As speculators gamble with heating oil, senior citizens get colder

I remember a scene in the movie, Distinguished Gentleman where Eddie Murphy, as a newly elected representative to the US Congress, is being shown the ropes by a seasoned veteran who wants to take him under his wing. He is explaining to the uninitiated Murphy how the system workers and the advantages of being on a certain committee.

If you vote this way, the veteran tells him, this industry will give you money. If you vote the opposite way, he points out, a different industry will shower you with money. Naturally, Murphy gets a big smile on his face as he realizes Congress is a place where the players never lose.

It was a great example of what the US political machine does. Congress is a great place to enrich oneself. Any commissions or panels or any other form of structure that they create in Congress will only serve the interests of capitalists. Osha is a joke for example; it is a meaningless and ineffective tool when it comes to ensuring safety in the workplace; when we used to have safety meetings at work I always used to joke that OSHA is real good, 25 inspectors for 2 million workplaces. The best protection at work is strong organization of the workers.   Congress has in it only political parties that represent and safeguard the interests of capital, that protects the rights and freedoms of the marketplace. It has actually one party with two wings to it.

There is another one of their regulatory panels called the Commodity Futures Trading Commission CFTC). There has been much activity around this commission in the wake of the near collapse of the financial system that was prevented only through the intervention of public funds;  and increased regulation was passed last year through a bill called the Dodd-Frank reform law named after Chris Dodd and Barney Frank.  Dodd is Chairman of the Senate Banking Committee, so right there we know who he is looking after.  You can't be in that position unless your trusted.

The law allows the CFTC to “restrain speculators” says Bloomberg Business Week, and the recent spike in energy prices is raising the issue of speculation once again. The price of heating oil, which is an important item in the colder states, has been rising and the commission wants to limit investor activity in the energy market.

The problem is that these capitalist politicians are grumbling among themselves over the pace of regulation or whether there is need for regulation of speculators at all, as for some, there is no evidence that speculation is causing price increases. These speculators have two ways of buying these energy contracts Business Week explains. One is through regulated exchanges that require a certain amount of openness. Or they can trade and negotiate for deals privately through swaps. This is basically very similar to all the haggling that went on around private equity where the regulated exchange, the CFTC in this case, is not privy to the goings on in the deals outside the exchanges. The private equity dealmakers were savagely criticized by the investors active in the exchanges because their deals are secret in the main and the money was taxed at a lower rate. In 2006, the top 25 hedge fund managers made $15 billion between them.

“The absence of restrictions allowed investors to pour into the oil markets” says one industry player. “Oil has developed a lot of the same characteristics as gold” he adds, “It isn’t supply and demand that’s driving prices, it’s the interest in oil as an asset”

It’s like the toxic asset problem that still looms like a dark cloud over the economy’s head, the myriad of what capitalists call “financial instruments” whose ownership in unknown. “The agency(CFTC), however has little idea how many swaps there are, who’s involved, and what they’re worth.” Says Business Week; “That market is completely dark to us.”, says one of the commission members.

So the Democrats and Republicans are squabbling over regulation with the Democrats wanting to hire more staff to implement some restraint on speculators and the Republicans denying speculators are the problem and threatening to cut the commissions’ budget if they don’t leave the speculators alone.

This is an electoral game these two parties play constantly. The real issue for working people is: why do we allow people to speculate on a social need like energy at all? Why are people allowed to gamble on the price of heat? Why are they allowed to gamble, play a betting game with each other, on the price of food? One of the reasons house prices rose to the level they did and have since been brought back to earth is speculation in housing, or more accurately, wasters engaging in the unproductive activity of gambling on the price of human shelter. There should not be a student debt market or
a market where oil or food can be bought and sold as an asset only.

This is not to say we should simply ignore and not support regulation, even when they claim to do it. The problem is that they will never regulate themselves in a way that serves our interests, that places social need above profit. We have no political party of our own in Congress that, coupled with pressure in the form of mass action, can impose our will on them to a certain degree. Either way, any gains we make of this nature will be undercut the first chance they get and cannot be permanent.

Building our own political alternative to these two capitalist parties is an important step on the road to abolishing markets and exchanges where individuals can gamble and influence the cost of our food, shelter and basic needs.