The price of oil

A slow return to cyberspace today, from an internet cafe.

While offline, I’ve been keeping an eye on the price of oil debate. There is, of course, a great deal of fuss about the price of a barrel breaching $40, especially and predictably in the United States. It has been tremendously instructive to watch C”N”N’s response to all this. C”N”N’s parade of experts from the American Petroluem Institute, the American Enterprise Institute, and other palaces of good sense has been the embodiment of Noam Chomsky’s famous sentence: “Colorless green ideas sleep furiously”. All the white men in suits wheeled out to opine on the price spike speak in well-formed English sentences, to be sure, but they make fuck-all sense. Among the idiocies proposed to solve the problem – drilling in the Arctic and tapping the strategic oil reserve. Elsewhere, proposals include lower fuel taxes, and invading Venezuela. This will, of course, do nothing to solve the underlying problem. While in the longer term, there’s a big demand crunch, supply is more than able to keep up in the short term.

The reason for sky-high oil prices lies neither in the demand nor supply for oil-for-consumption. It lies in price speculation. Traders are betting, successfully, that given the various kinds of panic to which corporations are prone, they can charge pretty much what they like on a contract to guarantee a fixed future supply of oil. And the traders are winning every time. Of course, the consequences of price speculation are exactly like a genuine shortage – high prices, and idiots rushing to loosen the spiggots on any source of oil they can wrench their hands on. But there’s no real shortage. Just a bunch of wankers making a pile of cash off this.

Am I being a little paranoid? Hardly. Yesterday, the Snohomish County Public Utilities District – and what a lovely name that is – released transcripts of conversations from Enron’s Portland offices, in which traders were openly conspiring to raise the price of energy during California’s energy crisis. It is not only reasonable to assume that the same thing is happening on a national level today, it is a certainty.