Speculator's mocking the airlines

[blueridge71]

ISpeculation is playing a part in the price, its not the only reason but it is adding at least 30-40 dollars a barrel onto the price.

Just curious if you have any reference for this "fact." The Wall St. Journal reports that 90-95% of the price at the pump is directly attributable to crude oil prices.

A look at the OPEC website (http://www.opec.org/home/basket.aspx) shows the daily basket price astonishingly close to the trading price per barrel. It looks to me that IF speculators are driving up prices (and I havn't seen any evidence that they are other than shrill leftist voices trying to draw attention away from the fact that 90% of our offshore reserves are not being tapped) that they add about $10 per barrel maximum.

I realize that it is much easier to blame an evil capitalist or corporation than to understand the reality that we have royally screwed ourselves, but admitting that we (and when I say "we" I mean the Democrats and their environmental special interests) are a big part of the problem is the first step to fixing it.

 

[blueridge71]

Thanks for a dose of sanity, Milky.

I'll toss in that investors in commodities futures can lose an unlimited amount of money if they guess wrong. Unless you are Hillary Clinton and have a LOT of beginner's luck.

 

[blueridge71]

Same thing with oil speculation... how can this nation survive on such a vertical spike in prices? It's simply not sustainable. When the oil prices literally tank this economy, and it looks like we're well on our way, and people really curtail spending like they've started to, you'll see the oil bubble burst... look out below!

The speculators are enjoying this rapid rise just how the real estate speculators enjoyed the rapid rise in home prices from 2002 to 2005.

There is some truth to this. In the past, when high oil prices have led to a recession, oil demand has tanked and the price fell. Again: SUPPLY and DEMAND.

 

[skiandsurf]

Sad that your entire week revolves around enough papers and ice.

Granted, when it came to the lavs, you guys were the best turd burglers around.

I would rather spend my week getting papers and ice, instead of worrying about fuel costs and furloughs.

And as far as the lav is concerned, thats what line guys are for, and the happily take our tips.

 

[Superpilot92]

Are oil speculators driving up gas prices?

By KEVIN G. HALL

Michael Greenberger said speculation is a major factor, and he knows a lot about the complex global oil market. He directed trading and markets for the Commodity Futures Trading Commission from 1997 to 1999. That body regulates the trading of contracts for future deliveries of commodities, including crude oil. The contracts, called futures, drive oil prices. Greenberger, a law professor at the University of Maryland, told McClatchy why he thinks financial speculation is driving up prices.

How do speculators drive up oil prices?

Speculators are able to drive up crude oil prices today because they're allowed to trade in the U.S. in futures markets not overseen by U.S. regulators. Therefore, they are free to dominate these markets by taking huge positions within them. And there is an additional fear that, because of a lack of oversight, they may be engaging in manipulative practices — i.e., wash sales and false reporting that would be barred in a regulated environment.

What is a "wash sale" and how does it work?

That's a prearranged trade between two or more parties in which there is no economic risk and the sole purpose of which is to give the appearance that the price of a commodity is going higher or lower in a way that does not reflect supply and demand.

Who are these speculators? Do they have names and addresses?

I really cannot answer that with certainty because these unregulated markets are so opaque. Many say that Goldman Sachs & Co. and Morgan Stanley are primary traders on the principal market outside of direct U.S. supervision, the Intercontinental Exchange, otherwise known as ICE. The whole point here is that we need transparency through a thorough investigation to determine precisely what is happening on the Intercontinental Exchange, including who key traders are and the positions they are taking in these markets. That transparency is provided regularly for those exchanges regulated directly by the (futures trading commission).

How much of today's record oil price is attributable to speculation?

There are many estimates being made by observers of these markets, economists and industrial energy consumers suggesting that the price of a barrel of crude oil could be anywhere from 25 percent to 100 percent in excess of what market fundamentals would dictate. For example, (the Organization of Petroleum Exporting Countries) has recently said that a barrel of crude should not be in excess of $70, and it has opened its own investigation into excessive speculation in these markets to find out what interests are causing the price to be almost double that.

What about supply-and-demand fundamentals? Aren't they behind oil's rising price to some degree?

There can be no doubt that there is a supply-and-demand problem at work here. But many believe, including me, that there's a speculative premium that goes beyond what supply-and-demand factors dictate. And that's what could be drained with aggressive United States regulation.

Can the futures trading commission do something, and if so why hasn't it?

Thirty percent of the U.S. futures trading in United States-delivered West Texas Intermediate crude oil contracts is conducted by the Intercontinental Exchange. Despite the fact that that exchange is owned by an Atlanta-based corporation with trade-matching engines in Chicago, the commission insists that it (ICE) should be regulated by the United Kingdom. It takes this position because the Intercontinental Exchange bought a British petroleum exchange (the International Petroleum Exchange) in 2001.

The Commodity Futures Trading Commission has the power to terminate its deference to British regulation of that Atlanta-based institution trading in the U.S. and controlling 30 percent of the major U.S. crude-oil contracts. They have authority to do so immediately and to bring ICE under full U.S. regulatory oversight.

(The CFTC announced Tuesday that it will condition ICE's access to U.S. contracts on its adoption of the same contract size limitations and accountability measures that apply within the U.S. This is only a partial step toward the regulation that Greenberger calls for; it leaves overall regulation of the ICE under British oversight, which is less rigorous than U.S. rules.)

How does the absence of effective regulation of commodity trading compare to the stock-market excesses of the 1920s?

To the extent that the Intercontinental Exchange operates outside of U.S. limits and controls on speculation, there is very substantial evidence suggesting that United States futures trading on that exchange is akin to the unregulated trading in U.S. stocks in the 1920s. That comparison is aided by the fact that huge positions in these markets can be obtained by speculators with less than 10 percent margin.

(Margin is a requirement that a buyer of a security or commodity put down a certain percentage of the price of the transaction when executing a trade. A low margin requirement invites speculation, since an investor puts less of his own money at stake.

(Low margins were a cause of the 1929 stock-market crash. Since 1974, stocks have had a margin requirement of 50 percent set by the Federal Reserve. For U.S. crude oil futures contracts, margin requirements are generally below 10 percent and are set by market participants, not federal regulators.)

 

[hate2bL8]

traders are not concerned about what happens to the commodity in the future. From what i understand they hold massive volumes of contracts( millions)and are only responsible for a small fraction of what they are holding(this is how they can make huge profits) and rarely hold it for longer than mimutes or even seconds

 

[Superpilot92]

THE ONLY PEOPLE WHO SAY IT ISNT SPECULATION ARE THE FINANCIAL IKNSTITUTIONS THAT ARE MAKING THE MONEY OFF OF RISING OIL PRICES.

How does the absence of effective regulation of commodity trading compare to the stock-market excesses of the 1920s?

To the extent that the Intercontinental Exchange operates outside of U.S. limits and controls on speculation, there is very substantial evidence suggesting that United States futures trading on that exchange is akin to the unregulated trading in U.S. stocks in the 1920s. That comparison is aided by the fact that huge positions in these markets can be obtained by speculators with less than 10 percent margin.

(Margin is a requirement that a buyer of a security or commodity put down a certain percentage of the price of the transaction when executing a trade. A low margin requirement invites speculation, since an investor puts less of his own money at stake.

(Low margins were a cause of the 1929 stock-market crash. Since 1974, stocks have had a margin requirement of 50 percent set by the Federal Reserve. For U.S. crude oil futures contracts, margin requirements are generally below 10 percent and are set by market participants, not federal regulators.)

 

[Superpilot92]

traders are not concerned about what happens to the commodity in the future. From what i understand they hold massive volumes of contracts( millions)and are only responsible for a small fraction of what they are holding(this is how they can make huge profits) and rarely hold it for longer than mimutes or even seconds

Exactly, thus piggybacking off one another.

 

[Superpilot92]

[FONT=verdana,geneva]On several occasions in the past few months, I have written about the impact of skyrocketing fuel prices on airline customers – in their daily lives and when they travel (Final Approach May 1 and Final Approach May 28 ). In the long run, to lower oil prices for all Americans, we need to increase domestic supply, increase exploration, alternative energy sources and conservation. However, one near-term solution to the problem is for government to investigate and rein in oil speculators.[/FONT]

[FONT=verdana,geneva]What is the Commodities Market? – Commodities are raw materials purchased by manufacturers of finished products such as food manufacturers, oil refiners or builders. Businesses that are highly dependent on oil – refineries, heating oil dealers, airlines and trucking companies among others – lessen their risk of significant price fluctuations by purchasing future delivery contracts at predetermined prices in what is known as the commodities or futures markets. The two largest U.S. commodities markets or futures exchanges are the Chicago Mercantile Exchange and the New York Mercantile Exchange, where people trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity at a specified price with delivery set at a specified time in the future.[/FONT]

[FONT=verdana,geneva]What is the Problem with Oil? – There is a significant disconnect between the paper market for oil (speculators) and the physical market for oil (consumers). In recent years, speculators have taken advantage of actual consumers of oil by bidding up the price for futures contracts. If a speculator purchases a contract for delivery of oil at a high price six or 12 months in the future but has no intention of actually taking delivery of the oil in that contract, then a physical customer who needs that oil – to deliver home heating oil, to operate trucks or airplanes, or even to process in a refinery – will be forced to pay the higher price in order to obtain the oil that is needed.[/FONT]

[FONT=verdana,geneva]How Do They Get Away with That? – Increasingly, sophisticated institutional investors have managed to manipulate the rules and regulations governing commodities transactions through a series of exemptions and waivers, including the so-called “Enron loophole,” low margin requirements and the dodging of U.S. public disclosure requirements. These complex arrangements have a similar impact: They put people engaged in oil-related businesses at a disadvantage with those who gamble relatively small sums that the price of oil will increase out of proportion to marketplace demands. If that happens, as it has regularly over the past few years, those who need oil for their businesses pay a premium, which is passed on to you – the consumer. [/FONT]

[FONT=verdana,geneva]What Can Government Do Now? – In the near term, Congress needs to address the impact of unchecked speculation in the commodities market. [/FONT]

[FONT=verdana,geneva]Commodities trading is overseen by a small, but very powerful government agency known as the Commodities Futures Trading Commission (CFTC) . Congress can require the CFTC to implement a host of controls such as imposing limits on the quantity of commodities contracts speculators may purchase, closing the loopholes that allow speculators to trade exempt from any government oversight or regulation, and requiring reporting by those who are engaging in speculation. [/FONT]

[FONT=verdana,geneva]Experts say that closing regulatory loopholes in the trading of commodity futures will result in a significant reduction in fuel prices.[/FONT]

[FONT=verdana,geneva]What’s Next? – Congress is expected to debate some of these issues in the next few weeks and it is urgent that they hear your voice. To facilitate public participation in the debate over speculators, we have launched a broad-based coalition, S.O.S. NOW, that provides a wide array of information on speculation and its impact on the price we all pay for oil. S.O.S. NOW stands for Stop Oil Speculation Now, and we urge you to go to the Web site www.stopoilspeculationnow.com and send a message to Congress about oil speculation.[/FONT]
[FONT=verdana,geneva]Sincerely,[/FONT]

[FONT=verdana,geneva]James C. May[/FONT]
[FONT=verdana,geneva]President and CEO[/FONT]
[FONT=verdana,geneva]Air Transport Association[/FONT]

 

[clippyrip]

It looks to me that IF speculators are driving up prices (and I havn't seen any evidence that they are other than shrill leftist voices trying to draw attention away from the fact that 90% of our offshore reserves are not being tapped...

you sir are a clown....try pulling your head out of Fox News's A$$.