Warehouse E

Artificial Crisis?

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Obama Zeros In On So-Called

“Enron Loophole”

By James Donahue

Democratic Presidential candidate Barack Obama has outlined a four-point plan for curbing soaring fuel prices that includes a clamp on speculative oil buying by big corporations.

Obama is calling for legislation that would close the so-called “Enron Loophole,” a kink in a law created at the request of Enron Corporation that allowed for the kind of speculative commodity futures trading by wealthy buyers that caused the Enron debacle.

Many believe that kink, basically a deregulation of prices on energy, is a primary cause of the excessive price hike in oil. Speculators are using the same tricks Enron used to take over the electric and natural gas industries by turning these fuels into a commodity thus becoming middlemen getting rich on the energy market.

Enron was attempting to control the electric and natural gas industry. Corporate CEO Ken Lay succeeded in pushing through electric power deregulation in 24 states, opening the door for a massive “rip-off” of consumers that forced the price of electricity up in California and other states.

Speculators are suspected of using the same tricks this year to control and force up the prices of not only oil but food and certain other commodities. By excessive buying and controlling these commodities, wealthy corporations and investors can force prices up and then sell for big profits.

The story that the price spike has been caused by the threat of a world shortage of oil may be a smoke screen for what is really going on.

The OPEC nations, that have been taking some of the heat, appear to be as concerned about the effect the price increase in fuel is having on world business as everyone else. Saudi Arabia, one of the major producers of oil, has agreed to step up production over the 500,000 barrel per day increases already announced, if the market needs it.

In the meantime, the big oil corporations like Exxon, Gulf and Mobile are reporting exorbitant profits in the multi-billions of dollars.  

The “Enron Loophole,” legislation thought to have been a good idea in the 1990s as a way of opening the business of producing electricity as a free market system, prevented the Commodity Futures Trading Commission from overseeing the futures market and investigating cases where excessive speculation may be driving up prices. While designed to allow more freedom in the electric power markets, it opened the door for Lay and his co-conspirators to do their dirty work.

That loophole has not been closed, and many lawmakers are concerned that speculators have moved from electric power to oil, gas and food.

Obama is proposing that US energy futures trade on regulated exchanges. His plan is to call on the Federal Trade Commission to investigate market manipulation, including the oil futures market, and ask the Justice Department to investigate whether energy traders have been engaged in illegal activities that have helped drive up oil and food prices.

We believe the Obama plan makes more sense than a proposal by Republican candidate John McCain that calls for lifting the ban on offshore oil exploration and a tax holiday on gasoline sales.