Maybe Finally the Govt will do Something about Oil Speculation

[GTKeeper]

I just received this 'open letter' from Delta Airlines. I think now that several multi billion dollar companies are directly affected by oil speculators there is a chance for our government to do something about it. Afterall our government is owned by corporations.

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting

 

[Taejin]

I don't honestly think the oil speculators are driving up the price of oil unreasonably. I think oil speculators are pushing oil to reach its 'real' price point faster. Thus, the entire hullabaloo about oil is misfounded imo - we're simply seeing the results of several economic factors converging, and people need to blame another group of people. Blame the speculators or not.. I think the high price of oil is here to stay, unless demand drops for some reason.

 

[ProfJohn]

The obvious solution to this problem is to tax the hell out of any profits made off the sale of oil futures.

Put a high enough tax rate and the speculators will go looking elsewhere for profits.

And this does not hurt the producers or the end users.

I am surprised the Democrats didn't come up with this solution yet.

 

[soccerballtux]

That's a good idea.

 

[GTKeeper]

Originally posted by: Taejin
I don't honestly think the oil speculators are driving up the price of oil unreasonably. I think oil speculators are pushing oil to reach its 'real' price point faster. Thus, the entire hullabaloo about oil is misfounded imo - we're simply seeing the results of several economic factors converging, and people need to blame another group of people. Blame the speculators or not.. I think the high price of oil is here to stay, unless demand drops for some reason.

Thats an interesting opinion. Why do you not think that speculators are affecting the price at all?

Here is what doesn't make sense in a pristine supply/demand world:

US will use less gasoline this year than last year, no affect on oil prices
Refineries are NOT operating at full capacity 88-90% vs 96-98% in the mid 90s, can't argue that they are being constrained by capacity issues, in fact they are losing money
News of SA increasing production by .5 mil barrels a day has 0 impact on oil prices


What is insulating the oil prices?

 

[Slew Foot]

Originally posted by: GTKeeper
I just received this 'open letter' from Delta Airlines. I think now that several multi billion dollar companies are directly affected by oil speculators there is a chance for our government to do something about it. Afterall our government is owned by corporations.

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting

It was OK for tech stocks and housing on the way up, but dont you dare touch my gas prices :roll:

 

[GTKeeper]

Originally posted by: Slew Foot

Originally posted by: GTKeeper
I just received this 'open letter' from Delta Airlines. I think now that several multi billion dollar companies are directly affected by oil speculators there is a chance for our government to do something about it. Afterall our government is owned by corporations.

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting

It was OK for tech stocks and housing on the way up, but dont you dare touch my gas prices :roll:

What you are comparing are apples and oranges. When the tech bubble was occuring you had an option not to invest your money, put it in a CD, or NOT buy Tech Stocks.

Also, when 66% of all purchases occur with the intention of never taking delivery you start to affect the market with said purchases. But if you bought up all the options of a company and then the company reported 0 earnings, you would lose all your money. Countries and companies purchase oil contracts themselves because thats how they get the oil, through the delivery. They can't buy 'directly' from the oil companies.

If speculators all got ahold of 100% of the futures contracts, they could charge whatever they want for oil. Right now they have 66% so they charge almost what they want to sell those futures.

See my point?

 

[ProfJohn]

There is a difference between stock trades and future trades.

When you buy a stock you are buying a piece of a company.
When you buy a future you are buying an IOU.

There are tons of other differences as well, you really can't compare the two.

As for housing, the problem was not as much speculators as it was to much easy money and giving ARMs to people who were screwed once their rates went up. People who are paying fixed rates and plan on living in their houses have not lost a thing due to the decrease in housing prices. It will just take them longer to make a profit, but eventually the cost of houses will return to their pre-drop levels and everyone will be happy again.

 

[PokerGuy]

Its far from clear that speculation is really driving the price of oil, I've seen (what appear to be) compelling arguments for and against. Even experts in the field are not in agreement on it.

Speculation is probably at least a component of what's driving up the price, but it's not the only (or even main?) driving force. It looks like speculation is going to be the whipping boy for the oil price issue, but I doubt curbing it is going to solve anything in the long run.....

 

[Lemon law]

Once again Non Prof John plays the part of GWB fiscal insanity policy defender. Many innocent people were hurt, especially types shuffled around by their employers and then asked to move three of four years later. Before they made a few bucks by selling their old house at a small profit, moved to a new location, but this time around the house they have that they bought for X will only resell for 60% of X. And then they may be forced to go to some location where real estate did not depreciate as much.

Those people lost a bundle. The other people who lost a bundle bought mortgage securities falsely rated, and many of them are foreign investors who are never going to loan us money again.

This is just more republican garbage that says regulation is bad and free markets work. And every damn time we try it, the thieves move in and the American people get burned. From the S&L bailout, to Enron, to the Western Power crisis, and now this.

 

[Slew Foot]

Originally posted by: Lemon law
Once again Non Prof John plays the part of GWB fiscal insanity policy defender. Many innocent people were hurt, especially types shuffled around by their employers and then asked to move three of four years later. Before they made a few bucks by selling their old house at a small profit, moved to a new location, but this time around the house they have that they bought for X will only resell for 60% of X. And then they may be forced to go to some location where real estate did not depreciate as much.

Those people lost a bundle. The other people who lost a bundle bought mortgage securities falsely rated, and many of them are foreign investors who are never going to loan us money again.

This is just more republican garbage that says regulation is bad and free markets work. And every damn time we try it, the thieves move in and the American people get burned. From the S&L bailout, to Enron, to the Western Power crisis, and now this.

Truth be told you get get reshuffled from a strong housing market to a weak one and be able to live like a King, just as well.

Speculation is what drives almost any capital investment, people complain when they miss out on the train. Im willing to bet almost everyone on this board had some tech stocks during the bubble, how many people complained about the meteoric rise based upon nothing but speculation? Not many. Likewise many people own homes, did people complain when values were skyrocketing (and dont tell me speculators weren't involved in flipping multiple houses)? PJ even refers to this himself when he says that people will be happy when values return to high levels.
So whose complaining about high oil/commodity prices? The person who loaded up on energy/food funds, or the guys that missed the boat?

 

[LegendKiller]

Originally posted by: Taejin
I don't honestly think the oil speculators are driving up the price of oil unreasonably. I think oil speculators are pushing oil to reach its 'real' price point faster. Thus, the entire hullabaloo about oil is misfounded imo - we're simply seeing the results of several economic factors converging, and people need to blame another group of people. Blame the speculators or not.. I think the high price of oil is here to stay, unless demand drops for some reason.

"real" price? The "real" price is driven by people who want and those who have oil, not by the people who shuffle it around or buy as middlemen, holding it hostage.

Only people who think "efficient markets" is nothing more than bullshit for "we don't want anybody regulating us so we can fuck as many people as possible".

I have studied "efficient markets", work inside them, and I think that the whole notion is trash. Efficiency stops when greed, fear, irrationality, and stupidity enter the equation.

Thus, humans are incapable of efficiency.

Finally, this isn't supply/demand. First, if it were, then you'd see shortages somewhere. Why? Because those who don't have enough money to buy up the higher-valued oil, would create shortages on the back-end.

If you think it's supply vs demand, then tell me what situation in either equation has changed significantly in the last 6 months to equate to a 60% price increase. additionally, tell me what variable has changed in the last year to dictate a 100% price increase?

There's plenty of oil out there that's justfied by $80bbl price.

This is a speculative bubble that's fucking everybody in the globe, you don't even have to own a car, heat or cool your house, you just need to eat, to be fucked by this.

 

[ProfJohn]

Lemon, you are not worth replying too.

 

[LegendKiller]

Originally posted by: Slew Foot
Truth be told you get get reshuffled from a strong housing market to a weak one and be able to live like a King, just as well.

Speculation is what drives almost any capital investment, people complain when they miss out on the train. Im willing to bet almost everyone on this board had some tech stocks during the bubble, how many people complained about the meteoric rise based upon nothing but speculation? Not many. Likewise many people own homes, did people complain when values were skyrocketing (and dont tell me speculators weren't involved in flipping multiple houses)? PJ even refers to this himself when he says that people will be happy when values return to high levels.
So whose complaining about high oil/commodity prices? The person who loaded up on energy/food funds, or the guys that missed the boat?

There's a huge difference between investing for the purposes of delivering a good or product to the market or adding your own service to the market. Futures purchasers only add liquidity to the point that the market needs liquidity for the purposes of hedging. Since they completely over-dominate hedgers, they aren't providing liquidity but are merely bidding up the commodity.

I wouldn't normally have a problem with this. Gold is fine, fuck with that if you want. However, when you start screwing *EVERY* human being on the planet because you need a quick buck, I have a moral problem.

 

[lupi]

There's nothing the government can do about oil speculation as the system now exist. When they tried to put limits in the traders went to other commodity markets. I heard a story recently that said one of the Asian exchanges was going to open a new commodity section to cash in on the profit from oil trading going on now.

Add that with OPEC coming out and saying they expect world demand to increase over the next 20 years by 50% and they have the capacity to meet that demand, even OPEC is putting the blame of current prices on speculators.

 

[GTKeeper]

Originally posted by: LegendKiller

Originally posted by: Slew Foot
Truth be told you get get reshuffled from a strong housing market to a weak one and be able to live like a King, just as well.

Speculation is what drives almost any capital investment, people complain when they miss out on the train. Im willing to bet almost everyone on this board had some tech stocks during the bubble, how many people complained about the meteoric rise based upon nothing but speculation? Not many. Likewise many people own homes, did people complain when values were skyrocketing (and dont tell me speculators weren't involved in flipping multiple houses)? PJ even refers to this himself when he says that people will be happy when values return to high levels.
So whose complaining about high oil/commodity prices? The person who loaded up on energy/food funds, or the guys that missed the boat?

There's a huge difference between investing for the purposes of delivering a good or product to the market or adding your own service to the market. Futures purchasers only add liquidity to the point that the market needs liquidity for the purposes of hedging. Since they completely over-dominate hedgers, they aren't providing liquidity but are merely bidding up the commodity.

I wouldn't normally have a problem with this. Gold is fine, fuck with that if you want. However, when you start screwing *EVERY* human being on the planet because you need a quick buck, I have a moral problem.

I believe Slew Foot just got owned.

 

[LegendKiller]

Originally posted by: lupi
There's nothing the government can do about oil speculation as the system now exist. When they tried to put limits in the traders went to other commodity markets. I heard a story recently that said one of the Asian exchanges was going to open a new commodity section to cash in on the profit from oil trading going on now.

Add that with OPEC coming out and saying they expect world demand to increase over the next 20 years by 50% and they have the capacity to meet that demand, even OPEC is putting the blame of current prices on speculators.

Hey, so that's great. Why don't we just keep our financial markets as fucked up as the lowest common world denominator. That way we can let idiots run around our own markets, reduce transparency, increase transaction costs, increase volitility, and roll us back to a 2nd or 3rd world country equivlalence in capital markets.

There's a reason why we have the best capital markets in the world. It's because we hold our companies, our brokers, our transactors, and everybody else, to a far higher standard than the remainder of the planet.

 

[lupi]

And when the companies didn't want those standards imposed on them, they took their $$$ to a foriegn commodity market which is why congress then deregulated ours to get them back.

Unless something has changed prevented those companies from again going overseas, talking about increased regulation as the answer is just talk.

 

[LegendKiller]

Originally posted by: lupi
And when the companies didn't want those standards imposed on them, they took their $$$ to a foriegn commodity market which is why congress then deregulated ours to get them back.

Unless something has changed prevented those companies from again going overseas, talking about increased regulation as the answer is just talk.

And, because of the deregulation, at the request of enron, we have commodity prices that are through the roof, fueling worldwide inflation.

So, we make marginal returns on having those "investments" in the US, whereby trillions in capital can be "invested", which creates a side-effect of fucking the entire globe.

Hey, great idea!

 

[Slew Foot]

Originally posted by: GTKeeper

Originally posted by: LegendKiller

Originally posted by: Slew Foot
Truth be told you get get reshuffled from a strong housing market to a weak one and be able to live like a King, just as well.

Speculation is what drives almost any capital investment, people complain when they miss out on the train. Im willing to bet almost everyone on this board had some tech stocks during the bubble, how many people complained about the meteoric rise based upon nothing but speculation? Not many. Likewise many people own homes, did people complain when values were skyrocketing (and dont tell me speculators weren't involved in flipping multiple houses)? PJ even refers to this himself when he says that people will be happy when values return to high levels.
So whose complaining about high oil/commodity prices? The person who loaded up on energy/food funds, or the guys that missed the boat?

There's a huge difference between investing for the purposes of delivering a good or product to the market or adding your own service to the market. Futures purchasers only add liquidity to the point that the market needs liquidity for the purposes of hedging. Since they completely over-dominate hedgers, they aren't providing liquidity but are merely bidding up the commodity.

I wouldn't normally have a problem with this. Gold is fine, fuck with that if you want. However, when you start screwing *EVERY* human being on the planet because you need a quick buck, I have a moral problem.

I believe Slew Foot just got owned.

How did I get owned? Youre the one whose commute cost doubled amongst other things and are too stupid to do anything about it except complain.

You my friend, are the one who is "owned".

 

[zephyrprime]

Originally posted by: lupi
There's nothing the government can do about oil speculation as the system now exist. When they tried to put limits in the traders went to other commodity markets. I heard a story recently that said one of the Asian exchanges was going to open a new commodity section to cash in on the profit from oil trading going on now.

Add that with OPEC coming out and saying they expect world demand to increase over the next 20 years by 50% and they have the capacity to meet that demand, even OPEC is putting the blame of current prices on speculators.

There's one thing the government can do. Cut off the source of funds. These funds being traded are largely borrowed dollars. If Bears and companies like that were allowed to fail and if the Fed wasn't backstopping bad debt, there would be less money available for speculation.

 

[GTKeeper]

Originally posted by: Slew Foot

Originally posted by: GTKeeper

Originally posted by: LegendKiller

Originally posted by: Slew Foot
Truth be told you get get reshuffled from a strong housing market to a weak one and be able to live like a King, just as well.

Speculation is what drives almost any capital investment, people complain when they miss out on the train. Im willing to bet almost everyone on this board had some tech stocks during the bubble, how many people complained about the meteoric rise based upon nothing but speculation? Not many. Likewise many people own homes, did people complain when values were skyrocketing (and dont tell me speculators weren't involved in flipping multiple houses)? PJ even refers to this himself when he says that people will be happy when values return to high levels.
So whose complaining about high oil/commodity prices? The person who loaded up on energy/food funds, or the guys that missed the boat?

There's a huge difference between investing for the purposes of delivering a good or product to the market or adding your own service to the market. Futures purchasers only add liquidity to the point that the market needs liquidity for the purposes of hedging. Since they completely over-dominate hedgers, they aren't providing liquidity but are merely bidding up the commodity.

I wouldn't normally have a problem with this. Gold is fine, fuck with that if you want. However, when you start screwing *EVERY* human being on the planet because you need a quick buck, I have a moral problem.

I believe Slew Foot just got owned.

How did I get owned? Youre the one whose commute cost doubled amongst other things and are too stupid to do anything about it except complain.

You my friend, are the one who is "owned".

So you are saying that raising an issue is 'complaining' ? I don't even own a car, so how did my commute cost double among other things... what other things?

Thanks for making crap up. You don't even know what my costs are, but are bold enough to make stupid assumption about them. Your logic is flawed and we have proven that you are wrong.

 

[LegendKiller]

Originally posted by: zephyrprime

Originally posted by: lupi
There's nothing the government can do about oil speculation as the system now exist. When they tried to put limits in the traders went to other commodity markets. I heard a story recently that said one of the Asian exchanges was going to open a new commodity section to cash in on the profit from oil trading going on now.

Add that with OPEC coming out and saying they expect world demand to increase over the next 20 years by 50% and they have the capacity to meet that demand, even OPEC is putting the blame of current prices on speculators.

There's one thing the government can do. Cut off the source of funds. These funds being traded are largely borrowed dollars. If Bears and companies like that were allowed to fail and if the Fed wasn't backstopping bad debt, there would be less money available for speculation.

Largely borrowed funds? Where do you get that? I'd love to see your facts and figures.

Second, futures only require 5% margin, so the "funds" in the market are a very small portion of the notional value.

 

[JeffreyLebowski]

Originally posted by: Taejin
I don't honestly think the oil speculators are driving up the price of oil unreasonably. I think oil speculators are pushing oil to reach its 'real' price point faster. Thus, the entire hullabaloo about oil is misfounded imo - we're simply seeing the results of several economic factors converging, and people need to blame another group of people. Blame the speculators or not.. I think the high price of oil is here to stay, unless demand drops for some reason.

How is speculation not driving it up. Simply put, Supply and demand of a product should be regulated by the supplier and the demander. The demander is the end user of the product, IE the people buying gas. Speculators act as a middle man and "by" oil but don't ever touch it. With their involvement they are an extra step in the chain, and every step makes a profit. So tell me how in a Supply/Demand situation you can have 2 demands. a Actual use demand an dan artifical demand?

 

[Tab]

Originally posted by: ProfJohn
Lemon, you are not worth replying too.

Liar. You just did. 😛