We need an MMP type campaign for free public transport

UNITYblog editorial 11 July 2008 A just released Australian report claims petrol could hit $A8 ($NZ10) a litre within a decade. The report confirms that people on low incomes will be the worst affected by Peak Oil scenarios. See 'Fuel for thought - The future of transport fuels: challenges and opportunities' But still NZ's Labour government wants to spend billions of dollars on new roading projects. They've been deafened by the honks of the roading lobby and aren't hearing the voices of people calling for a 21st century public transport system. Green Party co-leader Russel Norman responding to the Aussie report in the NZ Herald says: "Petrol at that price would make the Government's entire motorway building project a white elephant - modern day Easter Island statues. Our new motorways would be monuments to short sightedness and profligate waste of resources." "We have no choice but to move to a far less oil-dependent economy, because rising prices will give us no choice." That's why we need to forget about tinkering around with emissions trading schemes that are next to useless and build a nationwide, multi-organisation, campaign for free and frequent public transport. This is the solution that's desperately needed and which hundreds of thousands of people in NZ - and around the world - will see the sense of. Free and frequent public transport needs to be turned into the kind of high profile broad-based campaign that won MMP voting.

Oil price shock means China is at risk of blowing up

by Ambrose Evans-Pritchard from The Telegraph 7 July 2008 The great oil shock of 2008 is bad enough for us. It poses a mortal threatto the whole economic strategy of emerging Asia.The manufacturing revolution of China and her satellites has been built oncheap transport over the past decade. At a stroke, the trade model looks obsolete.

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"Why can't the Government lift the GST on everyday living items, e.g. food and petrol?"

UNITYblog editorial 5 July 2008 The cost of petrol is spiking upwards again and likely to reach $2.50 per litre. Working people are really hurting. A recent letter from the NDU express asks the question: "Why can't the Government lift the GST on everyday living items, e.g. food and petrol?". The correspondent goes on to say: "I travel 70km per day to get to work. I estimate the cost of petrol plus wear and tear on the car is around $150 per week. Take this off our lousy wage. And we have to ask ourselves, is it worth getting out of bed at 5am five days per week or financially are we in the same boat if we stay at home and collect the dole? What's the government going to do?" This crisis for working class people is going to be a big election issue. RAM is continuing to build the "GST-off-food" campaign, which will run right up until election time. The response has been overwhelming on the streets of working class suburbs across the country. The extent of grassroots anger means there's the opportunity to turn this demand into a real mass movement that the politicians in parliament cannot ignore.

Nationalise big oil, enemy of people and planet

by Dick Nichols

from Socialist Alliance website, Australia

The latest surge in the spot price of crude oil (to $US139 a barrel - 87.4 cents a litre) dramatises the urgent need for our society to wean itself off dependence on “black gold”. The longer we remain hooked the greater the devastation both to our environment and to the living standards of millions, especially the poorest peoples of the planet.

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Perhaps 60% of today’s oil price is pure speculation

by F. William Engdahl
from Global Research
May 2, 2008

The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?

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Electric rail in jeopardy because petrol prices too high!

by Ondine Green

After decades of sabotage and delay it's finally been agreed by all parties that Auckland's rail network needs to be electrified for the needs of people and planet. So it's absolutely stupid that the Auckland Regional Council has been forced to approve a budget without provision for buying electric trains in the coming year (see http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10516091)

The Labour government declared in 2007 that Auckland could have electric rail - but only if ordinary Aucklanders paid up to 5c extra per litre of petrol for it. Now the petrol tax is in political doubt because of skyrocketing oil prices. Yet Labour refuses to consider any other options for funding. So, in other words, Auckland's electric rail is in jeopardy because petrol prices are too high! This is of course the stupidest Catch-22 situation ever. It's precisely because oil is in short supply (and going to get shorter) that we need electric rail, and other sustainable transport, as soon as possible. Aucklanders might be wondering whether the Labour government actually wants Auckland to have electric rail. It's possible that windfall profits from petrol price gouging have blinded them. Perhaps they really don't care if Auckland chokes on its own congestion and pollution. A government with working people's interests at heart would immediately guarantee all the funding needed for Auckland to have an efficient, comprehensive electric rail system within five years. This should be paid for out of general funds, not by putting an extra tax burden on working people in Auckland, most of whom at the moment don't have a real choice but to use their cars to go to work. The nasty Nats aren't any better. Maurice Williamson says he wants electrified rail "somehow". "Somehow", in Maurice's book, always means what are euphemistically called "Public-Private Partnerships". Maurice wants the government to subsidise big business to build our rail network - and then to make a profit off it indefinitely. But the profit motive is exactly what got us into this mess. The reason we need electric rail is precisely because the corporate sector is infatuated with the car. All the experience of the 1990s - especially the debacle with our national rail network - shows that private enterprise just doesn't run public transport in an efficient or sustainable manner. Public transport must be owed by the nation as a whole, and run for ordinary people's needs, not the health of some balance sheet. Labour and National agree - Aucklanders being able to get about their city without having to burn expensive and polluting fossil fuels is not a priority for them. Isn't it time we had a better option?

Call for investigation of possible price gouging by oil companies

RAM - Residents Action Movement Media release 12 June 2008 Today's announcement by Caltex of a six cents rise in the price of standard petrol takes a litre to a sliver under $2.13. A company spokesperson blamed the latest price hike on rises in overseas oil prices. "I question Caltex's explanation for the price hike," says Roger Fowler, transport spokesperson for RAM - Residents Action Movement. "The price of a litre of standard petrol in New Zealand is 35% dearer than in the United States. Yet oil production in America is now a lower proportion of the country's total petrol needs than is the case in New Zealand. So how can NZ petrol be priced so much higher than over there?" "This throws grave doubt on Caltex putting all the blame on offshore price fluctuations. It does leave Caltex in New Zealand open to the charge that they are price gouging Kiwi drivers," said Roger Fowler. "I am writing to the Commerce Commission to ask them to investigate recent rises in NZ petrol prices and see if multinational oil companies are indeed price gouging us in New Zealand." "I will also be asking why oil extracted from NZ territorial waters is exported as crude, while more expensive oil is imported for the Whangarei refinery. On the surface, this appears to be a profit-making strategy for the oil companies which exposes New Zealand to serious oil security risks." "There does seem to be compelling reasons for an independent investigation of the whole operation of the oil industry in New Zealand. That investigation should have the power to make any recommendations that seem appropriate, including nationalisation of the oil industry if the multinationals are found to be price gouging and blocking development of the Whangarei refinery and they refuse to change their ways." "I will be raising issues like these as I campaign for RAM in the Manukau East electorate, where Kiwi battlers are struggling to fill up their cars and suffer from some of the region's worst bus services," said Roger Fowler. BACKGROUNDER: 1 gallon of petrol in the US = US$4 (see UK Guardian 11.6.08). 1 US gallon = 3.78541178 litres. This morning's exchange rate = US$1 for NZ$1.32 (see Yahoo currency exchange). For more information, contact: Roger Fowler RAM transport spokesperson & Manukau East candidate 021 2999 491 mangere.east.access@paradise.net.nz

Nationalise big oil, enemy of people and planet

by Dick Nichols from Socialist Alliance website, Australia The latest surge in the spot price of crude oil (to $US139 a barrel - 87.4 cents a litre) dramatises the urgent need for our society to wean itself off dependence on “black gold”. The longer we remain hooked the greater the devastation both to our environment and to the living standards of millions, especially the poorest peoples of the planet. The challenge is huge. The response must combine defence against the threat to livelihoods from oil price rises with a plan to restructure economies and ways of living so that oil-intensive production and transport becomes a thing of the past. Many pro-market commentators – and not a few environmentalists – welcome the latest oil price hike (which means the real price of oil has risen 400% in the last six years, greater than in 1970s oil crises) as helping achieve that goal. They bemoan the “cheap populism” of the Coalition’s proposed five cents a litre cut in petrol excise and the Rudd government’s FuelWatch scheme. The Financial Review’s economics editor Alan Mitchell says: “What our leaders should be telling voters is that the price of petrol has nowhere to go but up, and that they should take that into account when they buy their next car and make their next decision about where to live.” And what about those millions of consumers of fossil fuels whose lives aren’t focused on getting out of a gas-guzzling 4WD and into a Toyota Prius? Can the urban poor of Jakarta react to the Indonesian government's planned 28.7% increase in fuel prices by switching to solar panels? Should the Yorkshire fisherman whose weekly fuel bill has gone from $4000 to over $9000 in the space of a year respond to this "price signal" by fishing from a sailing boat or the nearest wharf? Less dramatically, what should be done about the $700 a year increase in the average Australian family budget that recent petrol price rises are reckoned to bring? Defending living standards The most immediate challenge that the oil price surge creates is the defence of living standards – to stop the burden of the crisis being placed on the shoulders of working people and the poor. But defence of people’s livelihoods is also critical to make sure that the shift out of fossil-fuel dependent energy actually wins the mass support it will need if it is to actually happen. Here those environmentalists who think that increases in oil prices are to be welcomed because they are producing a (still minor) shift into diesel and hybrid cars and public transport are dangerously deceived. If the movement against global warming doesn’t propose its own solutions to the pain of oil price hikes, it abandons the field to the Brendan Nelsons (and even worse anti-environmental demagogues). Take, as a warning sign, the recent demise at the polls of London mayor Ken Livingston, who with the best intentions in the world introduced parking fees in the inner city, but without sufficient improvements in public transport to reduce people's car and petrol dependence. Here it’s important to grasp is that it’s not true in the short term that the retail price of petrol “has nowhere to go but up”. And that’s not just because the latest oil price hike involves a speculative bubble which will burst sooner or later. It’s also because there’s a huge difference between the cost of extraction of crude oil and the final retail price of petrol. In between come the profits of the oil corporations, the wholesalers (often the same companies), the shippers and government taxes. Start with the cost of oil extraction. According to the Bank of Kuwait oil at $100 a barrel yields the following astronomical rates of profit, which are based on the production cost of a litre (given here in brackets): Kuwait 488% (11 cents); United Arab Emirates 300% (16 cents); Saudi Arabia and Qatar 233% (19 cents); Canadian oil sands 203% (21 cents); and Bahrain and Oman 150% (25 cents). Next along the chain comes refining. According to the December 2007 Australian Competition and Consumer Commission report Petrol Prices and Australian Consumers, “the major refiners have established a comfortable oligopoly” which conducts a “policy of pricing locally refined petrol on the basis [of] an imported equivalent product rather than the actual cost of domestic refining or even the actual cost of imports.” The ACCC calculated that when unleaded petrol retailed for 121.6 cents a litre in 2007 the import parity price (suspect) was 56.1 cents, the refiner margin 3.7 cents, the wholesale margin 8.1 cents, government taxes (petroleum excise and wholesale and retail GST) 49.2 cents and the retail margin 4.4 cents. These figures make nonsense of Kevin Rudd’s claim that the federal government has done everything “physically possible” to contain oil price increases. A government that was concerned to confront the impact of such surges could: * Set a maximum retail price and adjust fuel excise and consumption tax rates accordingly (presently being considered by the Italian, Spanish and French governments); * Set limits to retail price movements and the various margins (refiner, wholesale and retail). In June 2007, the refiner margin in Australia jumped to over 12 cents, provoking the ACCC inquiry. Regulation along these lines has been introduced in Belgium and is presently being pushed in the Portuguese parliament by the Left Bloc. According to Bloc spokesperson and economist Francisco Louça simple anti-speculative rules like these could cut prices at the pump between 10 and 14 cents a litre. Nationalise the oil corporations Nonetheless, in today’s world of long-run rising oil extraction costs these sorts of measures will only bring temporary relief so long as the industry remains profit-driven and in private hands. Seriously tackling the impact of oil prices on living standards will require the nationalisation of big oil (in Australia Shell, Mobil, Caltex and BP). This is not just the only way to expose the true accounts of the oil corporations (which the ACCC was never sure it had in its hands). Nationalisation is also critical to carrying out the program for energy sustainability our environment needs, one which will have eliminating oil dependence at its core. The movement against global warming needs to fight for the nationalisation of big oil for exactly the same reasons that it fights the privatisation of electricity in New South Wales – without public ownership of the commanding heights of energy production the capacity to quickly introduce renewable technologies and phase out carbon-intensive generation practically disappears. It is also the only framework in which a “right price” for oil-based products can be addressed – not so low as to provide no incentive to reduce consumption, nor so high as to undermine the livelihoods of workers and communities. In November 2006, the world price of crude was US 38 cents a litre and retail prices ranged from Venezuela’s three cents a litre (i.e., involving a subsidy of 35 cents a litre) to Iceland’s 186 cents a litre (with the highest fuel taxes in the world). On January 21, 2007, Venezuelan president Hugo Chávez told the audience of his weekly TV program Aló Presidente that the price of petrol was far too low. “We haven’t touched the price of petrol for eight years. It’s really gross to sell petrol the way we’ve been selling it, it would be better to give it away.” Our case in Australia is the complete opposite. Confronted with a Rudd government determined to do practically nothing about soaring petrol prices the union movement must demand full compensation for the increases in the cost of living they produce. Indeed, the oil price surge is a sharp reminder of the need for full indexation of wages and welfare payments, a position that the trade union movement should never have abandoned. There’s only one solution to the oil price crisis: the union and environment movements must fight side by side against the devastation the Shells and Exxons are wreaking on our planet and its peoples. Dick Nichols is the national coordinator of the Socialist Alliance, a broad left party in Australia.

Perhaps 60% of today’s oil price is pure speculation

by F. William Engdahl from Global Research May 2, 2008 The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How? First, the crucial role of the international oil exchanges in London and New York is crucial to the game. Nymex in New York and the ICE Futures in London today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil‹West Texas Intermediate and North Sea Brent. A third rather new oil exchange, the Dubai Mercantile Exchange (DME), trading Dubai crude, is more or less a daughter of Nymex, with Nymex President, James Newsome, sitting on the board of DME and most key personnel British or American citizens. Brent is used in spot and long-term contracts to value as much of crude oil produced in global oil markets each day. The Brent price is published by a private oil industry publication, Platt¹s. Major oil producers including Russia and Nigeria use Brent as a benchmark for pricing the crude they produce. Brent is a key crude blend for the European market and, to some extent, for Asia. WTI has historically been more of a US crude oil basket. Not only is it used as the basis for US-traded oil futures, but it's also a key benchmark for US production. The tail that wags the dog All this is well and official. But how today’s oil prices are really determined is done by a process so opaque only a handful of major oil trading banks such as Goldman Sachs or Morgan Stanley have any idea who is buying and who selling oil futures or derivative contracts that set physical oil prices in this strange new world of “paper oil.” With the development of unregulated international derivatives trading in oil futures over the past decade or more, the way has opened for the present speculative bubble in oil prices. Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the “tail that wags the dog.” A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.” What the Senate committee staff documented in the report was a gaping loophole in US Government regulation of oil derivatives trading so huge a herd of elephants could walk through it. That seems precisely what they have been doing in ramping oil prices through the roof in recent months. The Senate report was ignored in the media and in the Congress The report pointed out that the Commodity Futures Trading Trading Commission, a financial futures regulator, had been mandated by Congress to ensure that prices on the futures market reflect the laws of supply and demand rather than manipulative practices or excessive speculation. The US Commodity Exchange Act (CEA) states, “Excessive speculation in any commodity under contracts of sale of such commodity for future delivery . . . causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity.” Further, the CEA directs the CFTC to establish such trading limits “as the Commission finds are necessary to diminish, eliminate, or prevent such burden.” Where is the CFTC now that we need such limits? They seem to have deliberately walked away from their mandated oversight responsibilities in the world's most important traded commodity, oil. Enron has the last laugh As that US Senate report noted: “Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called futures look-alikes.” The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress. The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated: “The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.” In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day. 1 Then, apparently to make sure the way was opened really wide to potential market oil price manipulation, in January 2006, the Bush Administration’s CFTC permitted the Intercontinental Exchange (ICE), the leading operator of electronic energy exchanges, to use its trading terminals in the United States for the trading of US crude oil futures on the ICE futures exchange in London ­ called “ICE Futures.” Previously, the ICE Futures exchange in London had traded only in European energy commodities ­ Brent crude oil and United Kingdom natural gas. As a United Kingdom futures market, the ICE Futures exchange is regulated solely by the UK Financial Services Authority. In 1999, the London exchange obtained the CFTC’s permission to install computer terminals in the United States to permit traders in New York and other US cities to trade European energy commodities through the ICE exchange. The CFTC opens the door Then, in January 2006, ICE Futures in London began trading a futures contract for West Texas Intermediate (WTI) crude oil, a type of crude oil that is produced and delivered in the United States. ICE Futures also notified the CFTC that it would be permitting traders in the United States to use ICE terminals in the United States to trade its new WTI contract on the ICE Futures London exchange. ICE Futures as well allowed traders in the United States to trade US gasoline and heating oil futures on the ICE Futures exchange in London. Despite the use by US traders of trading terminals within the United States to trade US oil, gasoline, and heating oil futures contracts, the CFTC has until today refused to assert any jurisdiction over the trading of these contracts. Persons within the United States seeking to trade key US energy commodities ­ US crude oil, gasoline, and heating oil futures ­ are able to avoid all US market oversight or reporting requirements by routing their trades through the ICE Futures exchange in London instead of the NYMEX in New York. Is that not elegant? The US Government energy futures regulator, CFTC opened the way to the present unregulated and highly opaque oil futures speculation. It may just be coincidence that the present CEO of NYMEX, James Newsome, who also sits on the Dubai Exchange, is a former chairman of the US CFTC. In Washington doors revolve quite smoothly between private and public posts. A glance at the price for Brent and WTI futures prices since January 2006 indicates the remarkable correlation between skyrocketing oil prices and the unregulated trade in ICE oil futures in US markets. Keep in mind that ICE Futures in London is owned and controlled by a USA company based in Atlanta Georgia. In January 2006 when the CFTC allowed the ICE Futures the gaping exception, oil prices were trading in the range of $59-60 a barrel. Today some two years later we see prices tapping $120 and trending upwards. This is not an OPEC problem, it is a US Government regulatory problem of malign neglect. By not requiring the ICE to file daily reports of large trades of energy commodities, it is not able to detect and deter price manipulation. As the Senate report noted, “The CFTC's ability to detect and deter energy price manipulation is suffering from critical information gaps, because traders on OTC electronic exchanges and the London ICE Futures are currently exempt from CFTC reporting requirements. Large trader reporting is also essential to analyze the effect of speculation on energy prices.” The report added, “ICE's filings with the Securities and Exchange Commission and other evidence indicate that its over-the-counter electronic exchange performs a price discovery function – and thereby affects US energy prices – in the cash market for the energy commodities traded on that exchange.” Hedge Funds and Banks driving oil prices In the most recent sustained run-up in energy prices, large financial institutions, hedge funds, pension funds, and other investors have been pouring billions of dollars into the energy commodities markets to try to take advantage of price changes or hedge against them. Most of this additional investment has not come from producers or consumers of these commodities, but from speculators seeking to take advantage of these price changes. The CFTC defines a speculator as a person who “does not produce or use the commodity, but risks his or her own capital trading futures in that commodity in hopes of making a profit on price changes.” The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil for future delivery in the same manner that additional demand for contracts for the delivery of a physical barrel today drives up the price for oil on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum. Perhaps 60% of oil prices today pure speculation Goldman Sachs and Morgan Stanley today are the two leading energy trading firms in the United States. Citigroup and JP Morgan Chase are major players and fund numerous hedge funds as well who speculate. In June 2006, oil traded in futures markets at some $60 a barrel and the Senate investigation estimated that some $25 of that was due to pure financial speculation. One analyst estimated in August 2005 that US oil inventory levels suggested WTI crude prices should be around $25 a barrel, and not $60. That would mean today that at least $50 to $60 or more of today’s $115 a barrel price is due to pure hedge fund and financial institution speculation. However, given the unchanged equilibrium in global oil supply and demand over recent months amid the explosive rise in oil futures prices traded on Nymex and ICE exchanges in New York and London it is more likely that as much as 60% of the today oil price is pure speculation. No one knows officially except the tiny handful of energy trading banks in New York and London and they certainly aren¹t talking. By purchasing large numbers of futures contracts, and thereby pushing up futures prices to even higher levels than current prices, speculators have provided a financial incentive for oil companies to buy even more oil and place it in storage. A refiner will purchase extra oil today, even if it costs $115 per barrel, if the futures price is even higher. As a result, over the past two years crude oil inventories have been steadily growing, resulting in US crude oil inventories that are now higher than at any time in the previous eight years. The large influx of speculative investment into oil futures has led to a situation where we have both high supplies of crude oil and high crude oil prices. Compelling evidence also suggesting that the oft-cited geopolitical, economic, and natural factors do not explain the recent rise in energy prices can be seen in the actual data on crude oil supply and demand. Although demand has significantly increased over the past few years, so have supplies. Over the past couple of years global crude oil production has increased along with the increases in demand; in fact, during this period global supplies have exceeded demand, according to the US Department of Energy. The US Department of Energy’s Energy Information Administration (EIA) recently forecast that in the next few years global surplus production capacity will continue to grow to between 3 and 5 million barrels per day by 2010, thereby “substantially thickening the surplus capacity cushion.” Dollar and oil link A common speculation strategy amid a declining US economy and a falling US dollar is for speculators and ordinary investment funds desperate for more profitable investments amid the US securitization disaster, to take futures positions selling the dollar “short” and oil “long.” For huge US or EU pension funds or banks desperate to get profits following the collapse in earnings since August 2007 and the US real estate crisis, oil is one of the best ways to get huge speculative gains. The backdrop that supports the current oil price bubble is continued unrest in the Middle East, in Sudan, in Venezuela and Pakistan and firm oil demand in China and most of the world outside the US. Speculators trade on rumor, not fact. In turn, once major oil companies and refiners in North America and EU countries begin to hoard oil, supplies appear even tighter lending background support to present prices. Because the over-the-counter (OTC) and London ICE Futures energy markets are unregulated, there are no precise or reliable figures as to the total dollar value of recent spending on investments in energy commodities, but the estimates are consistently in the range of tens of billions of dollars. The increased speculative interest in commodities is also seen in the increasing popularity of commodity index funds, which are funds whose price is tied to the price of a basket of various commodity futures. Goldman Sachs estimates that pension funds and mutual funds have invested a total of approximately $85 billion in commodity index funds, and that investments in its own index, the Goldman Sachs Commodity Index (GSCI), has tripled over the past few years. Notable is the fact that the US Treasury Secretary, Henry Paulson, is former Chairman of Goldman Sachs. F. William Engdahl is an Associate of the Centre for Research on Globalization (CRG) and author of A Century of War: Anglo-American Oil Politics and the New World Order. He may be contacted at info@engdahl.oilgeopolitics.net 1 United States Senate Premanent Subcommittee on Investigations, 109th Congress 2nd Session, The Role of Market speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat; Staff Report, prepared by the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs, United States Senate, Washington D.C., June 27, 2006. p.3.