Chris Hayes offers up two propositions today. First: High gasoline prices are bad for incumbent presidents. Second: Speculators play a big role in driving up the price of crude oil, and therefore the price of gasoline as well. His conclusion: The CFTC should impose “position limits” that restrict the size of the bets speculators can make on oil futures, and to do that three out of five CFTC commissioners need to vote for these limits:
Not surprisingly, the big Wall Street banks like Goldman Sachs don’t want this, and the two Republican members of the commission don’t favor any position limits rules with real teeth. To his great credit, CFTC Chairman Gary Gensler (a former Goldman banker I was quite critical of when nominated to the position) has taken a strong leadership position in advocating strong limits, and Democratic commissioner Bart Chilton has been supportive as well. That leaves the deciding vote in the hand of Democratic Commissioner Michael Dunn, who’s expressed misgivings.
Now, it just so happens Dunn’s term is up in June and last night MSNBC’s Ed Show reported that the White House has begun vetting his replacement. This may seem obscure and technical, but given the precariousness of the recovery and political explosiveness of gas prices, nominating a replacement enthusiastic about reigning in excessive speculation may be the single most important decision the White House makes between now and Election Day.
This should make for great cocktail party chatter if you want to sound super plugged in to the inside minutiae of campaign politics. Hey, who do you think Obama is going to replace Mike Dunn with? You know, the CFTC guy. Jeez: Commodity Futures Trading Commission, dude. Try to keep up!
On a more serious note, there’s still considerable question about whether the 2008 spike in oil prices was driven by speculation, though I’m friendlier to that thought today than I was at the time. This time around there are the same problems trying to figure out what’s going on (the WTI-Brent price spread remains a bit mysterious, for example), but beyond that there’s also the obvious fact that there are pretty compelling supply explanations for recent price increases. Saudi Arabia may still be pretty stable, but plenty of other oil producers in the Mideast, with Libya in first place, aren’t. It would be strange if the events of the past couple of months didn’t produce a natural price spike.
Still, reasonable position limits might do some good and are unlikely to do much harm. For reasons both prudent and political, Obama might be well advised to find a CFTC commissioner who agrees.