Argentina: Nationalizing Big Oil (again) - David Galland

Speaking of Theft

This week my adopted home of Argentina decided that it, rather than a private firm, should control 51% of YPF, the largest energy operator in the country. The circumstances leading to the re-nationalization of most of YPF are fairly complex, but whatever the problems the government was trying to solve could have been readily solved by encouraging free markets. Instead, for reasons touched on in the article before, the populist solution of re-nationalization was the one selected.
As one might expect, the re-nationalization has justifiably set off a round of condemnation and retaliatory threats from a wide range of sources, including officials from the US, the IMF and the EU.
Which is somewhat ironic, given that roughly 90% of the world's oil is directly owned by government-run corporations or entities that they control. In other words, any country that hasn't already nationalized its energy resources is very much the exception to the rule.
Here in the US, bastion of the free market that it is, the government is far more nuanced in its approach to the energy sector. Rather than overtly nationalize, the government blocks critical pipelines for political brownie points and attempts to solve the matter of high oil prices through regulatory action as opposed to letting the market find its natural level.
Speaking recently in the Rose Garden, President Obama stridently intoned, "We can't afford a situation where some speculators can reap millions, while millions of American families get the short end of the stick."
His plan? According to Bloomberg, it is to fund a six-fold increase for surveillance and enforcement staff at the Commodity Futures Trading Commission to put 'more cops on the beat' overseeing oil markets."
Furthermore, also according to Bloomberg:

He also is seeking to give the CFTC new authority to raise margin requirements for traders' oil positions and stiffen civil and criminal penalties for businesses that are guilty of market manipulation to $10 million from $1 million. The plan would cost $52 million.

I don't have time to once again go into the important role that speculators play in commodities markets, but I can assure you that once the CFTC starts to wield its large new stick around – if for no other reason than to recoup the $52 million it's spending to implement the program – it's going to have the desired result of dampening the enthusiasm of the speculators. And that, in turn, will result in oil companies reducing the amount they spend to bring new sources of oil online. Translation: oil prices will go higher.
But according to the pandering politicians, it's not the consequences that matter; it all comes down to morality – and according to them it's immoral for anyone to make money by taking the other side of the trade when oil companies look to hedge the price of their future production.
You'll want to keep that in mind as the lights start to flicker.