Speculators Expose the False Doctrine of 'Drill, Baby, Drill'

THE NEWS: U.S. oil inventories are at their highest levels since September of last year, Bloomberg News reports. Gasoline consumption is down. Yet oil and gas prices continue to skyrocket. What gives?

THE PROVOCATION: Can there be any clearer evidence that the Palin Doctrine of "drill, baby, drill" simply won't work?

Today's oil prices have virtually nothing to do with oil supplies and everything to do with speculators. This isn't news. It has been highlighted in news reports for years now. The amazing thing is that, in spite of this, so many people persist in the false belief that we can simply drill our way to lower gas prices. This is nothing more than pure fantasy. Consider the current situation: U.S. oil inventories are flush, consumption is down and prices are still rising at breakneck speeds.

Want an analogy? Imagine you walk into a bar and order a beer. The bartender sets a glass down on the bar and hands you a bottle, whose contents you deposit into the waiting receptacle. Once the glass is full, you ask for another bottle ... which you proceed to pour into the same glass. Because it's already full, the contents overflow onto the bar, provoking a few scowls from nearby customers whose shirtsleeves are suddenly awash in yellow liquid.

Do you think the bartender's going to refund your money for the wasted bottle? Not a chance. And oil companies are no more likely to refund our money for paying them (with tax subsidies) to drill for oil that we don't even need.

Self-styled capitalists like Mitt Romney and Rick Santorum like to talk about "what the market will bear." Well, right now, the market won't bear all the oil and gas sitting in American inventories, because we're actually exporting about as much oil as we're importing right now. That's right. It's pouring out of our oil wells and just sitting there like so much wasted beer. Meanwhile, the oil companies and speculators are raking in profits hand over fist.

The allies of big oil assure us that a mysterious and benevolent deity they call capitalism will, somehow, make everything OK. Just let the markets work their magic, they counsel. But this isn't magic - it's more akin to voodoo economics. Heck, it's not even capitalism, which is rooted in the law of supply and demand. In a true capitalist system, an increase in the supply of oil, combined with a reduction in demand, would lead to lower prices. Instead, prices are going up.

That's because speculators - "investors" who buy oil for the sole purpose of selling it to someone else at a higher price - have rigged the game. They now make 70% of all oil purchases, with people who actually use the oil accounting for the remaining 30%. It's the old middleman mark-up ploy. And in this case, there are two middlemen: the speculators and the oil companies. They both stand to benefit immensely from this pseudo-capitalist shell game, while the consumer and the economy take it up the proverbial tailpipe.

It's interesting to note that all this is happening in an election year. Not only that, but it's occurring at precisely the time that the economy is showing some real signs of life for the first time in four years. Consumer confidence is gaining momentum, unemployment is falling, the auto companies have found their footing, and even the housing market appears on the verge of stabilizing. All this has occurred under a president whose record on energy is mixed, but who is by no means in the pocket of big oil.

Politicians belonging to the "drill, baby, drill" faction, on the other hand, have accepted millions upon millions of campaign donations from oil companies and speculators. Does this prove that these special interests are intentionally driving up prices to influence a democratic election? No. But it certainly gives us plenty of incentive to watch them closely.

I'm not a conspiracy theorist, but neither am I naïve to the backroom deals that are struck every day in the corridors and conference rooms of Washington, D.C. Nor am I blind to the trend that has been systematically replacing the power of the ballot with the power of the political donor over the past two decades. The potential for abuse is certainly there, the motive (additional profit) is clear, and the precedent for such behavior is firmly established. One would have to be in a state of extreme denial to think that these profit-obsessed power brokers aren't trying every trick in the book to get a puppet like Romney or Santorum in office.

Yes, even at the cost of sabotaging the recovery.

The irony of all this is that it has nothing to do with conservatism or personal responsibility. It has everything to do with radical self-interest, which is to be promoted by hook or by crook. The speculators who buy and sell commodities for the sole purpose of profit aren't working. They're making money off of other people's labor - the members of a rapidly shrinking middle class who work 8-to-5 in factories and cubicles to make an honest day's wage. These speculators are no better than the welfare cheats who collect public assistance while sitting back on their fat asses watching Judge Judy.

The difference is, most people on welfare - especially in times of high unemployment such as this - actually need the help. Most of them aren't watching Judge Judy. They're out applying for jobs and trying to find a way to survive. The speculators are the ones sitting on their asses while others do the real work. And their asses (i.e., the wallets in their back pockets) are a whole lot fatter than any welfare recipient's. They're like outlaws who steal thousands of dollars from a bank safe at gunpoint ... then blithely complain to the local constable about the pickpocket on the other side of the street. And worse than that, they claim the "market" gives them every right to rob the bank down the road, as well.

The upshot of all this is that all the drilling in the world won't change the equation as long as speculators and big oil lobbyists are playing with loaded dice. "Drill, baby, drill" won't work. It will merely foul the environment while prices continue to rise and money continues to flow into the pockets of the oil companies and speculators.

Remember our friend the bartender? He's not going to object if you keep buying beer you don't drink. More than likely, he'll congratulate you for boosting his business. And if you're smart, you won't pour all that extra beer out onto the bar. You'll take it home and store it in the freezer; then, you'll sell it to your friends when the bar runs out (thanks to you) and they need a few 12-packs for their Super Bowl party.

At a handsome profit, of course.

Congratulations. You've officially become a speculator. Your friends will hate you for gouging them. But the bartender will love you because he'll be able to jack up the price of his own beer thanks to the artificial shortage you created. And you'll be making enough money to pay off those pesky politicians who might otherwise have sided with your angry (former) friends - the ones who can't pay their mortgages because they spent too much money buying your high-priced beer for their Super Bowl party.

Of course, the analogy isn't perfect. Beer isn't a necessity, and most of us can get along without it just fine. But what happens if one changes the commodity to something we rely on in our daily lives - such as electricity? Or medicine? Or oil? Suddenly, the producers and the speculators have us over a barrel (pun intended). They have the money to corner the market and drive up prices. They have the money to pay lawyers and lobbyists and politicians. We average consumers, on the other hand, will never have the money to fight back, because we will have spent it on the electricity we need to stay warm. Or the gasoline we need to get to work. Or the medicine we need to stay alive.

The speculators, if they're smart, will use their profits to buy stock in the production companies, so they can more easily manipulate the supplies. How many speculators have a direct stake in oil companies? It's a question worth asking.

Another question worth asking: What's the price we pay for following the gospel of "drill, baby, drill"? An environment destroyed by people drilling for oil they don't need so they can sell it to people who don't use it ... and exploit people who don't have any choice but to buy it at inflated prices.

If this is the god of capitalism, consider me a devout atheist.