UYGUR: Despite the best efforts from Republicans, the American people have already figured out who‘s at fault for rising gas prices. It‘s the oil companies, which is obvious, and also the big banks. A new poll shows 89 percent of Americans blame big oil companies for the rising gas prices. Very logical. The poll also shows that 90 percent of Americans blame Wall Street speculator for $4-per-gallon gas. And of course, they are entirely right. Even Goldman Sachs admits it. In April, the bank warned clients that speculators are artificially boosting oil prices by as much as $20 a barrel.
Now that could cost us as much as 80 cents a gallon for every time we go to the pump extra. Who wants to pay 80 cents extra? Well, that‘s terrible for the rest of us, but you know what? This could have all been avoided. In 2008, House Democrats voted for legislation that would have reined in the speculation. But of course, the Senate Republicans killed it, now, why do they care? Because those big banks and big oil companies, they are the ones that profit from all of this and of course, they are the Republicans‘ top contributors.
All right. Now, let‘s figure out how this all works. I‘m going to bring in Tyson Slocum here, he‘s the director of Public Citizen‘s Energy program.
Tyson, great to have you here. Let me get started with the most obvious question, which is how does the speculation on Wall Street lead to higher gas prices? I think people want to know, how does that work?
TYSON SLOCUM, DIRECTOR, PUBLIC CITIZEN: Right. Well, prices of oil
and gasoline aren‘t set by OPEC. They are not set by the Saudis or
anybody else like that. It‘s—it‘s—it takes place on trading markets in
places like New York and other financial centers, where large banks, like Goldman Sachs and Morgan Stanley, are buying and selling commodity contracts. We have removed a lot of the regulations over these markets, allowing these energy companies to have a big chunk of the market and that is uncompetitive and it allows them to engage in huge levels of speculation that end up driving volume and prices up.
You see a lot of price volatility on these markets and that‘s being driven by the actions of just a small handful of very large banks. They are also bringing a lot of money from pensions and wealthy individuals that are investing in commodities, not to hedge their risk, like normal companies do, like airlines and other entities that have exposure to this price of oil and gasoline, but are investing in commodities just to make money. And so the banks are really driving this speculative rise in prices. Like you said, it is out 75 to 80 cents a gallon.
UYGUR: And so, Tyson, I want to dive into that just a little bit more for clarity, right? Because normally supply and demand would control
prices but here, the demand for the actual commodity is being boosted
up by all the trading so they are pouring in all this money, the banks are into the oil commodity so there by increasing the price of oil which
increases our price of gas. Is that right? Do I have that figured out
SLOCUM: You have got—for every gallon of gas, there are thousands
of dollars in speculative trades behind that gallon of gas that is physically being pumped into your car‘s gas tank. That‘s because the traders on Wall Street, the big banks like Goldman Sachs, are just buying and selling tons of paper contracts. Ninety seven, 98 percent of those trades never result in the physical delivery of a barrel crude oil or gallon of gasoline, it is all just speculation. Now, look, speculation has to play a limited role in these markets. What we at public citizen don‘t like is when speculators are dominating the market, when they are driving the prices beyond the supply/demand fundamentals, because that‘s what‘s killing working families and small businesses right now is we have got this speculation tax of around $30 or $35 a barrel which translates to around the 70, 80 cents a gallon that‘s just pure profit taking by the banks and it really hits all of us hard.
UYGUR: All right.
SLOCUM: And while the oil companies aren‘t necessarily manipulating
things, they are making a killing, because their costs to produce oil aren‘t going up. You know it costs them about 18 bucks to extract a barrel but they‘re selling it for more than 100, that‘s huge profits.
UYGUR: Tyson Slocum, thank you for the explanation, we really
appreciate it, we‘re out of time now. But I want everybody to
understand, more drilling—most gets you three cents a gallon but this
speculation costs us 70 to 80 cents a gallon, that‘s what we have to
address. And the guys getting rich off of it are the banks and the oil
companies as Tyson just explained.
Thank you for watching, everybody. That‘s our show tonight, “HARDBALL” starts right now.