America's Petro-Terrorists: Wall Street and Washington conspire to destabilize the U.S. economy, one barrel of oil at a time

America's Petro-Terrorists: Wall Street and Washington conspire to destabilize the U.S. economy, one barrel of oil at a time
Illustration by Peter Ryan

On July 11, 2008, the price of oil rose to $147 per barrel, a record high. Gas stations engaged in hot pursuit as the price of a gallon rocketed past $4. All hell was about to break loose.

The country's largest banks had already begun to implode through arrogance and ineptitude. Now the oil market had moved in with a thundering uppercut.

Airlines and trucking firms watched their costs punch through the roof. So did every other business great and small, because 90 percent of American goods are shipped in some form or another.

Former international securities lawyer Dennis Kelleher: “I asked the senior official at Goldman [Sachs] at the time. There were no supply and demand issues that could remotely explain the doubling and doubling again of oil prices.”
Charles Steck
Former international securities lawyer Dennis Kelleher: “I asked the senior official at Goldman [Sachs] at the time. There were no supply and demand issues that could remotely explain the doubling and doubling again of oil prices.”
William Black, former bank regulator turned economist at the University of Missouri-Kansas City: “People can’t conceive of a world without these massive institutions, and can’t believe they’re a negative influence.”
Forester Michael
William Black, former bank regulator turned economist at the University of Missouri-Kansas City: “People can’t conceive of a world without these massive institutions, and can’t believe they’re a negative influence.”

"That was the breaking point of the economy," says Tyson Slocum, director of the energy program at Public Citizen, a Washington, D.C., government-watchdog group. "That's when businesses said they could no longer fuel their trucks and that fuel costs were overwhelming their payroll."

So began a surge of layoffs that would push well into the next year.

America's political leaders could only muster a simpleton's response. Demand had outstripped supply, they claimed. And it was all the fault of radical environmentalists. If they'd only let us drill for more riches offshore — or on protected lands in Alaska — we could all go back to cranking Toby Keith in our Chevy Tahoes.

It was a fabulous, made-for-TV narrative. Who can forget Sarah Palin shaking her fist at the Republican National Convention, exhorting the legions to "Drill, baby, drill!" What began as a rallying cry soon became an article of faith at cafés and kitchen tables, executive suites and editorial meetings.

There was just one tiny problem: Absolutely none of it was true.

In four short years, the price of oil had risen nearly 400 percent. For this to be a natural occurrence, it would have required a sudden, massive increase in world oil consumption — coupled with equally massive shortages in production. None of which had happened.

"I asked the senior official at Goldman [Sachs] at the time. There were no supply-and-demand issues that could remotely explain the doubling and doubling again of oil prices," says Dennis Kelleher, a former international securities lawyer. "In order to justify that, it would literally take the discovery of China on the demand side or the loss of Saudi Arabia on the supply end."

And those politicians who were bleating about environmentalists? What they conveniently forgot to mention was that millions of acres had already been approved for drilling in the United States but remained untouched. The demand just wasn't there.

The boys on Wall Street must have had a hearty laugh over this. After all, they knew oil prices had ceased to have anything to do with supply and demand. Eight years earlier, they'd been granted the right to make huge, unregulated bets in the oil markets. Now they'd driven gasoline to the brink, just as they had with the mortgage industry.

The funniest part: All those finger-pointing politicians were their accomplices. This was an inside job.


A senator goes whoring

It happened on the night of December 15, 2000. The country was in tumult over the Bush-Gore election. This diversion offered Republican Senator Phil Gramm of Texas an exquisite opportunity to push American financial stability back 100 years.

That evening, Gramm inserted a 262-page amendment into the Commodity Futures Modernization Act. Leaked e-mails would later reveal that it had been written by lobbyists for Enron, Goldman Sachs and the Koch brothers, Kansas billionaires who would later fund the Tea Party movement.

Gramm had turned his office into a subsidiary of Wall Street. From 1997 to 2002, the securities and banking industries had lathered him with $640,000 in campaign contributions. His biggest sugar daddies weren't from Texas; they were Credit Suisse, Morgan Stanley, Bank of America and Goldman. And he was more than willing to step-and-fetch-it on their behalf.

Big oil, big banks and big speculators such as the Kochs wanted to make monster bets in the futures markets. But they wanted to do it in secrecy — without any government regulation.

The futures markets are where the world trades its raw materials, from wheat to oil, coffee to cattle. They were designed not as toys for banks or speculators, but for merchants who actually use those products.

Before a farmer plants his oats in spring, he can agree to sell them to Kellogg's at a set price come fall, the same way Southwest Airlines can lock in a price now for a delivery of fuel in January. This allows companies to set their costs and income long-term, so their businesses — and their customers — aren't regularly blown up by wild price swings. Everyone has a stake in keeping prices stable.

Which is why futures had been heavily regulated since the 1930s, when Wall Street last incinerated the U.S. economy. Up till then speculators had regularly terrorized the country by artificially driving up prices and hoarding things such as grain.

But the stock-market crash of 1929 offered Congress a teachable moment. The men of Wall Street could not be trusted. It wasn't just their eagerness to screw their fellow countrymen. Their occasional bouts of breathtaking incompetence made them dangerous to themselves as well. So rigorous laws were enacted to protect both the nation and the banks that ran it.

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16 comments
northsiderasta
northsiderasta

Remember when gop lackeys & hacks worried that BP would not have enough money to drill for more oil?

Richard1980
Richard1980

Goldman Sachs, and others, have done the same thing to metals. They've bought warehouses and are "hoarding" steel and aluminum supplies, manipulating the market and pushing prices higher. Wall St. and the banks need to be kicked out of the commodities markets. They've turned our "free markets" into "manipulated markets," their own Las Vegas, and they are putting our economy on the gaming table, as long as they win, our economy, and citizenry, be damned. http://www.protopage.com/buy-keflex-online http://www.protopage.com/buy-clomid-online http://www.protopage.com/order-amoxil-online http://www.protopage.com/bigger-breasts

Daniel Mays
Daniel Mays

just more republican lies when will u people see whats going on and vote democratic for the people not corporations get rid of citizens united reinstate glass- steagall reelect obama

Don G
Don G

Finally! Someone else with the same conclusions I have had from the get go. Nothing more than big business in politicians pockets. What a bunch of A$$ holes!

Imapayne_57
Imapayne_57

And their blaming Obama for this. This was spear headed by George W.

Snazd
Snazd

Maybe we could put a few of our jobless Americans to work - building guillotines to set up on Wall Street and in front of the Capitol building.

Jacquebquique
Jacquebquique

Timothy Geitner was the "fair haired boy" of Goldman-Sachs. I wonder where he ended up?

Mzonker1
Mzonker1

RE Petro terrorists You are beyond "full of crap". Follow the $ to see who profits from increased gas prices. How long will u remain a sophomore in Jr College?

Not Applicable
Not Applicable

I agree with the major tenets of the piece - politicos are soft on regulation and my calculations show gas today would be $2.40 to $2.70 a gallon in STL without speculators (but not 40% less). There are ways to deal with this, but there isn't the political willpower to do so (combined with the reality that too many voters are economics/math challenged and can't understand the true factors involved).

Trista DiGiuseppi
Trista DiGiuseppi

I'm pretty liberal, but this article is ridiculously subjective. Sorry, I believe there is some truth to this piece of work, but I also smell a lot of sour grapes and bullshit.

Droptheduck7
Droptheduck7

How is the WAR on DRUGS going??? Makes one beleive that Congress and Wall Street are making very nice Profits on BOTH!!! - and NO NEWS NETWORK addresses either!!! After reading this article, it is evident to me that BOTH PARTIES MIGHT ON THE TAKE!!! - However, I have no concrete proof of either - except results, or lack there of !!!

Danieljoeoconnor
Danieljoeoconnor

thankyou for this article. i hope your house doesn't get hit by a drone attack. the fact that this insanity continues unabated despite all common simple logic is evidence of an ulterior motive being perpetrated by evil men in league with senator phil ghram. and that is the imploding of our economy along with other sovereign nations economies to create a problem in need of a solution: the new world order global government. it all ties in with the inside 911 job, all the fema camps across the nation, to the rehearsing of martial law complete with tanks in the streets of st. louis. our government has obviously been hi jacked by the satanic devils that eisonhower and john f kennedy warned us about a week before they blew his brains out.

Robert
Robert

The only way America is going to show congress and these corporate fat cats we are tire of their s#*t is to do what they think we wont do. We have to literally storm congress and wallstreet and throw these people out into the streets right and their faces. We would have to start with congress first, the very place these crooks are hiding at. The sad part is America seems to not be ready to stand up so we continue to get raped without the use of any lube. All I see and hear is people talking about doing something and yet nothing happens and the false promises from campaigners telling us what we want to hear for an election. The great John Adams stated that American democracy would destroy itself from within and that is exactly what is happening. So if congress and big bussiness think they don't have to follw the rules, THEN WHY SHOULD THE REST OF AMERICA HAVE TO FOLLOW ANY RULES.

Lennonsmum
Lennonsmum

Most of the country's working people, or should I say unemployed and underemployed, are hiding their heads in the sand. When there is no more money anywhere but in the hands of the ultra-wealthy, there is no one to blame but ourselves for not throwing the thieves in prison. I am very disappointed with how little the average person reads about what is going on. The sound-bites on TV is all they hear and then think they are so well-informed...What's worse is that most people have given up and don't listen or read much of anything; they have given away their power...

Rikarius
Rikarius

And that my dear is how they get away with it. Total denial by citizens as to the depth of corruption in todays political and judicial arena. If one questions the integrity of our leaders we are considered unpatriotic, in reality the opposite is true. It is our duty as citizens to be diligent in the safeguarding of our rights. Politicians only have the power which we give them. To blindly follow any parties or pollitical agenda is ignorance of the highest degree. Businesses only purpose is to make money. The human, environmental or any other factor is contrary to their purpose. If a loophole exist is it there duty to exploit it. It is our duty to amke sure to close it. To allow this type of corruption to exist for so long says a lot about the intelligence and gullibility of our nation as a whole.

 
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