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| Government investigates oil markets |
| 2008-05-30 |
| I think eliminating speculation will solve this. Even OPEC thinks the natural price of oil should be about $65/bbl. The difference has to be made up by speculation or manipulation. I doubt the oil companies are stupid enough to manipulate prices. That leave speculators and manipulators outside the big oil companies. All this could be brought to a screeching halt if they would have to accept delivery of the oil and pay for transportation fees to their storage facilities or rent or something. Of course, all this is in my barely educated opinion, but sometimes that's what works best! ;-) Agency looks for fraud and price manipulation in crude-oil markets; crude has soared 42% since December. Federal regulators are six months into a wide-ranging investigation of U.S. oil markets, with a focus on possible price manipulation. The Commodity Futures Trading Commission on Thursday said it started the probe in December and took the unusual step of publicizing it "because of today's unprecedented market conditions." Crude prices, which on Thursday hovered around $127 a barrel, have risen more than 42% since early December. Gasoline prices are nearing a national average of $4 a gallon, up from about $3.20 a year ago. The commission said details of the investigation remain confidential, but announced a handful of other initiatives designed to increase transparency of U.S. and international energy futures markets. For example, the CFTC said it will immediately require monthly reports from institutional investors who manage funds designed to mimic the price of crude oil and other energy futures. The goal, the agency said, is to identify the amount of such index trading and to "ensure that this type of trading activity is not adversely impacting the price discovery process." The CFTC also said it has reached an agreement with its British counterpart and InterContinental Exchange Inc.'s Futures Europe to expand surveillance of energy futures contracts with U.S. delivery points, including the benchmark West Texas Intermediate crude, which trades on the New York Mercantile Exchange. "The implementation of today's measures will improve oversight of the energy futures markets to ensure they reflect fundamental economic forces of supply and demand, free of manipulation and fraud," the CFTC said in a statement. U.S. Sen. Jeff Bingaman, chairman of Senate Energy and Natural Resources Committee, earlier this week asked the CFTC to provide the committee with more information about its oversight of energy commodity markets. The New Mexico Democrat said he was concerned about increasing trading activity in U.S. crude oil taking place overseas and in over-the-counter markets. He also questioned the CFTC practice of classifying so-called "swap dealers," including large investment banks, as "commercial" market participants alongside traditional buyers and sellers, such as oil companies and airlines. "The practice of including investment banks in the commercial participant category calls into question the CFTC's continued assertion that noncommercial participants, or speculators, follow rather than lead oil price movements," Bingaman wrote in a letter Tuesday. Congress earlier this month voted to give the CFTC greater oversight of unregulated electronic exchanges, such as ICE, as a way to protect consumers and deter price distortion and manipulation. A Senate subcommittee investigation last year found that hedge fund Amaranth Advisors LLC, which collapsed in 2006 after losing more than $6 billion in natural-gas trades, had shifted its activities to ICE from the regulated Nymex to avoid trading limits, and that the "excessive speculation" raised homeowners' heating bills. Speculation has been cited as one on many factors contributing to surging petroleum prices, along with assumptions about new supplies, limited demand growth, possible supply disruptions overseas and the dollar's depressed value against other currencies. |
| Posted by:gorb |
| #7 If we're talking about the Pelosi/Reid government I'm sure it'll get straightened out. Heh heh. |
| Posted by: Hellfish 2008-05-30 22:42 |
| #6 Even OPEC thinks the natural price of oil should be about $65/bbl. Not that I'm an expert, but I have a sneaking suspicion that OPEC might be beginning to get concerned about a possible technological breakthrough that could leave them eventually eating their oil. They may be greedy bastards, but they ain't stupid. They know that in the long run, $135 a barrel is their death warrant. Mike |
| Posted by: Mike Kozlowski 2008-05-30 19:18 |
| #5 The market is taking care of the housing problem right this very minute. I'm looking at 1 for a possible rental. |
| Posted by: George Smiley 2008-05-30 17:55 |
| #4 The market in housing and credit in the USA has obviously failed, and some of the speculation in oil is a spillover from that crisis. Both of which were encouraged, enabled and exacerbated by government action. |
| Posted by: Nimble Spemble 2008-05-30 12:43 |
| #3 Ultimately I've got a lot more confidence in the market resolving this problem than the government. It has a far more effective way of dealing with speculators. There is no free market in oil, and there hasn't been one since the days of John D. Rockefeller. The "Panics" of the 19th and early 20th centuries were a very effective way of dealing with speculators and resolving such problems, but I really don't recommend them. The market in housing and credit in the USA has obviously failed, and some of the speculation in oil is a spillover from that crisis. |
| Posted by: Anguper Hupomosing9418 2008-05-30 12:08 |
| #2 Speculators provide important liquidity to markets. Perhaps you might want to consider that traders in the oil market can leverage on a 7% margin requirement versus 50% in stocks. Change this and the rules of the game might change. Also think about all those tankers Iran has tied up storing oil they can't sell and preventing other oil from reaching the market. Ultimately I've got a lot more confidence in the market resolving this problem than the government. It has a far more effective way of dealing with speculators. This list of government actions does not lead me to believe government will do much to lower the cost of energy. |
| Posted by: Nimble Spemble 2008-05-30 11:22 |
| #1 Speculation has been cited as one on many factors contributing to surging petroleum prices, along with assumptions about new supplies, limited demand growth, possible supply disruptions overseas and the dollar's depressed value against other currencies. I guess they hide overt acts and conspiracies to 'obstructing domestic energy extraction and development' under "new supplies". |
| Posted by: Procopius2k 2008-05-30 11:03 |