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Going after the speculators is just an oil distraction

U.S. must accept the reality of global supply and demand.

Wednesday, July 9, 2008 - 10:31 am

There must be something in the Democratic psyche that always demands a villain. Name any complicated problem facing the country, and Democratic legislators will discover that the root cause is that someone, somewhere is making an “obscene” amount of profit.

So now we have U.S. Rep. Baron Hill, D-9th, responding to the high price of gasoline by introducing a bill that would re-establish the Futures Trading Commission’s jurisdiction over energy commodities futures, an action “that would help curb excessive speculation in the U.S. futures market.” Experts say such speculation adds between $20 and $50 to the price of a barrel of oil.

Yes, but others say it’s much less than that. No one can say for sure. As complex as the issue is, most people agree there are several major factors affecting the high cost of oil. Speculation is one of them. So is the weak dollar. So is political instability in some oil-rich parts of the world.

But there is a central fact that Hill’s bill ignores: The speculators are making money because they are betting that demand for oil will keep increasing even as supplies become smaller, sending the price ever upward.

And they are right.

Demand is down right now in the United States but skyrocketing elsewhere, especially in China and India. The International Energy Agency says in a new report that spare production capacity will fall to minimal levels by 2013. And global demand will grow from 86.9 million barrels a day this year to 94.1 million barrels by that year.

Hill’s speculation-control measure might not do much harm, and parts of it are aimed at more transparency, which is not a bad thing. But it is a distraction. We are caught in the squeeze of a burgeoning demand for a finite resource, and we depend for far too much of it on foreign suppliers.

We need to use more of our own oil, for starters – announcing the authorization of drilling offshore and in Arctic National Wildlife Refuge would also put the brakes on some of that speculation. And, looking ahead to the day when oil can’t supply the energy needs it does now, we need to be developing all the alternatives we can: wind, solar, nuclear, hybrids, coal liquefaction and on and on.

And, as much as it might pain Democrats, we should hope some smart people figure out how to become filthy rich in the process. Profits for them mean energy for us.