On pretty much the only issue they have going for them, Republicans have insisted that this year’s oil price spike was caused by supply and demand – and in fact they have actively disputed the notion that speculation may have played any role. “Basic economics tells us this is a supply and demand issue,” Kevin McLaughlin, campaign spokesman for Republican Sen. John Cornyn, told the Chronicle in July. And Austin Rep. Michael McCaul collected gas receipts throughout the district to send to House Speaker Nancy Pelosi to promote the GOP’s “Drill Here, Drill Now” policy.
Not so fast, says an independent study. As reported by the Associated Press, hedge-fund company Masters Capital Management released a report last week asserting that speculators are indeed to blame. CEO Michael Masters said large institutional investors pumped $60 billion into oil futures, boosting the price, and the price fell back down when about $39 billion was withdrawn. “We have clear evidence the fund flow pushed prices up and the fund flow pushed prices down,” said Masters, adding that the amount of money invested was “way off the scale.”
“These large financial players have become the primary source of the dramatic and damaging volatility seen in oil prices,” said Masters.
Cornyn’s Democratic challenger, state Rep. Rick Noriega of Houston, was quick to go on the attack. His campaign sent out a press release pointing out a Cornyn vote earlier this year against a bill to crack down on energy speculation. The release said: “We knew then and we know now. Uncontrolled speculation has driven up the cost of gas. John Cornyn is among the top seven recipients of Big Oil campaign contributions and is the only one in the top seven who is not a candidate for President.”
McCaul’s challenger for the District 10 seat, trial lawyer Larry Joe Doherty, jumped into the fray as well: “The recent report … confirms what I have been saying throughout this campaign – Republicans’ refusal to crack down on oil speculation is the main reason for our current energy crisis,” said Doherty. “Republicans led by George Bush and Michael McCaul voted against tough legislation that would provide the oversight and accountability we need to crack down on the speculators.”
“In fact,” he continued, “a key component of my energy price reduction strategy is passing accountability legislation to drive hedge-fund speculators out of the energy market so that we can get some relief at the pump. Michael McCaul is standing in the way of that accountability.”
Requests for comment from the Cornyn and McCaul campaigns were not returned – but in fairness, the requests were made as Hurricane Ike hovered off the Texas coast, which kept both elected officials busy (McCaul’s district stretches all the way to the suburbs of Houston).
This article appears in September 19 • 2008.