• Dark markets
    May 08,2008

    Everyone is talking about oil prices, as if $4-per-gallon gasoline is a crime against America. The Vermont House went on the record with a resolution demanding an investigation of market manipulations and price gouging that may be contributing to high prices. Gov. James Douglas was quick with a press advisory noting that he had called for such an investigation months ago.

    One of the concerns of those seeking answers about the high prices is the so-called "Enron loophole," which was a provision added to federal commodities trading law in 2000 at the behest of Enron, exempting electronic energy trading from federal oversight.

    Lack of oversight has led to what is being called a "dark market" in energy trading that has driven prices higher than the fundamentals of supply and demand would indicate, according to critics. Among those critics is Matthew Cota of the Vermont Fuel Dealers Association, who has said that the fundamental price of crude oil ought to be in the range of $55 per barrel, rather than $120.

    But the high prices are not the crime. In fact, higher prices for carbon could be an important mechanism for weaning America from the fossil fuels that are causing global warming. The crime is where the extra money spent by consumers is going.

    Apparently, it is going into the pockets of hedge fund operators and other speculators and also into the treasuries of Saudi Arabia and other oil-producing nations. The supply pipeline that brings oil to America is complemented by another pipeline that delivers American cash to the Middle East and elsewhere.

    Earlier this week President Bush attempted to sound a note of sympathy with the American consumer, saying that high gas prices were a "tax on workin' people." Presumably, by calling it a tax, he was trying to make it seem wicked. But if it were actually a tax, it would be something else entirely.

    As columnist Thomas Friedman has pointed out, if the United States had levied a gas tax of $2 per gallon back when gas cost $2, all the extra money that is now heading overseas would have stayed in the treasury of the United States government and could have been used, not to fund skyscrapers in Dubai and terrorists in Iraq, but the development of alternative energy in the United States and the refurbishment of America's infrastructure.

    Curbing demand through increased efficiency and a tax on carbon would also have helped keep the price down. As it is, high oil prices are driving up food prices around the world, and people are starving as a result. This, too, is a crime.

    This dilemma is so complex it is hard to know where to begin untangling it, but here are some steps. Impose effective regulation of energy markets. Impose even greater efficiencies on our auto fleet and in our homes and other buildings. Encourage development of alternative technology and fuels. Wean ourselves from ethanol. Encourage sustainable agriculture that is less dependent on petroleum.

    The pervasive pessimism gripping America at present is owing to the sense that our political system is not capable of doing any of this. The dawning optimism created by the political campaign is owing to the sense that one day maybe we could.

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