Is Middle East unrest causing oil price spikes? Maybe not.
COMMENTARY | March 07, 2011
Reporters and editors, based on past experience, should examine the extent to which stock market speculators and the oll companies are pushing gas prices to the $4 mark. For guidance, here are some questions and leads from experts who wrote about the subject for Nieman Watchdog in the period 2005 to 2009, when oil and gas prices shot last shot through the roof.
By Barry Sussman
According to some skeptical experts, sharp spikes in oil and gas prices in recent years were brought about more by speculators and price-gouging by energy companies, and less by problems of supply and demand. Nieman Watchdog ran story after story to that effect.
Gas prices again are headed to the $4 mark. For a while the upward move was blamed on the revolution in Egypt. Now civil war in Libya is said to be the cause of further, stiff increases.
The press needs to take a deeper look here. The main reason to doubt that unrest in the Middle East accounts for the price increases is the “fool me twice” principle. The manipulation by stock market gamblers and oil companies in recent years was blatant, antisocial, and very successful. Does anyone doubt that the same groups would try again?
Other factors point to the same culprits creating a crisis where there isn’t one. The citizen rebellions in the Middle East have been dramatic, earth-shaking, undreamt of before they occurred – and they have had no discernible effect on the production and shipment of oil, which haven't slowed down any. The caretaker government in Egypt has quietly and efficiently kept the Suez Canal open for oil tankers and other traffic. Saudi Arabia has announced that OPEC is ready to make up for any gap in production in Libya and elsewhere if one occurs. Thus, the world may be changing radically but as far as oil and gas prices go, events in the Middle East have made for one big ho-hum.
It’s possible of course that fear of the unknown is driving up oil prices to an extent. Oil expert Daniel Yergin, convening a conference on oil in Houston, agrees that supply and demand are not at issue in the current price spike but does cite Middle East uncertainty. He told National Journal on March 7 that "the market is responding to fear" and that "oil prices are not signaling a shortage of oil, it’s signaling political risk.”
But it’s also possible, and likely, that the same old groups are using the crisis to their own advantage. Experts such as Peter K. Ashton, Henry Banta, Joseph Davis, and Tyler Slocum have written deft “Ask This” pieces and essays on oil and gas for Nieman Watchdog. Here are some of their contributions from 2005 to 2009, about as relevant today as they were when first written:
Tyson Slocum, April 19, 2005:
Taking a harder look at possible gasoline price-gouging
The research director of Public Citizen's Energy Program says the press is too quick to conclude that price increases are simply due to supply and demand. Reporters, he says, aren't asking the right questions.
Henry Banta, July 11, 2006:
Speculators -- not supply and demand -- are to blame for skyrocketing gas prices
A bipartisan Senate report, largely ignored by the media, says that there's no oil shortage and none is expected. Rather, it's massive, unregulated speculation that is costing consumers billions of dollars – and vastly enriching people like T. Boone Pickens.
Henry Banta, May 31, 2007:
Stymied in reporting on gas prices? Try these questions
'The shift of billions of dollars from average Americans to the shareholders and managers of oil companies is important news, as are the reasons behind it. This deserves far better coverage than it has gotten.'
Peter K. Ashton, June 15, 2007:
The method behind endless gasoline price spikes
The oil companies have consciously reduced inventories while demand has been steadily growing. The result is that whenever a refinery hiccups or a pipeline ruptures, there’s a dramatic spike in gas prices.
Henry Banta, July 13, 2007:
Unregulated energy-market speculation is costing you money
It's much too easy for unscrupulous investors and energy companies to create and profit from huge price spikes – without anyone knowing. Henry Banta thinks the government should limit such temptations.
Joseph Davis, May 5, 2008:
10 tough questions on oil and gas prices
For starters, Joseph Davis asks: Why is Congress so passive on the lack of refining capacity? What about probes into price manipulation? The House passed a bill on price gouging; who’s holding it up in the Senate?
Peter Ashton and Henry Banta, June 17, 2009:
Must we have $4 gas prices again? And if so, why?
Peter Ashton and Henry Banta say a new, costly speculative bubble—a repeat of last summer—is taking shape, and they suggest ways to reduce the risk. Isn’t this an important job, right now, for those in the Obama administration as they extensively rewrite the rules for financial markets?
Barry Sussman is the editor of the Nieman Watchdog Project. He is the author of The Great Cover-Up: Nixon and the Scandal of Watergate, now in its fourth edition.
04/22/2011, 12:54 PM
Dear Mr. Sussman,
Why are you and the others having the same old conversation about oil prices you had in 2007/8. Why are you media people allowing President Obama to skate the problem by having the Justice dept., "look into it". It's the same problem that has been and is being ignored. Massive speculation.
You know as well as I do that Obama is surrounded with Goldman Sachs and Wall Street people and he has sold out to them just like G.W.Bush did. You KNOW this.
Why are you not hammering the President about the bill Harry Reid wanted to introduce to close the the major loopholes in the speculation market in 2008 but was blocked by the republicans. That November the Democraps took control of both houses and after that the bill was never mentioned again.
I am as disappointed in YOU, the media for going along with the nonsense, happy to revisit the same old, same old and just pick up a paycheck for nothing.
Do you people work for Goldman Sachs too?
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