I doubt you noticed gas prices in Milwaukee this summer reached $4.20 a gallon. The Secret Service pumps your gas.
While driving, the only thing we in the Midwest pay more attention to than stoplights are gas prices. Forget China. It wasn't a dragon that drove up prices but vampires.
Do you remember the California electricity crisis in 2000 and 2001? The price tripled, and blackouts rolled through the state. We later learned it was manipulation by Enron. You know the end of that story.
Commodities deregulation passed by Congress in December 2000 opened the gates to the creation of dark trading exchanges operating outside of oversight and regulation. There, Enron traders played it fast and furious.
Did Washington learn its lesson and protect Americans from further exploitation? No. In fact, it slashed regulation further. This was not limited to oil. All commodities trading, such as corn and wheat, was deregulated.
Prices for all soared. I am sure you haven't bought a loaf of bread in some time. That, too, was blamed on China. In 1936, Congress passed legislation to prevent commodities speculation, thereby ensuring that supply and demand set the price. True shortages would raise them, not greed. It worked - for 60 years.
All of that was reversed over the past eight years as Washington became intoxicated by the deregulation mantra. Hedge funds, investment banks and sovereign wealth funds gambled on commodities, sending food prices soaring, squeezing business costs, putting people out of work and driving the economy into recession.
Ironically, the Enron traders did not end up behind bars but behind terminals trading oil. After cutting their teeth running up electricity prices, they ran up gas prices.
I am not asking you to ignore the financial crisis or the recession. Nor should you rest easy now that the price of a barrel of oil has deflated somewhat. The laws and policies that sent it skittering skyward are still in place.
Yes, the price of gas is now well below $3. But speculators sit on piles of cash. They are waiting to make another score.
You talked too little about oil during the campaign, focusing on the financial meltdown and recession. If you resolve those and ignore this one, the country still is going to be in crisis.
On the Hill, there have been half-hearted efforts since Enron to block commodities speculation. Unfortunately, when times are good, no one wants to rock the boat.
Now that times are bad, Congress held hearings this spring and summer. Oil prices peaked as the hearings ended in mid-July, and Congress passed some weak-kneed legislation. Fear - the only antidote to greed - of regulation gripped speculators. Prices tumbled.
You should read the testimony. It is disturbing how easily we have been fleeced. And put a copy of "The Tyranny of Oil" by Antonia Juhasz on your White House night stand.
This is a national security issue, too. Speculators not only enriched themselves but enriched countries that are not our friends. They benefited from wellhead prices that even OPEC couldn't conjure.
If you propose urgent bipartisan legislation before you take office in January, it would set a tone that speculation no longer will be tolerated. It would keep prices down until the new year. When you take office, we need an emergency package before the vampires get back in the game.
There are those who still oppose regulation. They are blind. Every busy intersection has stoplights.
Forget "Drill, baby, drill." This would be far less expensive and far quicker than a 10-year gamble in offshore drilling.
Regulate, baby, regulate.