????Conoco took full advantage, snapping up the lower-priced barrels for its refineries in the midcontinent and then selling the fuel it made from them to Americans and other buyers at the higher global price -- a move that not only went unchallenged, but was supported by the industry. This past November, after Conoco announced it would sell its portion of Seaway Pipeline to new owners who confirmed they would reverse the pipeline's direction to allow oil to flow out of Cushing again, oil prices promptly popped back above $100 a barrel. Rarely does a single incident so clearly highlight the immense power held by those wielding our nation's strategic pipelines, yet our government continues to wield the kid-glove treatment.
????A cursory glance at the historic price chart reveals the seriousness of the situation: oil prices have hit unprecedented highs for sustained periods since 2003, regardless of the latest news in the Middle East or supply and demand data. Ever since energy prices began to run off the rails during the latest Iraq war, our nation's elected officials have either thrown up their hands in resignation or called for more drilling as if it was the ultimate cure-all. Frankly, if supply was truly the panacea, Cushing's record supply highs should have been enough to knock oil far from its $100 pedestal. But they were not.
????Meanwhile, demand for oil can't be blamed for keeping prices up either, as global demand growth has been sluggish in light of the protracted economic downturn, supported by data out this week from the Energy Information Administration, the statistics arm of the U.S. Department of Energy.
????The global growth spurt in electronic trading hasn't helped matters. These days, anyone in the world with a caffeinated trigger finger and an Internet hookup can treat the U.S. energy market like a Vegas casino. This is another fact politicians don't like to acknowledge, because now that Pandora's Box is open who's going to shut it?
????For those who do not believe electronic trading is susceptible to corruption, think again. A federal appeals court last month reversed a conviction decision against a former Goldman Sachs (GS) programmer who was found guilty of stealing high-frequency trading code from the bank that, according to Assistant U.S. Attorney Joseph Facciponti, could potentially be used "to manipulate markets."
????While it is concerning that such proprietary trading code might be stolen at all, one might also ask why Goldman, which declined to comment, has code that might manipulate markets – including the oil market – in the first place. Perhaps we could just drown it in more oil.
????Leah McGrath Goodman is the author of The Asylum: The Renegades Who Hijacked the World's Oil Market.
