Obama's Oil Speculator Wish Heads for Big Oil, Buffett Rule Abyss

NEW YORK ( TheStreet) -- President Obama would like to crack down on speculation and manipulation in the oil markets, but he doesn't talk about it often enough or have enough friends in Congress.

That leaves Obama's attack on oil speculators stuck somewhere between real policy and plain politics.

It's a safe bet that the president's wishes related to reining in the oil market speculation are doomed to join his legislative Wish List to Nowhere, alongside the Big Oil tax break repeal effort and the Warren Buffett "tax the rich" campaign, both recent legislative failures.

The attack on oil market manipulation is nothing new for the president, either.

In fact, this is one of the most frustrating aspects of the new focus on oil market manipulation: it was exactly one year ago that President Obama created a Justice Department financial task force to rein in the oil market.

Since then, nothing much has been heard from the White House or said by the president on this issue specifically.

Take it from Jim Collura, of the New England Fuel Institute and Commodity Markets Oversight Coalition -- who works on the oil markets speculation and manipulation issue 365 days a year -- when he says that it's been a frustrating effort. Or in other words, "It's always exciting when the president talks about this because he rarely does," Collura said.

Collura's group used more PR-friendly words in a press release applauding Obama's oil market manipulation speech on Tuesday, stating, "His President Obama's statements are long overdue and are encouraging, especially considering the harmful effect that unchecked financial activities have had on businesses, consumers and the broader economy."

I would emphasize the choice of the word "overdue."

"We'd written the president and urged him to step up the working group he formed, led by Attorney General Holder, but my sense is that the working group met once and was inactive after that," Collura said.

The inactivity on oil speculation and manipulation goes all the way from the White House to the primary federal agency, the Commodity Futures Trading Commission, overseeing the self-regulated commodity exchanges.

In mid-March, a group with which Collura works representing industries -- airlines, truckers, fueling companies and petroleum marketers -- that need to hedge fuel prices for actual business reasons, sent a letter to the CFTC asking why its Energy and Environmental Markets Advisory Committee (EEMAC) -- created by the Dodd-Frank Act, hadn't held a meeting since 2009.

"Given the current run-up in oil prices and many members of Congress urging the CFTC to immediately impose position limits on oil traders, our organizations believe an EEMAC meeting is needed to address stakeholder concerns," the industries' group wrote to the CFTC.

The meeting still has not occurred. "We have a seat on that committee," Collura said. "I'm bewildered. The CFTC has the authority to call for a meeting. It was the only committee made permanent within the CFTC in the Dodd-Frank Act. I don't get it."

Why the renewed push on oil market speculation after a year's hiatus and given the frustration voiced by a lobby group directly involved in the oil market issue representing some of the biggest fuel hedgers that exist?

Memorial Day is coming up and there's the chance that gasoline prices continue to rise. It's an election year and it's not just the Republicans, but even Democrats asking the president to do more on the issue of gas prices. The head of the CFTC, Gary Gensler, is being attacked from all sides. Then there is also the old, reliable tactic of vilifying oil companies and oil speculators, but this much is obvious to even the most casual observer.

In short, the White House is feeling a lot of pressure. That's not to say Obama's aiming at oil market shenanigans is merely a ploy. There is a real policy aim reflecting the fact that oil market speculation and manipulation exists, even if the White House enthusiasm for the policy seems to ebb and flow.

Obama's plan would increase penalties for market manipulation from $1 million to $10 million -- a measure that would be "the least" the government could do to send a message to the worst offenders. The plan would also increase position limits for traders and add "more cops on the beat" to oversee the oil markets, both measures that would aim to combat speculation rather than just punish outright manipulation. However, it would require elevating what have been emergency powers of the CFTC to a permanent level, and that's a much tougher sell.

"Obama's heart is in the right place," Collura said.

But that's about it. Either way, the politics dictate that no matter what the president says, current Capitol Hill partisanship leaves little room for the oil market manipulation wish list to succeed.

In September 2008, Fred Upton (R-Mich.), head of the House Energy and Commerce Committee, and Frank Lucas (R-Okla.), chairman of the House Agriculture Committee, both voted in favor of HR 6604, the Commodity Markets Speculation Bill, a piece of legislation that mirrors in philosophy and aim what the president laid out on Tuesday.

Obama's legislation has little chance of finding such bipartisan support from key energy and commodity committee Republicans today. Just consider Upton's flip-flop last year on energy efficient LED light bulbs, when he went from supporting LEDs to becoming beholden to the Tea Party view that Obama was trying to implement a "dictatorship of light" in setting higher efficiency standards for light bulbs and phasing out an incandescent bulb that hadn't evolved in a century. Yes folks, it's come to this.

For the sake of argument, let's leave both sides of the political fray to their usual predilection for choosing sound bite over sound energy policy in bottom-lining Obama's renewed campaign to tackle oil market speculation.

Obama's words give the appearance of wanting to do something, while Congress gives more than the appearance of planning to do nothing. You can be sure that where it matters -- in the virtual trading world of the oil speculators -- lack of physical appearance doesn't stop the activity. The very debate over whether or not the speculators even exist (I defer to a colleague who has been in the trading trenches to answer this question), obscures the fact that they are very busy doing their part to add to a high price of oil that gives the appearance of being higher than it should be.

So when critics of the president say the latest White House rhetoric about the oil market crackdown won't crack oil prices, they are likely right, even if for the wrong, patently political, election season reasons. If they want to criticize the president over this issue -- as opposed to use it as an excuse to write the formula in the mind of the average American subconscious that Obama = $4 gas -- it would suffice to point out that when it comes to aiming at the speculators, Obama can't seem to keep his eye on the crude bubble for very long, not much longer than the time it takes to make a once-a-year speech speculating on the topic.

-- Written by Eric Rosenbaum from New York.

>To contact the writer of this article, click here: Eric Rosenbaum.

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