Exactly how much are oil speculators actually driving up the price of oil?

[S-Des]

As for "my ideology losing elections," a point is coming when middle class voters connect the dots between, shortages, massive price hikes and chipping away at their standard of living, and the green orthodoxy that is causing those things to happen. Then we'll see who loses elections.

Well, we came really close with the House Bill that died last week (you know, the one where the Dems claimed if we just gave them 45 Trillion dollars, they'd fix everything for us and we wouldn't have to worry about it? ).

 

[JAMESBJOHNSON]

ROXANNE

Somtimes they connect the dots.

Our local pols are orgasmic to build light rail across the region. They package it like Bill Gates packages all of his humbugs that require 6 versions before the bugs are worked out. So our pols promote the notion that the train will wait for you outside your house and carry you to work, then do the same in the afternoon.

But the reality is the contractors will make money, developers around the stations will make money, and the trains only go where pols need to be...city hall, the airport, the stadium, and the courthouse. Tampa is building a trolley that costs 3 million dollars per city block of track. The existing line is losing its ass, but they want to build more track.

What the Greening of America means is: Pols and lawyers are filling their pockets with green.

 

[trysail]

Last week Sen. Charles Schumer gave a typically cynical, dishonest, demagogic, insincere "fist pounding" speech berating Saudi Arabia for failing to increase production by 1 million barrels per day. He claimed that this means gas costs 50-cent more than it would otherwise. ("Typically" not just for Schumer, but for the entire corrupt breed of professional pols.)

One-million gallons a day is the amount of oil that ANWR would be producing if Schumer and his looting colleagues had not voted on numerous occasions to prhohibit it. Not to mention all the other parts of the U.S. they've made off limits for mineral exploitation.

Actually, I have mixed feelings about that. For a long time I've had a secret attraction to the "energy policy" that George Will decribed in a column last week: "America says to foreign producers: We prefer not to pump our oil, so please pump more of yours, thereby lowering its value, for our benefit. Let it not be said that America has no energy policy."

Y'see, my hope is that someday the population rebels against the dictatorship of cynical "green" elites, and demands an end to all this nonsense. When that day comes this nation will be sitting pretty, although all the rest of you in the world may be fucked. I guess there's a little bit of imperialist in me after all, just as there is in Sen. Schumer and the other members of that ongoing criminal enterprise known as the U.S. Congress.

~~~~

PS - Schumer made up that "50-cents per gallon" bit, like he and his ilk make up all kinds of stuff when it's expedient, but the point remains.

Roxelby—
That was a swell post.

I believe "Chuckie" Schumer may be the perfect source of data for a "moron barometer."

The barometer will be calibrated on a scale of 1 to 100 and will be an indicative measure of the percentage of birdbrains resident in the United States.

The calculation is simple:
( # of votes for "Chuckie" Schumer/ # total votes cast) x 100 = moron index

P.S., it was "Chuckie's" position on the Dubai Ports Authority issue that convinced me that he would make a perfect wind indicator ("which way is the wind blowing today"); anyone casting a ballot for him is indubitably brain dead.

 

[Le Jacquelope]

Ok there are a lot of factors that go into the price of oil. Not only do you have the supply vs demand, but recession, and the weak dollar.

I'm certainly not denying the weak dollar's effects on oil prices - but there are conflicting reports as to the actual supply of oil. Some reports say it is rising faster than consumption. (I posted that already.)

First, we have supply vs demand. Supply has not gone up in the past couple of years, while worldwide demand is increasing by developing countries. A lot of these countries have subsidies for their fuel, China, India, Venezuela, and Indonesia just to name a couple. They want their economies to grow, and thus subsidize fuel prices in order to attempt to do this. So, their people don't feel the pain at the pump, yet...however a lot of these countries are now working in plans to try to wean their people off of cheap gas.

And the food riots will commence. Oh no wait, they already have, in many places already.

Now, the economy is in a recession, so typically what happens during that time is stockholders sell off and head into commodities. This is very normal, and if you follow the trends, clear to see. Now, add into that fact that now you have 401K funds...large chunks of money that the managers have at their disposal. The managers primary task is, of course, to make money for that 401K, so they are going to follow this and shift the money into commodities. So, not only do you have the typical shifting of funds, but now the extra money from larger and larger 401K funds being shifted.

Exactly. Commodities like oil. I'm astounded by those who say that when you have this much money going into oil, it doesn't drive up the per barrel price of oil.

The dollar is weak, all research points to that. There used to be a time where you could go to Canada with a dollar and buy things on the cheap, this is no more as the Canadian dollar has, gasp, been on par or worth more. This is true with the dollar vs the euro, the pound, and the yen. Oil is traded worldwide in dollars, so when the dollar is weak, say the euro has more buying power. The dollar can be finicky, last week it was gaining, till the European Central Bank mentioned possibly raising its rates, which cause the dollar to drop. The US Treasury has made a stance to no longer lower rates, which caused it to rise slightly, and should rise again, if the rumors of raising rates at the end of the year come true.

One way or another, we're gonna be screwed.

My apologies on the nuke crack. As for the rest, all's fair in contentious debate (within the bounds of civility - you and I are "throwing elbows," not being uncivil.) BTW, I'm not ignorant, I just disagree with you. I'm actually very well informed, but there's no reason for you to know that (although one should not presume otherwise).

Agh, you know, I'm sorry for snapping at you. You just keep being nice and civil even though we sorely disagree.

As for "my ideology losing elections," a point is coming when middle class voters connect the dots between, shortages, massive price hikes and chipping away at their standard of living, and the green orthodoxy that is causing those things to happen. Then we'll see who loses elections.

Methinks they are looking up at the brown haze in the sky, the health problems that burning gasoline is causing them, and they're probably noticing that the green movement is saving their lives. The buoyancy of hybrid car resale values and the raging popularity of my electric SUV says the green movement is highly underrated.

Solar energy is marching on forward in both innovation/effectiveness as well as popularity. No amount of right wing propaganda is going to do away with the fact that the more solar panels we have out there during the day, the more zero-emissions electricity we're going to have during the day. Right wing propaganda has absolutely no ability to erase the fact that solar energy does not need oil, coal or wood to fuel those solar cells. It ain't gonna happen. When the sun's out, the energy is going to flow into the grid. It's a net plus. The green movement marches on...

Drive around my town and look at the Raley's/Bel Air delivery trucks. Lots of them now have "Biodiesel" on them. The green movement marches on.

By the time the Republicans get their own "Inconvenient Truth" propaganda film out, electric cars will be back in production and, due to the skyrocketing cost of gasoline, people will be beating down doors to get them.


FYI, Republicans are scrambling to get away from the Bush reputation. The Conservative revolution is crumbling around the world - in Australia and Japan, the Right has recently lost. Badly. That should say something. Something ominous.

 

[Le Jacquelope]

So now Saudi officials blame speculation on the sudden rise in gasoline prices...

hmmmmmmm.

http://news.yahoo.com/s/ap/20080622...t&printer=1;_ylt=AnQXZC_sN.CHsggd9dg1GT8UewgF

Saudi Arabia opens oil summit as fuel prices soar

1 minute ago

King Abdullah has officially opened a high-level oil summit in Saudi Arabia amid a standoff between the kingdom and the U.S. over who's to blame for skyrocketing oil prices.

Delegates from 36 countries and 22 oil companies are attending Sunday's meeting, which the kingdom called for to show it is not deaf to international cries that high oil prices have caused social and economic turmoil.

The U.S. and other Western nations have put increasing pressure on Saudi Arabia to increase production, saying insufficient oil production has not kept pace with growing demand.

The kingdom has announced several small increases recently, but Saudi officials blame speculation in the oil market and not shortage of supply for the soaring prices.

 

[Le Jacquelope]

http://wcbstv.com/business/oil.trading.stocks.2.750770.html

Trading's Powerful 'Dark Markets'
WASHINGTON (CBS News) ― As gas prices skyrocket, attention has turned to public "pits," where brokers trade "oil futures" - the right to buy or sell crude oil at a specific price, on a future date.

But far away from the hue and cry, hundreds of millions of barrels of oil futures contracts are traded electronically every day, CBS News chief investigative correspondent Armen Keteyian reports.

More than 30 percent, experts say, exchanged in so-called "dark markets," the exact size and scope unknown to U.S. regulators.

"If you can trade out of the sight of U.S. regulators, you can manipulate these markets," said Michael Greenberger, a former top staffer at the Commodities Futures Trading Commission, or CFTC, which regulates the trading of commodities like oil in this country.

He recently told Congress that speculation is placing a huge premium on the price of oil.

"How much per barrel?" Keteyian asked.

"Well, there have been various estimates - anywhere from 25 percent to 50 percent," Greenberger said.

"People can actually corner the market and drive up the price," said Sen. Maria Cantwell, D-Wash. "When there is no policeman on the beat, you know that crime can go up."

More and more fingers are pointing at one of the least-known but most powerful foreign exchanges - the InterContinental Exchange, or ICE.

By the end of 2007, the all-electronic exchange accounted for nearly a 50 percent market share of all global oil futures contracts, a total of 138.5 million contracts - up 49 percent from 2006.

Today it boasts more than 2,100 individual traders representing virtually all of the major players in oil - banks, hedge funds, energy companies, investment giants.

And according to a securities filing, two of those giants, Goldman Sachs and Morgan Stanley, were founding partners of ICE.

"The fact that they started this shows the intent of where they wanted to go," Greenberger said. "Which was to trade crude oil and energy products without any police in the United States supervising it."

That's because it's considered a foreign exchange. Taking advantage of a loophole created by the CFTC, the company says its "energy futures business" is conducted in London, it is not subject to U.S. laws. Over strong criticism, the CFTC agreed.

All this despite the fact ICE headquarters are on the fifth floor of a building in Atlanta, it's primary data center in Chicago, and nearly all its trades settled in U.S. dollars.

"It is a charade, and ... it defies explanation," Greenberger said.

In a statement, ICE CEO Jeffrey Sprecher told CBS News that ICE is committed to providing "the same visibility in our oil markets that exists for U.S. Exchanges," and that ICE Futures Europe is "fully regulated" by the British government.

But British financial authorities are notoriously lax.

Now Congress and others are asking just how much of the crude oil futures market is being manipulated by either excessive buying designed to drive up the price, or phony transactions that imply a supply problem that does not exist.

Today, under pressure, ICE finally agreed to impose stricter limits on certain trading, shedding some much needed light on the dark side of oil.

(© MMVIII, CBS Broadcasting Inc. All Rights Reserved.)

 

[Le Jacquelope]

So according to this article, the PRACTICAL effect of curbing oil speculation is that gasoline will drop to $2/gallon.

If this is true, and the US drives gasoline prices down to $2/gallon, this could seriously hurt America. At $2/gallon people will drive like crazy, throwing fuel economy to the wind and giving rise to a new generation of gas guzzling vehicles. This pattern actually happened before during the 1970s oil crisis in which fuel efficient cars rose in popularity and then were pushed aside in the market by gas guzzlers when oil became cheap and plentifully distributed again.

We don't need to repeat this.

I refuse to say gasoline should be $4 a gallon to encourage fuel economy - because food prices are being driven up by this and many poor commuters can't survive at this rate - but something needs to remain in place to encourage the death of the internal combustion engine.

http://www.marketwatch.com/news/story/gas-could-fall-2-if/story.aspx?guid={2673C102-68E0-41D9-9C9A-10EE2E723948}&print=true&dist=printMidSection

Gas could fall to $2 if Congress acts, analysts say
Limiting speculation would push prices to fundamental level, lawmakers told

By Rex Nutting & Michael Kitchen, MarketWatch

Last update: 4:24 p.m. EDT June 23, 2008

WASHINGTON (MarketWatch) -- The price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy-futures markets, four energy analysts told Congress on Monday.
Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.
Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters' assessment at a hearing on proposed legislation to limit speculation in futures markets.
Krapels said that it wouldn't even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in futures markets.
"Record oil prices are inflated by speculation and not justified by market fundamentals," according to Gheit. "Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel."
Futures trading in London has not been a major factor in rising oil prices, testified Sir Bob Reid, chairman of the Chairman of London-based ICE Futures Europe. Rising prices are largely a function of fundamental supply and demand, not manipulation or speculation, he said.
"Energy speculation has become a growth industry and it is time for the government to intervene," said Rep. John Dingell, D-Mich., chairman of the full committee. "We need to consider a full range of options to counter this rapacious speculation." It was Dingell's strongest statement yet on the role of speculators.

Dingell introduced a bill on June 11 that would ask the Energy Department to gather the facts on energy prices, including the role played by speculators. See full story.
There are two kinds of speculators in the futures markets, Masters said. Traditional speculators are those who need to hedge because they actually take physical possession of the commodities. Index speculators, on the other hand, are merely allocating a portion of their portfolio to commodity futures.
Index speculation damages price-discovery mechanisms provided by futures markets, Masters added
The committee will likely consider legislation that would rein in index speculation by imposing higher-margin requirements; setting position limits for speculators; requiring more disclosure of positions; and preventing pension funds and investment banks from owning commodities.
Both major presidential candidates have supported closing loopholes that encourage speculation in the energy markets. Read more on Election Blog.
However, other witnesses said that pure speculators have had little impact on energy prices, which have doubled in the past year to about $135 per barrel. Both Treasury Secretary Henry Paulson and Energy Secretary Samuel Bodman have dismissed the impact of speculators on prices paid by consumers.
Speculators now account for about 70% of all benchmark crude trading on the New York Mercantile Exchange, up from 37% in 2000, said Rep. Bart Stupak, D-Mich., chairman of the investigations subcommittee. Stupak introduced a bill on Friday that would limit index speculation.
There has been much discussion recently about how big a role speculators have been playing in the sharp rise in energy prices, though no consensus has emerged on this point.
Congress, however, has grown increasingly concerned over speculative investors' role in the energy market in comparison with those buying futures contracts to hedge against risk from price changes. Lawmakers are expected to consider legislation to set strict limits -- or in some cases, an outright ban -- on speculative trading in energy futures in some markets.
Dingell is looking into any legal loopholes that may have contributed to speculation in energy markets. In 1991, according to documents provided by the Commodity Futures Trading Commission to the committee's investigators, the agency authorized the first exemption from position limits for swap dealers with no physical commodity exposure. This began what Dingell said was "a process that has enabled investment banks to accumulate enormous positions in commodity markets."
Is Congress barking up the wrong tree?
Neal Ryan, manager at Ryan Oil & Gas Partners, said that if Congress develops regulations to cut back speculative trading, speculation will just find a new home.
"Speculation is the root of capitalism," he said. "If the speculation is forced out of the U.S. exchanges, it'll simply show up on other exchanges that are OTC like the ICE, or new exchanges will pop up to allow for the spec trades to continue functioning."
Ryan said he does see a reason for Congress to look at eliminating aspects such as allowing West Texas intermediate crude oil futures to trade on foreign markets and the "Enron loophole," but "these exchanges are currently functioning as they are supposed to in a free marketplace."
The creation of a comprehensive U.S. energy policy that tackles issues of increasing domestic supply and reining in consumer demand via conservation should be Congress' focus, Ryan said. "Instead we're on bended knee begging the Saudis to put more oil on the market and talking about shutting down spec trades."

End of Story

Rex Nutting is Washington bureau chief of MarketWatch.
Michael Kitchen is a copy editor for MarketWatch and is based in New York. Nate Becker contributed to this report from San Francisco.