The feds’ convenient oil market crackdown

There goes Washington again, looking for fraud in all the wrong places.

The top federal law enforcement official, Eric Holder, promised Thursday to crack down energy market manipulation. The attorney general warned that “if illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action.”

That’s laudable. The problem is that there is no reason to believe illegal conduct is what’s driving up gas prices.

In a world of loose money, endless Chinese commodity demand and falling Saudi oil production, prices are going to rise even if everyone is behaving admirably.

Even more galling, Holder is taking this empty stand at a time when the government continues to ignore more glaring frauds. Three years after the meltdown, the number of meaningful financial crisis prosecutions is, like the Federal Reserve’s key lending rate, near zero.

This is not to dispute that speculators are all over the oil futures lately. Wall Street is happy to rip Main Street’s face off for the sake of making a buck in any market, and this one is no different.

But facilitating speculation is now official policy, thanks to Ben Bernanke, and you can hardly go sending people to jail for that alone. And when it comes to fixing the market, even Holder admits he hasn’t seen evidence that’s happening.

Of course, only a fool would claim there could never be any oil manipulation. Who knows, maybe the feds will crack some big trading ring. That has happened before.

But recall the outcome when the previous administration made a similarly principled decision in 2008 to crack down on oil fraud. The Commodity Futures Trading Commission charged one Dutch firm, Optiver, with trying to “bully the market” to the tune of a, ahem, $1 million profit.

That sort of bullying is not going to get you very far in a market in which open interest Thursday was valued at $328 billion.

Meanwhile, off in plain view on their various yachts and Connecticut mansions and tanning beds, we have a bunch of guys named Dick and Kerry and Angelo who just happened to walk off with eight- and nine-digit hauls while their shareholders got wiped out. Building financial cases is hard, yes, but is it really that hard?

You don’t have to be all that swift to see the difference politically, however. No one is going to get thrown out of office for failing to prosecute the guys who got rich before they drove Countrywide or Washington Mutual or Lehman Brothers into the ground. Mistakes, everyone can agree, were made. Can’t we just move on?

But Holder’s crusade against energy schemers comes as the average national gasoline price hits $3.84. That is a number that is apt to prompt millions of cash-strapped Americans to vote for the other guy, whoever it might be. And you can’t have that.

“We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity,” Holder said. Someday it would be nice to see some vigilance when the political angle wasn’t so obvious.

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