Brown Blames Speculators for High Gas Prices

Thursday, March 15, 2012

YOUNGSTOWN, Ohio – U.S. Sen. Sherrod Brown, D-Ohio, is again calling on the federal government to take a more active role in combating oil speculation, which he says adds more than 50 cents per gallon to the price of gasoline.

While President Barack Obama has come under fire for gas prices approaching $4 per gallon for unleaded regular, with some of his Republican rivals blaming environmental policies and his rejection of the Keystone XL pipeline, Brown laid part of the blame for high fuel costs at the feet of Wall Street speculators. He cited a February Forbes article that puts the cost of such “risky speculation” by Wall Street interests that have no intention of using the oil at 56 cents per gallon.

“Every time there’s a fire at a refinery or an outage at a pipeline or turmoil in the Middle East,” he remarked, “Wall Street and the oil industry use it as an opportunity to spike prices.”

That translates to an increase of $10 to $12 per fill-up for motorists or $15 per tankful for people who drive small trucks, he said. And for truck drivers such as Bud Burle, an owner-operator with K-Limited Carrier Ltd., Toledo, who joined Brown on a conference call with reporters, that means another $112 dollars to fill the tank of his 200-gallon truck. At $3 per gallon he can fill his truck for $600; at $5 per gallon the cost rises to $1,000.

Such an increase cuts into already thin profit margins for carriers, Brown said.

“That extra money actually means whether or not I’m still going to be in business because the margins are so thin that the reason I’m even in business now is my truck’s paid for,” Burle said. “If I had to make a truck payment in addition to the cost of fuel, I wouldn’t be able to make it.”

Any increase in the price of oil also adds to prices for tires and the cost of an oil change, Burle said. “And then everybody else has fuel surcharges that they put on so everything that you’re doing with your truck becomes more expensive.”

“One estimate put the cost of speculation to the trucking industry at $29 billion,” Brown said. Higher costs are then passed along the production line, making food more expensive for people, he added. That's why he asked Attorney General Eric Holder at a hearing last week about the work of a task force charged with fighting oil speculation. Under the Dodd-Frank financial reform legislation, the Commodity Future Trades Commission was given increased powers to set and enforce limits on oil speculation but has yet to do so.

Brown could not say why the commission has yet to write and enforce the regulations. The House of Representatives “has not exactly been generous with the dollars to carry out Dodd-Frank,” he remarked.

Brown stressed that he didn’t oppose speculation on oil futures by companies that use the oil, such as airlines, which have an interest in locking in a good price long-term when they see one. “One of the reasons Southwest is so profitable is it’s done oil hedging better than darn near anybody,” he said.

Brown also stressed that in conjunction with going after oil speculators the United States needs to develop alterative clean energy sources and invest in more energy efficient technologies. He also called for the closing of tax loopholes that allow “Big Oil” to reap billions of dollars in profits.

“They literally get billions of dollars a year through subsidies and tax breaks,” he said. “When the price of oil was $20 or $30 a barrel, maybe those incentives made sense,” but not today when oil is around $100 per barrel.