Oil Speculators targeted

[Son of Norway]

The headline:

Oil experts: Curb speculation to cut prices
Hedge fund manager, adviser tell Congress crude could drop by half in 30 days if new regulations are implemented.

The article:
House panel told curbing speculation could cut prices - Jun. 23, 2008

I'm tellin' ya, I smell a rat here. I'll bet you a donut that congress ends up doing nothing about this. The price of crude is artificially high and I believe that unregulated speculation in the market is the root cause.

[longtalltechsan]

Since when has congress done anything in 30 days. This is too easy...in fact it may be so easy that congress WILL screw it up.

[Powerman]

I was researching this subject and came across a good counter point.

American Chronicle | What Does Speculation Have to Do with Oil Prices?

"And if someone wants to buy a contract that they think will be worth more in the future and you are willing to sell it because you need the money now why should the government be concerned? Only if they sell a bill of goods to the gullible and can get them to buy into the idea that it is a demon called a speculator that is really at the fault of the pain. And all it takes to stop this nonsense is to call them on it and ask them to explain exactly how it works. All you will hear is a huge silence."

[FrankRizzoXD40]

If there weren't global supply issues, if the US wasn't refusing to help the supply problem by drilling its own oil, if demand wasn't growing faster than the supply, etc..etc..etc...then the speculators would have no reason to well, speculate and hedge their bets in the futures market that the price of crude oil would keep on increasing.

This doesn't mean that speculation shouldn't be looked into, but if there is no reason to speculate high then we wouldn't have this problem.

I think that speculation driving the price of oil is a symptom of a supply/demand problem, not the root cause of high prices. Speculators wouldn't just put their necks out there and hedge these kinds of bets if they didn't have a reason to think that they would be right.

Frank

[jtkratzer]

I think speculation is part of it, but at the same time, it's not the sole factor. Part of the problem this...take a look at your own retirement accounts and look at what those funds are invested in...oil, fuel, and energy. We're all responsible as we all want to see our portfolios grow but it's growing at the expense of fuel at the pump. It's not the sole factor, but add in supply and demand, add in speculation, add in our investments, add in that we're being blocked from drilling our own, and it just gets ugly in a hurry.

[afmo]

regulation of speculation is NOT the answer.

The answer is to do what Bernanke refused to do with the housing debacle. LET THE MARKET CORRECT ITSELF!

This here:

To underline his case, Stupak said speculators now control 71% of oil on the market. That means only 29% control the physical oil being traded, down from 61% eight years ago. He blamed loosely regulated trading markets with numerous loopholes for the ease that traders have to buy and sell crude.

If speculators control 71% of the oil on the market now, that means that they will HAVE to sell off that 71% control if they ever want to make any profit. All it will take is one day or so of massive selling to trigger a bubble collapse. When that happens, the market will correct itself, and prices will normalize to a level that the market can sustain.

[ducttape2]

The attack on the speculators is a farce. Just like oil's astounding 8% margin. HA!!

As pointed out earlier, what business does the government have regarding what market positions are made?

The government does more to drive the price than any speculation. Their tampering with the market is going to foul things up more than just letting it run its course.

[jtkratzer]

Originally Posted by ducttape2

The attack on the speculators is a farce. Just like oil's astounding 8% margin. HA!!

As pointed out earlier, what business does the government have regarding what market positions are made?

The government does more to drive the price than any speculation. Their tampering with the market is going to foul things up more than just letting it run its course.

The profit margin on gasoline may be that low, but the profits seem to be mostly created by record prices for crude oil.

[Son of Norway]

Quote:

Enron has the last laugh…

As that US Senate report noted:

“Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called “futures look-alikes.”

The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.

The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated: “The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.”

In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day.”

Link:

‘Perhaps 60% of today’s oil price is pure speculation’

This is trading and market manipulation without CFTC oversight. Under these conditions, the market will "correct itself" after you've emptied your pockets at the pump for these investors. Applaud them all you want, just keep paying up. The regulation proposed is no different than the regulations that are applied to all commodities. Why should energy be excluded? Where is the benefit in that?

Even the Saudi's can see this happening in the market. That's what they told Bush when he went over there begging for more output.

All bitching aside, I stand my my earlier statement: this congress will do nothing. Now let's all go fill up.

[Son of Norway]

Even Faux news is on this:

FOXNews.com - The Danger of Speculation - FOX Fan

And here is the news that speculators celebrate:

Fears of oil price rises as attacks in Nigeria offset gains at summit - Times Online

Pay up, sucker.