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Stop Oil Speculation:
Sen. Bernie Sanders and more than 60 other members of Congress say federal regulators should curb speculation in crude oil markets which has artificially pushed up gasoline prices to nearly $4 a gallon. The lawmakers - 23 senators and 45 members of the House - said Monday in a letter to the Commodity Futures Trading Commission that the regulators must stop Wall Street futures traders from dominating the oil market. The commission has flouted a provision in the 2010 Wall Street reform law that required regulators to put tough new trading limits in place by Jan. 17, 2011. "We are disappointed that, more than a year later, the commission has not fulfilled this important regulatory duty," the letter said.
Read more here: http://www.sanders.senate.gov/newsroom/news/?id=7FB6728B-29A4-46A6-8A8F-A5655818CAA6
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44 comments
 
I don't understand why speculation on finite resources is even allowed. Doesn't it just cause them to get used up faster?
Ralph H
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In 2008, there were Congressional hearings on this - the most often mentioned remedy was to forbid futures contracts that did not involve actual oil or gasoline delivery (so-called "paper trades").

This would allow people who needed to obtain gasoline or oil at a certain price to participate in the market, while locking out the "speculators"

What happened to that proposal?
 
Just as speculators push oil prices up, they also push it down through shorting as well. It works two ways. They are trying to regulate markets - sounds like anti-capitalism to me comrads :)
 
+Woozle Hypertwin Regulating US markets will push other markets speculation up, i.e. Singapore oil markets. What their doing is only stopping Americans in speculating, not the answer, as when Singaporean markets are up, it will affect US markets too. That's globalisation. .
 
In India oil prices are hiking day by day...if it goes like this i dont know wat will happen to our countries transpor in future.....:)
 
+Bopanna Kethira India sent a High Trade Delegation to Iran, your oil is assured whilst others fear sanctions on Iran wont work.
 
Assured? Until it runs out or Iran changes their mind.

The market has to operate under a set of rules. Otherwise it wouldn't exist. Changing them isn't automatically "communism". What a silly idea. 
 
There's nothing wrong with future contracts. They can be used legitimately, especially for things like wheat and food. The biggest issue is when there are more "paper trades" per day, than actual oil being produced. More or less, the price of oil is being driven up, and financial institutions are "investing" in it, rolling over contracts, continuously making money. (Not quite as simple as that, but that's the gist).
 
They, the republicans, could not get Obama on the economy, oil is a republican stronghold and they are working together to unseat the president, there is no doubt in my mind.
 
I can remember the days when gas prices held steady (mostly) from day to day. When the prices did go up it was by a penny or two. Of course, those were the same days that gas was pumped by an attendant, who also checked your oil and whisked the dirt out of your floorboards. I know, those days are long gone. These days gas prices fluctuate by the hour, literally. And not by just a penny or two...last gas price increase here, locally, spiked thirty cents between 8 a.m. and 12 noon. They can blame it on Iran's saber rattling, China's spike in consumption, a hurricane in the gulf, maintenance at a refinery or whatever...when the truth is the hikes can be directly blamed on speculation. Will anyone openly admit that? Hell no!

+Joseph Wise , I don't believe for one second that it behooves speculators to drive prices down, and would be difficult for them to do so amid all the predictions of "doom & gloom". Let's face it, speculators aren't the average working people who struggle from paycheck to paycheck. They are people who are connected to wealth, traders, Wall Street, politicians and the like. They are the rain makers who control the ebb and flow of commodities that stand to make a great deal of profit, both for themselves and their elitist buddies who control wealth, by driving prices upwards, whether artificially or justified. There's nothing anti-capitalist about wanting to rein in price gouging or paying a fair price for the actual market value of anything. Greed is, and has been for quite some time, running rampant. Those connected with wealth, and those on the verge of becoming wealthy, want the most return for the least effort. I think the title "speculator" is misleading. Instead they should be referred to as "manipulator".
 
+William Wheelehan it does seem a bit of a "coincidence" the way prices spike around elections. And many fall for it. 
 
Those that make the laws that control industry in any form should have absolutely nothing to gain from it.
 
The president has made it clear he wants higher prices on fossil fuels to force Americans to use alternative energies. Investors look at the fact that he turned down the Canadian oil pipeline, stopped issuing drilling permits in the Gulf and took a lot of public land out of availability for oil/gas leases. Throw in the problems in the middle east and investors start to bet oil prices will go up and they buy futures at higher and higher prices. The problem isn't how the market works, it's our president's determination to restrict coal and oil production as a means of "transforming" America's energy use. If he makes it clear by actions, not speeches, that he intends to produce as much oil as we safely can, the speculators will fear losing their money and start selling oil futures immediately.

Bernie Sanders is an admitted socialist and believes the government should control all production and wealth in a country. Every socialist economy in the world has failed and is moving to capitalism but somehow that doesn't mean anything to Bernie (and others). It's scary how close "the wealthy must pay their fair share" is to "from each according to their means, to each according to their need". Once you accept that people don't really own their stuff, the government is free to take it and redistribute it as they please. That's the ultimate tyranny.
 
+Isaac Hansen , been on my soapbox for quite some time now about those very same sentiments. It's a conflict of interest.
 
+Isaac Hansen While that may sound good, it is an impossible position, as it would ultimately require lawmakers to be completely separate from the society they live in. A couple examples--

Legislators shouldn't be able to make laws about food safety.
Legislators shouldn't set the budget for the military or federal law enforcement.

That being said, controlling all the details of regulating an industry can have a corrupting influence on legislation (much like earmarks). That is why the FTC sets and enforces the rules and the legislators advise that the rules should be more strictly enforced
 
+Joseph Wise said, "Just as speculators push oil prices up, they also push it down through shorting as well. It works two ways. They are trying to regulate markets - sounds like anti-capitalism to me comrads :)"

The only anti-capitalist idea here is the idea that markets don't need regulation. That's anti-capitalist in the extreme.
 
+Larry Reese said, "Bernie Sanders is an admitted socialist..."

And so are you, unless you want to try and convince the rest of us that you only drive on privately owned roads, don't use cars with features approved by governmental standards organisations, do not use GPS, or a mobile phone or drink municipal water.

Good luck with that you dirty socialist.
 
These clowns can do nothing about it as long as we in the US continue to not build new refineries or explore for the supplies that already exist. If you believe this B.S I have some swamp land you can buy and drain and then build a wonderful gated community. It's still cheap at half the price.
 
+J Lorensen pray tell, how does increasing the local supply of oil prodcuts reduce the price of oil when all oil is sold globally on a global market? Sure it will have some effect, but you'll need to tell us how much of an effect it will have.

Please show your work and make sure to include the 60% increase in the price of oil due to non-delivery speculation.
 
Of course the Commodity Futures Trading Commission has dropped the ball and not fulfilled this regulatory duty! The Federal government is full of parasites...pay for no work. Meantime, the crude oil speculation pushes the price of gasoline up and increases the cost of every thing from groceries to clothing, to energy. I wonder how many of these federal regulators have stocks in Crude Oil?
see my blog parasitesinpolitics.blogspot.com
 
We have used up all of the easy to obtain oil. A hundred years ago oil used to gush to the surface and it was a cheap commodity. Now it costs a lot more just to get it to market. It is a finite resource, and will get more expensive as time goes on and we use more of oil.

There have always been speculators. They lose as much as they win. Speculation cannot change the fact underlying the commodity traded. Speculation will often unseen truths about the market.

Is speculation driving the price of oil up, or is it pointing out the facts about our oil situation?
 
To add to +Stephanie Estby's statement, and I think this was also mentioned upthread, it is almost never the case that it makes logical sense to go short on a non-renewable product. The price will never go down significantly in a relatively free market.

Further, absent a reworking of the system that rewards the speculation behavior into one that is more even handed, the price will remain artificially high.

There are precisely zero totally free markets of significance extant in the world today. That means that the oil market is a combination of regulation based and market based incentives. Currently, it cannot be honestly argued by knowledgeable people that the regulatory environment in the oil market is NOT skewed towards rent-seeking; There's massive amounts of rent-seeking going on right now in the oil market.

Of course, people with an incentive to keep those rents will tell you otherwise, but you should expect that sort of mendacity from people who think it's acceptable to rent-seek in the first place.

Edit: added the phrase '...of significance...' to the first sentence of para. 3. There are actually totally free markets in places like Somalia and southern Afghanistan. Certain black markets can be considered totally free as well.
 
I may have posted this here before but I think of a free market as kind of like a unicorn. It could solve all our problems in a beautiful and elegant way... if it existed. But, it never has, or at best, has existed once or twice and only appeared to small groups of relatively primitive people. Perhaps using modern technology such as complex systems and bioengineering we could create one, but no one knows how and what it would look like. But, people really like to talk about it.
 
+J Lorensen drilling for more oil, just like draining swampland, is a temporary solution that causes more problems in the long run than it solves.

Our diminishing, expensive to reach American oil that we still have is not a long-term answer - at best a stopgap and at worst something the richest oil execs will sell to China at a profit, without any benefit to the American people.
 
It's not that free markets don't exist any more, it's that they can't exist at all beyond certain very specific instances.

Markets are all about allocation of resources and as soon as a market involves a public or semi-public resource of any kind, it becomes subject to Tragedy of the Commons-type market failures. TotC failures require extra-market rules to resolve. We call them regulations. As soon as you have regulation, you no longer have a free market. It's inescapable.
 
so does this mean that I can find a unicorn in some very specific instances too? (aside from gluing a horn on a horse).

I guess another parallel - both unicorns and the free market can exist in virtual environments (some online marketplaces, computer games)
 
Nah, it just means that free markets are more likely than unicorns, though not by much.

There's a whole list of market failures - things that happen in markets that naturally arise from the action of market forces that cannot be solved within the market itself - of which TotC is the most well known and therefore easiest to use as an example.
 
+Roger Burgess Hate to take you back to school basics; Free markets are the definition of capitalism, what you are saying a regulated market is a free market; That's a paradox.
 
+Joseph Wise said "what you are saying a regulated market is a free market; " That's precisely what I'm NOT saying. Please look at my posts

1:57PM:
"...free markets are more likely than unicorns, though not by much."

1:25PM:
"Markets are all about allocation of resources and as soon as a market involves a public ... resource of any kind, it becomes subject to ... TotC failures [that] require extra-market rules to resolve. We call them [the extra-market rules] regulations. As soon as you have regulation, you no longer have a free market. It's inescapable."

11:34AM
"There are precisely zero totally free markets of significance extant in the world today. That means that the oil market is a combination of regulation based and market based incentives."

10:44AM
+Joseph Wise said "...They are trying to regulate markets - sounds like anti-capitalism to me comrads :)"

I replied, "The only anti-capitalist idea here is the idea that markets don't need regulation."


So, in my post at 10:44 I discount the idea that regulated markets are anti-capitalist.

In my post at 11:34 I state that there are no, none, zip, zilch, nada totally free markets of any significance and directly seque to the correct conclusion that the Oil market, being a market of significance, is not totally free.

In my post at 1:25 I explain how once a market utilizes a public good it becomes vulnerable to TotC market failures requiring regulation to overcome

In my post at 1:57, while it doesn't have any direct relevance, I posit that free markets are only slightly more common than unicorns. Considering that not a half-hour before I explained why there are nearly as many free markets as unicorns, this should not come as any great surprise.

I'm really quite confused how you could possibly interpret any of my posts as saying 'Regulated markets are free markets" when I just spent most of the day pointing out the difference between regulated and free markets and how unobservant one has to be to think that there are any free markets of importance left in the world.

I know what I'm talking about and I'm extremely careful with my wording. Re-read what I wrote, but this time try explicitly to hold off judgement as to what I'm saying until after you've read it. To use a phrase a friend of mine pointed me to: Give it five minutes of fairness first.
 
+Roger Burgess I have to point out your comment

"The only anti-capitalist idea here is the idea that markets don't need regulation. That's anti-capitalist in the extreme."

Suppose you call that being a proponent of capitalism? True proponents of capitalism would argue that the only government intervention is through fiscal policies and none other. (Obviously some to ensure no theft, leave some security for the buy/seller but nothing else)

Know what your talking about; Lets see your other comment;

" it is almost never the case that it makes logical sense to go short on a non-renewable product. The price will never go down significantly in a relatively free market."

Thanks to the relatively free markets, you saw the shorters making a mint in the Gold boom and bust, the oil price shocks that have appeared across history; Remember oil was only at $40 after reaching $140 2008/09??

That's not being careful with your wording, Marxism takes the view of a planned economy, one that's this article is leaning towards and you are agreeing to it too. I'm being fair here, check what your saying, regulating investment is a Marxist view.

Good day to you sir.
 
+Charlie Hohn "The market has to operate under a set of rules. Otherwise it wouldn't exist. Changing them isn't automatically "communism". What a silly idea."

Regulating who can and cant invest is not just a set of rules, take a read on Marxism & Keynesian differences.
 
Shorter +Joseph Wise: Bah, crow tastes bad, even when I put jerk seasoning on it.

I'll be more gracious than you're being and accept your unspoken apology that I did indeed say that regulated markets are not free markets. I know you're apologizing because you pivoted from that claim to a completely different claim which has it's own problems.

Your new and shiny claim is that "True proponents of capitalism would argue that the only government intervention is through fiscal policies and none other. (Obviously some to ensure no theft, leave some security for the buy/seller but nothing else)"

Which of course is a different way of saying "...Markets need regulation" like regulation against theft and regulation for the appropriate use of police powers. We just disagree on the amount of regulation needed.

So, we already know you're a socialist, now we're just negotiating price so to speak.

I can confidently make that claim because it would take income redistribution to pay for these services that you deem necessary, and also because you're using my socialist internet developed with socialist, redistributive, winner-picking dollars at DARPA. I'm going to presume that you drive a car that's built to standards set by socialist, redistributive, winner-picking dollars at whatever the equivalent of the National Highway Traffic Safety Administration is in Australia and I'm quite sure that you use local products built by workers that are covered by whatever your Australian equivalent of Occupational Health and Safety Administration is.

So please, tell me again how a True Capitalist like yourself hasn't committed suicide in the face of such rampant anti-capitalist behavior, or at least moved to the Libertarian Paradise (TM) of Somalia? Surely fewer rules and regulations are better than more rules and regulations. Or is it because you're not, in point of fact, a True Captialist, but are in stead quite confused and are looking for easy answers.

And as for your isolated examples, big deal. My claim was that it "almost never makes sense to short oil", and coming up with a couple of examples of when it did makes no dent on it. You need to show a history of when it makes sense to short oil, which you failed to do.

The only thing I can come up with as to why you post crap like this is that your reading comprehension sucks.
 
Wallstreet is getting ready trading new born babies, to be born babies and all types of blood too. It is democracy whatever 1% wish they can sell.
 
+Roger Burgess Take it easy Roger, what you on about? Me failing to show you how shorting oil is profitable, I did that point exactly. $140 to drop to $40, any person shorting that would have made a mint.

Socialist?? What are you on about?

Please keep your posts short, I cant be bothered going through all that.
 
You know the "free market" everyone here is talking about, and whether it exists or not, whether wholly or partially or in some fairy tale kingdom of unicorns isn't really the issue here.

What really is at stake is the basic principle and and the model of supply and demand. Commodities and futures trading circumnavigate the model of supply and demand, and can and do artificially inflate the prices/costs of goods/services. Futures and speculation create volatility in the market. The hacks on Wall Street who screwed up the mortgage industry worse than a football bat, to the point of collapse, jumped from that frying pan straight into the oil futures/speculation fire. Everyone wants the highest yield on the shortest term with the least investment. What better commodity to choose than a finite resource that nearly everyone is dependent on? I'd bet my next paycheck that if all trades were cashed in at the opening bell today that there wouldn't be anywhere near enough barrels of crude to supply that demand! That friends, is not only morally and ethically corrupt, but IMHO, is (or if it isn't, should be) illegal.

The people involved in this fiasco don't want to work for their living, they want to risk and bet on fortunes. Who's capital do you think they're betting with? What if it doesn't work out? Well, the average person loses a bundle and those who created the mess will cry for bailouts...and more than likely get them...all on the dole of those who lost so much already; the average, working taxpayer. It infuriates me that We The People allow manipulating thieves and underhanded robber-barons to run the show, and when all is said and done, when the house of cards collapse around them, when they hightail it out of Dodge, who suffers the consequences? None of them!

Let's face it, no system is without flaws because humans (mostly the greedy ones) will find a way to manipulate the system to benefit their own vested interests. IMHO supply and demand works best. While there is a risk of gouging in times of shortages, it usually lasts short term and and is easier to rein in.

Futures and speculation can be beneficial and aren't totally evil in principle, except in the case of oil and those who are artificially manipulating it.
 
Now only way to meet our requirement only by solar and wind energy,...In india solar enrgy production will work well. but only our indian govnt should workout on this projects.
 
What about a tiny tax on each trade? 
 
I think Big Oil is going to try to gouge us and I have a right to keep running to work. Anybody can walk 5 miles to and from work, or bike 15 given 6 weeks to ramp up to it. It could save your life.
 
The only problem with a tax, tiny or otherwise, +Charlie Hohn , is that it's another tax. Last I checked, nearly 50% of my income goes to taxes in one form or another. Taxes would probably drive prices even higher, as the additional cost would be passed along.

The best solution would be to ban futures trading on oil entirely, but I don't see that happening. The next best option would be an accounting for every, single trade conducted...as in there has to actually be a barrel of crude or a gallon of gas for every piece of paper traded. And that would have to be based on actual production (what's pumped into barrels), not what anyone speculates is still in the ground.

On another note, has anyone noticed there hasn't been a peep from OPEC in years? It's no wonder either. They've never made so much profit and never would have been able to leverage a $137/barrel price. Yeah. We used to think it was awful when OPEC met and demanded a 30 cent increase per barrel!
 
+Joseph Wise said, "Me failing to show you how shorting oil is profitable, I did that point exactly. $140 to drop to $40, any person shorting that would have made a mint. "

But Joseph, that wasn't the statement I made. I did not say that shorting oil wasn't profitable. I made the claim that "it is almost never the case that it makes logical sense to go short on a non-renewable product." and showing me isolated incidents of where it does make sense does not run counter to the statement I made. Your reply runs counter to the following statement "it is almost never the case that it makes logical sense to go short on a non-renewable product." In order to dissuade me, you'll have to show a history of sustained profitability on short positions of oil. Here's the thing: You can't do that. You can't do that because oil speculation is positively rife with rent-seeking, to the point that there is almost no risk in taking a long position on oil giving you massively disproportionate profits for ridiculously little risk.

And no, I'm not going to dumb down my posts for your benefit, you're perfectly capable of reading up a few grade levels. If you can't handle dealing with complex topics in a complex manner, you should probably go to some other location on the internet, G+ is for dense, nuanced discussion. If you want trivially true and utterly useless statements disguised as reasoned argument, Facebook is at www.facebook.com.
 
the only problem with a problem with a tax being a tax is without taxes we wouldn't have any of the things that allow us to lead normal lives. Even the most primitive bands of humans pooled resources to attain what they needed, because bartering/the 'free' market doesn't supply everything we need. you may not like taxes, or death, or the fact that it gets cold in the winter, but that's part of life. I agree that sometimes tax money goes to things I don't support, it's a valid concern but it's not really relevant here.

But anyway I was talking about tiny, tiny taxes on microtransactions that would only cost a significant amount of money to those who do millions of trades a day. Disincentivizing that would most likely LOWER gas prices and solve a bunch of other problems too. Like you said, an actual halt to speculation may not be possible for now.
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