The next oil price spike will be a long time coming if Barack Obama keeps his election promise to “crack down on excessive energy speculation.”

The president-elect of the United States announced his pledge in dramatic opposition to rivals who stuck to more conventional political gestures. Republican John McCain and Democrat Hillary Clinton courted popularity by proposing to cut or rebate U.S. federal gasoline taxes, thereby giving cash to consumers while letting investors continue to make bets on rising oil prices.

Obama and his economic advisers dismissed tinkering with pump taxes as gimmickry. Cuts or rebates were rejected as futile drains on the U.S. government treasury that would only treat symptoms of “distorting” market ailments and miss the causes.

Obama did not mince words. After oil hit US$147 a barrel, he vowed to stop financial games with energy as part of a fair deal for wage-earners, along with help against soaring health care costs, inflated grocery bills, stagnant incomes and crumbling real estate values. “For years our energy policy in this country has been simply to let the special interests have their way – opening up loopholes for the oil companies and speculators so that they could reap record profits while the rest of us pay $4 a gallon (for gasoline),” he said. He vowed to close the loopholes with new regulation.

His view is not merely a knee-jerk political reaction liable to subside as the mid-2008 peak in oil and gasoline prices fades into history. His energy team’s commitment to curb speculation hardened during lengthy investigations by Washington legislators. Congress probed ways that executive agencies of the U.S. government, under former president George W. Bush, enabled trading in financial paper barrels to accelerate on Wall Street for nearly a decade of price increases.

The energy plank in Obama’s election platform cites a key study in a mini-library of critical reviews of trading in “derivatives” or commodity-futures contracts representing essentials from farm crops to fossil fuels. The verdict on oil is summed up by the title of a 57-page report by the investigations subcommittee of the U.S. Senate’s homeland security committee. The paper is called The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat.

The investigators found that oil markets defied economic common sense. Adequate supplies or surpluses of commodities are supposed to hold prices in check. But by mid-2006 there were, simultaneously, both rapid price increases and huge inventories in industry storage sites. The stockpiles were as big as a glut in the tanks when the oil price last touched bottom at about $15 a barrel in 1998. “Factors other than basic supply and demand must be examined,” the Senate report urged.

The puzzle posed by scarcity prices amid ample supplies persisted. A year after the Senate report, the head of the world’s biggest oil company admitted in Alberta that the market’s behavior had become a mystery.

“None of us know what oil prices are going to do,” ExxonMobil chairman Rex Tillerson told a news conference after addressing the 2007 edition of an annual fall blue-chip conference of industry and government leaders at Calgary business magnate Ron Southern’s Spruce Meadows equestrian center. “I cannot explain to you why we have $70 oil. The fundamentals [of supply and demand] support something much less.”

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