The article also contains a fantastic fact check on oil rhetoric.
President Obama has staked out a position of reducing dependence, and not focusing on a "drill baby drill" approach, noting that the U.S. only has 2% of the world's proven oil reserves. Senator Lisa Murkowski fired back on Friday with a WaPo oped which suggested that “[President Obama's line about the U.S. having 2% of the world's proven oil reserves] is crafted to make the audience think that America is both running out of oil and using oil at an unsustainable rate,” Murkowski said. This isn't particularly surprising for those who know that Senator Murkowski is a Republican from Alaska.
What do other Senators think of gas prices and oil? At least 11 senators argue for regulation of oil futures. What does this mean? Futures are a form of trading on the future value of a good or service. When used responsibly, they can reduce the effects of volatility in the market due to price changes. For example, one company may want to ensure that they have a consistent supply of, say, rice at a future date without worrying about sudden price changes or economic shocks. The rice supplier may want to ensure that someone will buy rice at a certain price at a future date, no matter the economic situation. The two enter into a futures contract. These contracts can promote market stability by hedging against economic risk in the future.
However, most futures contracts are a form of gambling. Speculators with no real stake in the actual supply and demand of oil bet on its future value based on world events and other factors. There are very few established, regulated markets for trading in oil futures. Instead, most contracts are bought and sold "over the counter," meaning they can proliferate with little regulation. Participants in these futures contracts can drive the price of oil up without any actual change in the supply and demand of oil.
Take this quote from Senator Barbara Mikulski's website:
Oil trades by speculators have jumped 35 percent since the latest round of civil unrest began late January in North Africa and then the Middle East. During that same period, U.S. gas prices have soared by almost 40 percent.
Speculators can buy $100 worth of oil futures with only $6 down. However, the [Commodity Futures Trading] Commission has the authority to call for higher margin requirements from exchanges where oil futures and various other commodities are traded. Other commodities traded in these same exchanges often require 50 percent down, instead of an extremely low six percent.
Senator Mikulski joins Senator Bill Nelson (D-FL), Senator Al Franken (D-MN), and other Senate colleagues to ask that the U.S.'s Commodity Futures Trading Commission regulate these futures further.
Unanimous Consent suspects that if constituents had a full grasp of the underlying factors in oil price changes, Senate offices would be getting an earful about this.
Senator Nelson's press release can be found here: http://billnelson.senate.gov/news/details.cfm?id=332017&
Senator Mikulski's press release can be found here:
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