The Other Strategic Use of the Strategic Petroleum Reserve: Screw the Koch Brothers & Goldman

Last week, the Obama Administration released 30 million barrels of oil from the Strategic Petroleum Reserve [1]. The stated reason? Relieve high oil prices. The practical way of getting there? Send a loud message to the Koch Brothers, Goldman Sachs, and the small pools of investors that invest with them, that the artificial predictability that they built into the trading of the commodity is now gone.

To every action in Washington, there is an equally forceful subtext going on. The stated reason for dropping millions of barrels of oil out of our strategic reserves is the secondary effect. The larger imperative? Send a loud message to commodity manipulators like Koch Industries and Goldman Sachs.

If the Commodities Futures Trading Commission (CFTC) will only prosecute the small fish for commodity manipulation, this is the only way to blast a hole through the oil pirates’ scheme. As we showed you in Things Get Worse With Koch: Tea Party Pumps Up $4 Gas and Have a Little Oil and Global Commoditization with that $7.00 Big Mac Meal?, the Kochs, Goldman, and their intimate pals have been able to construct their own fuel surcharge for each and every citizen of the U.S. by artificially creating scarcity in the supply line of oil to production facilities in the U.S. It has driven up the cost of everything that is transported, and will keep that super-heating built into everything that you consume or buy, from a burger to a new home.

They buy oil when prices are very low, then choke off the flow of it by diverting millions of barrels into holding tanks and ships to drive the price per barrel up. It’s a practice of which the CFTC is aware. As the Kochs and Goldman are politically powerful with the GOP, though, the agency has only been willing to go after much smaller fish for imitating the alleged big players of oil price manipulation.

The mainstream media, which digs into stories like a child attacking a piece of petrified wood with a spoon, went with the stated purpose of the reserve’s offset of Libyan oil.

“We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery,” Energy Secretary Steven Chu said Thursday.

Sadly, no one working in the media these days seems to like to research much. That oil has been out of the system for weeks, and prices actually went down a bit, not up, during the period that Libyan oil stopped hitting the market. There has been plenty of oil supply in the chain. OPEC and the other big producers have made it so because the commodity manipulation done by the speculators reduces long-term demand and increases the speed of searching for alternative sources, the thing that hurts their business most. It is the pirate sponges that have been removing it and creating the artificial scarcity.

How does the release of a mere 30 million barrels of oil screw up the game for these billionaires?

The name of the game is predictability. When you can control the price swing range in your favor, you have a powerful profit center. With the release of the oil from our strategic reserves, the Obama Administration undid in a small part exactly what the Koch Brothers did. NPR reports:

“Benchmark West Texas Intermediate for August delivery fell $4.59, or 4.8 percent, at $90.82 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price many international varieties, lost $6.78, or 5.9 percent, at $107.39 per barrel on the ICE Futures exchange.

The lack of announcement, or discussion of the move, confirms that it is designed to unsettle commodities piracy. The Kochs and Goldman lure in a number of large clients to invest with them in oil as a hugely profitable hedge against their other, riskier investments. If these investors fear that the government can come into the marketplace and disrupt millions in profit in the sale of sidelined oil, they will be less likely to invest in commodity manipulation, because it lacks that high degree of certainty.

That the Obama Administration had to work around the heel-dragging of the CFTC is lamentable. They should all resign for their shameful lack of enforcement of the tougher laws which the last majority-Democratic congress passed. That the Administration gave millions of Americans a modest amount of relief in the short-term is really inconsequential. What they did, though, is draw a line in the election sand: If Mr. Obama is returned to the White House, the party is over for commodities pirates.

The Koch Brothers will have to resort to crying over the end of the scheme in their overpriced Brawny paper towels.

My shiny two.

About Brian Ross

Brian Ross is a writer, screenwriter, political satirist, documentarian, filmmaker and chef. Ad hoc, ad loc, quid pro quo... so little time. So much to know!

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