NEW YORK For many oil traders, the growing storm of Washington rhetoric over near record oil prices has all the relevance of a good piece of fiction -- fine entertainment, but nothing more.
Unlike Don Quixote's imaginary giants, the villain of $4 gasoline prices is real. However, efforts to combat oil prices by President Barack Obama and his Republican opponents in Congress are about as useless as jousting with windmills.
That hasn't stopped them trying.
With consumers fixated on gasoline prices now nearing their 2008 peaks and the long presidential election cycle gearing up, both sides of the political aisle are offering their own solutions to bring down prices: drill for more oil; release supplies from the Strategic Petroleum Reserve; use more natural gas in vehicles; investigate markets for manipulation.
And while Obama has worked hard to temper any hope for a short-term improvement, realism has gradually ceded to realpolitik, forcing him to join others in desperately seeking to be seen doing something -- even if it's the wrong thing.
"What can they do? Nothing," said Stephen Schork, editor of the Schork Report, who has been involved with physical commodities market trade for more than 17 years. "This is a market that is basically being pushed around by geopolitical events and a lot of money."
Nothing that's been proposed is likely to happen, or likely to have an impact this year, next year or even in five years time, many experts say. As the market mantra goes, ultimately the cure for high prices may just be high prices.
While American drivers bemoan pump prices likely to have topped $4 nationwide this past week, they still pay half as much as consumers in the United Kingdom and other European nations, thanks to decades of low taxes that have fueled the nation's mighty thirst for gasoline.
"The real problem is that Americans have a huge appetite for buying oil," said Adam Sieminski, chief energy economist for Deutsche Bank.
U.S. oil prices have shot to 32-month highs over $113 a barrel this month with U.S. gasoline prices to within striking distance of the $4 a gallon level that helped trigger a drop in demand in 2008. Outside the United States, prices are even higher, with benchmark Brent crude over $124 a barrel.
Traders blame oil's recent rise on the conflict in Libya, which has cut the OPEC nation's supplies and concerns for potential disruptions due to unrest in the Middle East.
For some, the biggest culprit has been loose U.S. monetary policy, which has driven down the dollar against other currencies and encouraged investors to pour money into riskier assets such as commodities. This has given rise to a relatively new and popular dollar-oil trade, which sees oil prices rise when the dollar sinks.
Politicians have been quick to bring the discussion back to party talking points that seem to come up every time oil prices spike.
Republicans blame rising prices on restrictions for oil drilling. The Obama administration has pressed investment in alternative fuels and announced it was setting up a team to investigate whether speculators are pushing prices around.
Analysts said a fresh investigation into markets would not likely find widespread price manipulation by speculators. They noted that past probes of high gasoline prices by other administrations did not turn up large-scale malfeasance.
Efforts are already underway to limit buying by passive institutional investors who have flooded the market with $242.6 billion, according to CFTC data released Thursday. But proposals to limit the number of positions they can hold are widely expected to be set high enough to have limited impact.
"The new reality of oil pricing is that investors are in the market, just as speculators and hedgers are in the market," said Sarah Emerson.
Releasing oil from the 700 million barrel U.S. Strategic Petroleum Reserve at this stage would look more like an overt effort to drive down prices than a response to a supply disruption in Libya now two months old. This step would likely have little more than a short-term impact, since U.S. oil inventories are already relatively high.
Other policies, such as cutting tax breaks for oil drillers might help reduce the U.S. budget deficit and be popular with some voters watching big oil companies post strong returns. But it would not lower fuel costs. If anything, this could limit further investment and deter production.
Calls to open up more offshore U.S. acreage for drilling would not bring on more supplies soon, and converting the U.S. automobile fleet to alternate fuels also would take time.
NO EASY FIX
Behind the political bluster lies a real economic problem, which is reinforced to consumers in giant signs at service stations across the nation at a time when the economy is struggling with a shaky recovery.
The last time gasoline prices hit $4 a gallon, the United States was in the midst of recession, and drivers cut back on discretionary driving to compensate.
"I think it's all noise," said Amy Jaffe, director of the Energy Forum at the Baker Institute of the solutions being offered by the White House.
"Everything that the president has said except asking Saudi Arabia to raise production is a decoy."
Obama earlier this week urged world oil producers to increase output to bring down prices. But the Organization of the Petroleum Exporting Countries has little spare capacity to pump more of the high quality oil lost from Libya.
In addition, bullying the group to produce more crude has yielded little success in the past decade. That may be more true than ever now, as producing countries must contend with the steady decline in the U.S. dollar, the currency they receive for their oil exports. This decline has come even a massive wave of social spending in the Middle East inflates budget needs.
OPEC seems more likely to be mindful of the long-term damage it could do by allowing prices to get high enough to stymie a global economic recovery than of U.S. politics.
"(The United States), like other consumer countries, have always voiced their concern about high prices. But this is not something that would dictate what OPEC does," a Middle East OPEC delegate told Reuters.
That time might be better spent attempting to encourage the restart of Nigerian oil production from foreign oil companies idled by years of conflict with rebels in the Niger Delta -- crude that is similar in quality to Libyan oil.
"Hilary Clinton should be on the next plane to Nigeria," said Sieminski.
(Additional reporting by Amenda Bakr; Editing by David Gregorio)