Senator Asks Government to Curb Oil Speculators.

[elleng]

Source: NYT/Reuters

U.S. Senator Bernie Sanders has asked the federal futures market regulator to crack down on speculators whom he blamed for pushing up crude oil and gasoline prices.

The price for crude oil topped $66 a barrel on Friday, up more than 70 percent since mid-January. The rising oil costs have been passed on to consumers in the form of higher prices for gasoline, jet fuel and other oil products.

Sanders said the jump in petroleum prices was not justified, given that global oil demand this year is forecast to post the sharpest annual decline since 1981 and petroleum inventories are at their highest level in years.




Read more: http://www.nytimes.com/reuters/2009/05/29/us/politics/politics-us-cftc-oil-speculators.html?_r=1

[realisticphish]

1. can't do that. that's COMMINISM, dadgumit

[elleng]

2. Oh, Yeah!

What the speculators are doing results in some of us seeking REVOLUTION!!!

Had to SEARCH for gas 'as low as' 2.35 today.

[Old Coot]

3. If they push the price high enough, won't that result in people buying more efficient cars? nt

[Demeter]

4. With What Money?

[corpseratemedia]

11. we can't hurt the oil speculators, i mean banks, they gotta recoup their trillions

from us, the taxpayer

goodbye "glimmer" rofl

its only socialism when a senator with ethics tries to stop corporate corruption

[elleng]

5. Might be nice, but 'they' are not gas cos.

A bipartisan Senate report, largely ignored by the media, says that there's no oil shortage and none is expected. Rather, it's massive, unregulated speculation that is costing consumers billions of dollars. . .

What follows is a brief and somewhat simplified guide through the more important concepts in the report.

There are two ways to buy petroleum. One can simply buy it now, and pay for it at the current price. Or one can contract to buy it later at a future date, and pay for it at a price which reflects its future value. This future price will usually be different from the current price. Usually it reflects a premium that one is willing to pay in order to ensure a future supply and it reflects the parties' expectations about future prices. It has the advantage of locking in a price, thereby providing a "hedge" against an unexpected future price increase. (Futures markets also provide the means of hedging against falling prices.)

There are two kinds of buyers of petroleum: oil companies who need it for their refineries, and speculators who are simply looking to make money on trading. Oil and gas companies, of course, have facilities for handling deliveries: terminals, storage capacity, etc.; speculators do not.

Historically, there has been a simple and direct relationship between the amount of crude oil in inventory and the price. The more crude oil in storage, the lower the price. This was a simple supply-demand relationship. The same was true for natural gas. This simple and predictable relationship changed in 2004: higher inventories were suddenly associated with higher prices. This reversal of the normal price-supply relationship coincided with a massive influx of speculative money into the crude oil and natural gas futures markets. By one estimate, over $60 billion has been spent on oil futures in the NYMEX market alone over the last few years.

This massive infusion of speculative money in the crude oil and natural gas markets has changed the behavior of the players in the market. By one analysis, long-term futures prices have pushed up the longer-term prices to the point that it is more profitable for oil companies to hold oil to sell at a later date even in the face of current high prices. This has increased the demand for oil and gas in storage. The report uses an example: "Even if oil is at $70 per barrel today, suppliers will hold their inventories if they can sell it for $75 for delivery a year from now."

In effect, the speculation has increased the demand for oil and gas. As the report found, "As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum."


http://www.niemanwatchdog.org/index.cfm?backgroundid=100&fuseaction=Background.view

[look_to_the_future]

12. Best Solution!!!

The best solution to high gas prices is..... wait for it.... HIGH GAS PRICES!

If this really is speculator induced price frenzy, they will lose lots of money when the bottom falls out (as it always does in these sorts of speculator driven markets - check your most recent home assessment for confirmation of that). That's a much better fix than some senator putting in some knee-jerk reaction to the perceived problem.
High gas prices will indeed drive us to get more efficient with gas usage much better than stupid CAFE standards. We will choose to drive more efficient vehicles, limit our miles traveled, and avoid gas guzzling high pollution cars and trucks because it's in our best interest to do so.

Wait, not only does that make sense, but is seems almost too obvious.

[girl gone mad]

13. And where did the "massive infusion of speculative money" come from?

Why, http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x65173">from the American taxpayer, of course.

[rhett o rick]

6. Your subject got my attention. What Senator would do a thing like that?

Of course Sen Bernie Sanders, the people's Senator. I wish I could vote for Bernie.

[Metta]

7. Way past time to do this. Kudos, Bernie.

Good karma.

[depakid]

8. Good luck with the DINO's

On this issue, there's not a dime's worth of difference between them and the Republicans.

[elleng]

10. Right.

It was, in fact, attempted some time ago, under w. cftc acknowledged it had authority, but hadn't used it. (remember, brooksley born had been their chair!!!) Michael Greenberger, who had worked for her there and is now teaching at u.MD, testified about it. I'm gonna look for that info.

[elleng]

14. OK, dep, some info:

The Commodity Exchange Act (CEA), 7 U.S.C. § 1 et seq., prohibits fraudulent conduct in the trading of futures contracts. In 1974, Congress amended the Act to create a more comprehensive regulatory framework for the trading of futures contracts and created the Commodity Futures Trading Commission, replacing the Commodity Exchange Authority. The stated mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets.
. . .

The Division of Enforcement investigates and prosecutes alleged violations of the Commodity Exchange Act and CFTC regulations. Violations may involve commodity futures or option trading on domestic commodity exchanges, or the improper marketing of commodity investments. The Division may, at the direction of the Commission, file complaints before the agency's administrative law judges or in the U.S. District Courts. Alleged criminal violations of the Commodity Exchange Act or violations of other Federal laws which involve commodity futures trading may be referred to the Justice Department for prosecution. The Division also provides expert help and technical assistance with case development and trials to U.S. Attorneys’ Offices, other Federal and state regulators, and international authorities.

On July 25, 2007 the Division of Enforcement filed a civil complaint in Federal District Court in New York City alleging various illegal practices connected with natural gas futures trading and the collapse of hedge fund Amaranth Advisors. . .

CRITICISM

Barack Obama has argued that current loopholes in CFTC regulations have contributed to skyrocketing prices and lack of transparency of oil on markets<2>.

On June 25, 2008 Speaker Pelosi sent a letter to President Bush calling on him to direct the Commodity Futures Trading Commission (CFTC) to use its emergency powers to take immediate action to curb excessive speculation in energy markets. They must act to investigate all energy contracts. Despite growing reports of excessive speculation in energy markets, the CFTC has refused to take actions they have taken in the past<3>.

On June 26, 2008 the House passed the Energy Markets Emergency Act of 2008, H.R. 6377. The bill would take crucial steps to curb excessive speculation in the energy futures markets by directing the CFTC to<3>:

Use all its authority, including its emergency powers, immediately to curb the role of excessive speculation in any contract market trading energy futures or swaps, and
Use its most potent emergency tools – including the immediate powers to set new position limits (size of the stake that each speculative investor can hold in a given market), increase margin requirements (the money needed to trade), and impose other corrective actions as necessary – to eliminate excessive speculation, price distortion, sudden or unreasonable fluctuations, or unwarranted changes in the price of energy commodities or other unlawful activity causing major market disturbances that prevent the market from accurately reflecting the forces of supply and demand for energy commodities.

http://en.wikipedia.org/wiki/Commodity_Futures_Trading_Commission


Pelosi's words

In 2000, Senator Phil Gramm – now chairman of Senator McCain’s presidential campaign – slipped in the Enron loophole that exempted all energy futures trading from oversight by the Commodity Futures Trading Commission (CFTC).
Before the Enron loophole law, an estimated 70 percent of the energy futures market trades were made by energy producing and using industries—only 30 percent by speculators. Today, those numbers are reversed—and trading volume has increased six-fold. . . .

http://www.speaker.gov/legislation?id=0230#emergency

[depakid]

15. "Barack Obama has argued that current loopholes in CFTC regulations have contributed to skyrocketing

I guess that raises the question of where the notice of proposed rulemaking is in the CFR, doesn't it?

Oh wait... there hasn't been one.

[RedCloud]

9. String 'em up. That'll learn 'em good.

Can't fuck with our cheap gas prices.