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$4 Gas: “There Is No Justification” for High Prices, Says Fmr. Senator Dorgan

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As the price of oil trades near 2008-highs and the average price of gasoline hovers around $4 a gallon, world leaders are considering adding more supply to the market.

In recent days, the United States along with the United Kingdom, France and Japan have been in talks to ease the shock of rising oil and gas prices by releasing billions of emergency reserves onto the market. The laws of supply and demand dictate that when supply is great, prices should fall.

But the rise in the price for fuel is not an issue of supply and demand, says former Senator Byron Dorgan (D-ND), who helped shape the nation's energy policy as chairman the Senate Indian Affairs Committee and three subcommittees.

"There is no justification for the current gas prices. This is all about speculation by the people who are speculating on the price of oil and gas," he says. "We could shutdown excess speculation in commodity markets. This government should do that."

Senator Bernie Sanders (I-VT) said as much on The Daily Ticker earlier this month. Sanders, along with 70 members of Congress, wrote a letter to regulators at the Commodity Futures Trading Commission (CFTC), urging immediate action on oil speculation by enacting "strong position limits" and to "utilize all authorities available to…make sure that the price of oil and gasoline reflects the fundamentals of supply and demand."

Fadel Gheit, senior energy analyst at Oppenheimer, told us he blames speculators for adding "at a minimum" $20 per barrel to the price of oil. In a study of oil prices over the last five years, the St. Louis Federal Reserve determined speculation drove up oil prices by 15 percent. But those estimates are comparatively conservative. The CEO of ExxonMobil (XOM) believes speculation could be driving up oil prices by as much as 40 percent a barrel.

"These are people, by the way, who will never buy oil and never sell oil. They are actually buying and selling things they will never have from people who never had it," says Dorgan. "They are making money back driving up the price at the pump and the American people are the victims."

But for all the lambasting of Wall Street speculators for driving up energy prices, economists at IHS said Thursday they believe new regulation of commodity markets could adversely effect the U.S. economy as a whole.

"The regulations, as currently envisioned, could create a significant ripple effect through the energy economy that would reduce production, increase the cost of electricity and gasoline and ultimately affect jobs," said Kurt Barrow, vice president at Purvin & Gertz, a division of IHS. Why? By limiting commodity trading, IHS says it would make it more difficult for companies that hedge against future oil prices to manage risks.

Here are a few negative ripple effects predicted by the IHS study:

  • A rise $5.3 billion rise in U.S. electricity costs.
  • A $7.5 billion reduction in natural gas development, which has boomed in recent years, and a loss of 182,000 jobs.
  • A 4 cent increase in the price of East Coast gas prices due to the closure of two East Coast oil refineries.
  • A loss of $34 billion in gross domestic product and a loss of $12 billion in federal tax receipts.

Blowout: Dorgan's New "Eco-Thriller"

Former Senator Dorgan, a long-time clean energy advocate, joined The Daily Ticker's Aaron Task to discuss U.S. energy policy (or lack thereof), which is the subject of his new fictionalized thriller, Blowout. It is the first in a two-book series, which the senator calls an "eco-thriller."

The premise: "What if we were right on the edge of discovering a new source of energy that costs very very little, who would try to stop it and why and how," he explains.

Dorgan tells Aaron he believes speculators would likely be most opposed to such new clean and alternative technologies that the country desperately needs today.

In "Blowout," Dorgan writes of a team of scientists who are testing microbes that "eat their way" through coal, leaving dirty waste and methane behind. If successful, coal could be mined and produced without the polluting the atmosphere, which leads to climate change.

According to Dorgan, the same type of technologies he describes in his book are already being implemented today.

Why then the need to mimic reality?

"You can put things into the public conscious through fiction," he says. And that is just what he hopes "Blowout" will do.

More from Yahoo!'s The Daily Ticker

Oil Speculators Must Be Stopped and the CFTC "Needs to Obey the Law": Sen. Bernie Sanders

Oil Prices Are Going "Much Higher": Blame Iran…and Speculators, Gheit Says

The Looming Threat to Gas Prices: Strait of Hormuz Explained