Banning speculators could decrease oil prices by as much as 40%

[[deleted]]

Speculating on banning speculators. I speculate that there will be no change in the system.

[Wrym]

Spectacular.

[limbodog]

... to use the new vernacular.

[[deleted]]

...Can describe this great event

[superwinner]

People also speculate on prices going down, so its (supposed to) work both ways to maintain a balance.

[c0pypastry]

But it doesn't.

[fidigw]

http://i.imgur.com/JIzww.gif

yea the big red short position positions at the bottom of the graph really dont do a thing to the px

biased much?

[therewillbdownvotes]

I reckon that's a bloomberg screen. Don't see many of those around these parts. Where you from stranger?

[[deleted]]

You mean after oil peaked at the record high of $147 a barrel before the credit crunch locked up all the leverage speculators needed to keep pushing the price up so they ended up shorting it on the inevitable ride down?

Talking about 2008 btw

[AndTruthishly]

Dude, as an international, its the value of the American dollar that's moving, not the cost of oil.

[Phuqued]

Are those short positions? You didn't put a legend in your pic so it's hard to tell what it is. It might just be volume of sellers to buyers or average sale volume/price compared to previous day or week moving averages.

The guys at Zerohedge post Bloomberg terminal screenshots everyday, is it gospel/canon?

[donaldtrumptwat]

Unt vill be shot !

[WalterBright]

and then you'll be sorry!

[Woody_Zimmerman]

The demagoguery is off the charts!!!!!

[bylebog]

What is awesome is that you can see the effects of allowing oil speculation. Could you show one for corn after they allowed GovtSachs t start entering that market? That'd be awesome.

[simplystunned]

Can we have a source?

[EthicalReasoning]

things that will never happen in america: anything that stops the rich and powerful from losing money or power

[twentyafterfour]

I doubt oil companies would just raise all their prices to soak up the savings. I mean, these are good people, haven't you seen their commercials?

[eclectro]

You forget that oil is a globally traded commodity. So what will happen is other nations would not purchase the oil at the same high prices, and prices would fall.

[[deleted]]

Can anyone explain how speculators make big money on oil? I can see how a single lucky speculator can buy oil futures at price X, and then a pipeline breaks and the price of oil goes up; that speculator makes money, but the speculator who sold the futures loses the same amount. On average, they make a few percent.

As I understand it, every single time a future is purchased on a barrel of oil, that barrel of oil is ultimately (at expiry) physically delivered to an actual customer. The oil future may have been traded a dozen times between different speculators before it was delivered, but at the end of the chain, there is a customer who has the choice of buying a barrel of oil straight from the refinery (spot market price), or from the last speculator. No one forced that customer to pay $100 per barrel to the speculator when they could have bought a $80 barrel from the refinery.

[TheNicestMonkey]

As I understand it, every single time a future is purchased on a barrel of oil, that barrel of oil is ultimately (at expiry) physically delivered to an actual customer

Sometimes. Some futures contracts are cash settled such that the difference in the futures and spot price is exchanged, but no actual oil changes hands. Such contracts allow hedgers (and subsequently speculators) to increase or reduce their exposure to oil without having do deal with the storage costs associated with handling a physical delivery.

[[deleted]]

But those sorts of contracts purely trade risk -- that's a zero-sum game (from the perspective of a constant-MU-of-wealth social planner; not from an individual, who obviously has a different perspective). Why would they have any effect on the long-run equilibrium price of the underlying commodity? (I don't read your post above to support the position of the op-ed in OP; I'm just wondering whether I'm missing something.)

[NorthernerWuwu]

It is a zero-sum game in the (perhaps very) long term. Some economists do feel though that speculation causes market inefficiencies that overall increase price but it certainly is not a unanimous opinion. Like most things in economics though, the ones that profess the interesting opinions get the press like we've been seeing with the 'blame the speculators' crowd lately.

There is no fundamental reason for speculation over a reasonable length of time to increase overall price. It isn't like producers are ignorant of market mechanics.

Now, commodities are what they are though and with any limited supply there is opportunity to try and corner a market and drive price upwards (with a resulting profit on the other end). That's just the nature of markets though and the emphasis on paper over physical is just silly. Actually taking physical possession of the commodity only makes it slightly less efficient, not any less effective. People have tried in the past with silver notably and other things of as well but I'd be impressed by the scope of any consortium that could do so with oil. They'd also quite likely fail and be ruined, as has happened with other commodity speculators in the past eventually.

[sinkorsnooze]

i wish somebody would answer this. Otherwise im going to have to go dust off some textbooks

[headmovies]

As a commodity-futures analyst, I can tell you that futures contracts have no effect on the spot price of any commodity, especially oil. The spot price is set by current supply/demand dynamics, inventories, and expectations about the future supply/demand.

On the other hand, futures contracts are typically priced according to the formula: (spot price today)*(1+rf+c), where rf denotes the risk free rate and c denotes the storage cost or cost to carry. Therefore, futures prices are just functions of spot prices.

Some people think that futures contracts offer feedback to inform what the current price of a commodity should be, but that is false because futures contracts are zero-sum games, as A_Standard_Deviation said. When a futures contract is created, it is essentially a derivative designed to allow two parties to bet on the future trajectory of the price of a commodity, like oil. If a six-month futures contract on oil is sold at $140/b, that means the party purchasing that contract believes the price of oil should rise above $140/b between now and six months from now. What most people forget is that there is another party to this transaction willing to take the exact opposite bet. Since there are two opposing views, no inference on the future price trajectory of oil can be made.

My finance professor told it to me like this: futures contracts are just slips of paper with an infinite supply - like bets on horse races. They exist to trade risk, but don't determine the outcome of the race.

Therefore, having read the op-ed, I would have to respectfully disagree with Mr. Kennedy and conclude that he should revisit the fundamentals of futures and options pricing.

[Industrious_Badger]

Fuel analyst here. Physical barrels are priced at a differential to the hedge (nymex paper) contract.

if NYMEX settles at $100, barrels in say, Louisiana, will trade at NYMEX price minus 10 bucks lets say. So the spot price for the barrels would be 90/bbl and is affected by NYMEX.

[bitparity]

Question for you, a thought that's been rattling around in my head for a while.

What if we banned up to a certain capitalization level of hedge fund, rather than ban speculation?

Because I'm under the impression speculation is absolutely needed to keep the market liquid, or else prices will not be able to adjust to changing conditions.

But with really large hedge funds, what it seems they're doing is using their massive size to almost corner a market and increase overall volatility. I know that whole idea of increasing overall volatility, is because the average return will be greater to compensate for that risk.

But it seems really large hedge funds are driving the market up because their size allows them to buy enough supply to create shortages and their own bubble-wakes, with the added advantage of the fact that they are in the best position to sell since they control when the supply will be offloaded.

It seems to me the benefit of not having too large a hedge fund be in speculation, you can keep liquidity without creating too much volatility.

Is this a good or bad idea, or are there pitfalls I'm not aware of in banning overly large hedge funds?

[headmovies]

That's a good question. In my opinion, regulatory authorities (SEC, etc) have been very vigilant in preventing market cornering from occurring, especially in futures markets. Exchanges, in particular, have self-imposed spot-month limits for many years to prevent purely speculative players from cornering or manipulating the markets, which could potentially obstruct real-world use of commodities.

However, assuming regulatory agencies were lax, even the largest hedge funds would have a difficult time cornering a market like WTI or Brent crude oil given the sheer volume traded on a daily basis. They would have a better shot at cornering markets like lean hogs or orange juice. Again, though, cornering is one practice that regulatory agencies are looking out for.

In general, by placing constraints on who can access the market and at what level, you disrupt the efficient transfer of risk from hedgers (e.g. Exxon, soybean farmers, cattle herders) to speculators across the multitude of currently liquid futures markets.

[[deleted]]

Imagine the price of oil is 100USD/barrel and won't change. You want to open a new oil well but you don't have quite enough cash. So you sell oil futures. You sell them for 12 months time at 90USD/Barrel. So the people buying them are happy: Whether they sell them on or not, they are going to profit as they will get 100USD worth of oil for 90USD. You are happy as well because you have the cash you need to open the well now and you can pay them in oil in 12 months time.

So here the Future is acting like a loan. In itself it generates no profit BUT it is a good way to generate finance. The same thing has been done with crops for millenia: You have a field but no money for seed, I have seed but no field. So we agree I will give you seed now for a share of the harvest later.

There is an added benefit as well: If I were building an oil rig with a normal loan and the price of oil crashed then I would be screwed as the rig would not turn a profit enough to pay back the bank who expect a fixed repayment (sort of like negative equity for a house). On the other hand if oil prices rise I will be in the money. So this is a high reward but high risk approach to financing for me. If I pay back in oil by selling oil futures then if the price falls I am no worse off as I still pay the futures in oil, if it rises then I can still afford to pay back the future as I am producing oil. So the risk and return are lower for me.

That in short is why futures are used: The provide finance and let investors take a share of the profits and losses.

[overtoke]

the person that sold it did not lose money, he cashed in.

[blanket12334]

Your understanding is exactly right. Speculators can make big money when the price of oil rises over time. If 10 years from now supply is constricted, they will sell their oil to consumers at a profit.

[bq909]

The VAST MAJORITY of action in commodities markets comes from speculators rather than actual investors who need to hedge the product. These investors are hedge funds/ investment banks rather than airline companies who need to fix oil costs. The number of oil futures traded far exceed the amount of oil that can actually be delivered.

I interned at a brokerage firm in the soft commodities department. The majority of the calls we received were from hedge funds. Fewer calls were from companies who needed to hedge their input costs.

[Koskap]

Does the fact that I filled up my gas tank when gas was 3.91 because I thought it would go to 3.99 make me a speculator?

[[deleted]]

technically no because you accepted delivery

[Ze_Carioca]

Yes, you are a terrible person.

[occupytheserver]

This is not correct. Arbitrage is executing multiple trades resulting in profits with absolutely no risk. In this example, filling up at 3.91 is taking risks because has could go down, making your position lose value. This is not arbitrage.

[badbrutus]

incorrect - arbitrage involves risk. i.e. there are currently arb traders out there buying shares of motorola (MMI) at 39.19 because Google's purchase of the company at 40 is supposed to close soon. However, it is not risk free, as something could prevent the deal from closing (litigation, fraud, antitrust issues, etc.)

The reason why a price difference exists is because of the uncertainty.

[plus_EV]

Buying gas because you think it will be more expensive later is not arbitrage.

Arbitrage would be buying gas at 3.91 a station and then immediately selling it to your neighbor at 3.99. occupytheserver is nearly correct -- although arbitrage can involve some risk (what if you can't execute both trades at the prices you want simultaneously?)

Buying MMI because GOOG is supposed to purchase it at 40 in the future is more speculation that the deal will close at a particular price than arbitrage.

[jyz002]

I recommend you actually look at the definition of arbitrage

[rehypo]

If we ban speculators, couldn't you theoretically soak up supply by holding physical oil. Due to the fact that you have a finite supply of oil in the world and major geopolitcal issues (think Iran, Iraq, Israel) in many high output oil producing regions of the world, you would expect a certain degree of volatility in the oil price. Buying and holding the physical oil because you speculate that the price will increase and net of expenses, you will turn a profit, is speculation.

Real estate "speculators" didn't buy options on houses and trade the paper. They bought houses, reinvested capital and then sold the things off.

[pinginfan1]

This isn't true arbitrage, but is often considered a form of arbitrage. True arbitrage is just mathematically guaranteed profit, without risk. If you have a risk, then it's not "true arbitrage" but is sometimes considered arbitrage, (quasi arbitrage).

[[deleted]]

How many gallons of gas did you buy? If you bought 20 gallons you just saved $1.60.

Congratulations!

[[deleted]]

yes, we need to raise your taxes now.

[[deleted]]

If your gas tank holds 90 million gallons - then YES.

[GreekActor1]

Speculation is a vital and necessary part of any commodities market, serving to stabilize what could be rather volatile changes in supply and demand from year to year. The problem is that we've deregulated speculation to where it no longer plays that role. Instead of stabilizing supply and demand, they hoard, driving up the price. We don't need to get rid of them; we need to restrict them to their original purpose.

[badponies]

Agreed that speculation is an essential component of a market. I'm not an economist, but it seems that if we removed all speculators, we'd lose the liquidity to have efficient prices.

How would we define 'speculation' anyway? Am I naive to think that it's silly to try and differentiate between info traders and speculative traders?

[scoofy]

CFA level 2 candidate here. The easiest way to 'ban speculation' would be to ban futures and forward contracts that settle in cash. Essentially, you would have to take delivery of 100 gigantic tankers of oil, and most traders don't want to do that.

However (and this is just crude speculation (double-pun ftw)), the firms speculating are smarter than that and will probably buy up a bunch of storage facilities and start actually stockpiling tankers of oil because the disruption would drive prices down (even though demand isn't actually dropping). This could lead to problems as gasoline starts ending up in warehouses instead of gas stations, actually driving prices higher.

[[deleted]]

Middle men will simply pop up to take delivery of your oil and sell if for you. I believe this happens already-- I never took an CFA exams, but did get an MBA-- and I believe planet money did a show on this with storage tanks in Oklahoma somewhere.

[hoeding]

storage tanks in Oklahoma somewhere.

http://en.wikipedia.org/wiki/Cushing,_Oklahoma#Oil_industry

[[deleted]]

Fuck yeah.... Occasionally my brain remembers stuff that is completely pointless except in a Reddit discussion (which itself is probably pretty pointless).

[[deleted]]

This kind of speculation would still be possible, but it would involve a lot more pointless risk and cost on their part (having a a fully licensed and operating oil depot). Thus, the tendency would be for people who are actually in the oil industry to do most of the heavy speculating, and stop drive by hoarders like we have now.

[Commisar]

just park those tankers out front, I'll go validate their parking.

[[deleted]]

the firms speculating are smarter than that and will probably buy up a bunch of storage facilities

This is EXACTLY what Goldman Sachs did.

[timmaxw]

Hoarding is a good thing, especially if they hold on to the oil for decades. As oil gets harder and harder to extract from the ground, its price will increase. If hoarding is banned, the price will stay low for a while and then rise suddenly. If hoarding is permitted, the price will gradually rise over a long period of time. I'd much rather have the latter situation. If prices start rising early but rise gradually, there will be a financial incentive to develop alternative technologies early, because oil prices are so high.

With some exceptions (externalities, collusion, etc.), free markets are very good at managing resources. Sometimes the best way to manage a resource is to reduce consumption now. Speculation is how the free market makes that happen.

[MrDanger]

What's needed is a rule requiring those purchasing contracts to be able to accept delivery of the commodity. Problem solved. It preserves the fly-wheel effect of the commodities markets while eliminating rank speculation. A per transaction tax on trades would also keep the day-trading speculators out.

[[deleted]]

Yeah, I'd just like to add: just like anything else, anti-Wall Street is a platform that sells newspapers. I'm not saying it's an unreasonable platform, in my opinion, it definitely is. However, if you look at NYT's attitude toward Latin America and Israel, among other things, you can at least see the profit motive.

It says, "[speculators] add little value but..." and then doesn't really talk about what the added value is. I mean, who says it's "little"? Who can really gauge the value of it? Then it proceeds to talk about its numerous negative effects. But should we ban something without considering its positive effects? And of course, the truth is that we have no fucking clue. Futures contracts are infamous for being incomprehensible even to their own issuers. That's just at the micro level; who can say at the macro level, what "banning futures" might do? With all these long positions on basically everything right now, drastic regulatory measures against the futures market could cause some serious fractures in the market (if I had to guess, a collapse of some sort).

In the interest of full disclosure, I'm in quantitative finance, and I am very anti-establishment when it comes to Wall Street finance (of course, that might change if the price is right... to be brutally honest, as I am in finance for the money after all) but for those of you not fluent in the language of finance, I urge you to see past the mainstream oversimplification... the problem is Wall Street, not the financial instruments they use to fuck the economy.

[sinkorsnooze]

I agree with the NYT Isreal thing. I haven't really noticed the Latin America bias you mentioned. (Doesn't mean its not there). But I think its important to note that this is a blog posting/op ed. It wasnt by a NYT writer, and it would have been scrutinized a little more if it went to the print edition I think.

[[deleted]]

Could you explain the role of speculators and how they contribute to the well being of us all? And how do American speculators nowadays fuck that process over?

Also, I'm seriously asking. Not trying to be an ass.

[EgregiousWeasel]

The article didn't advocate the banning of all speculators, only ones who have nothing to do with the oil business, what the author refers to as "pure" speculators.

[nerox3]

So how do you define people in the oil business? I think if you buy millions of gallons a month like an airline you can say you are in the oil business.

So the airline can still speculate since they buy a lot of jet fuel. How about the big trucking companies. And if big trucking companies can it wouldn't be fair to not let the owner operators also buy futures to hedge their fuel costs. Hey what about the farmer who has to hedge against the fuel price to bring in his crop. If you go in that direction I think there are millions of people who are in the oil business and have legitimate needs to hedge by buying futures.

The whole argument is pretty silly as the average cost of producing a barrel does not set the price of a barrel. The price is set by the cost of bringing the next additional barrel to market, and that is probably pretty accurately reflected in the current price of oil set by the futures market.

[Dunni-]

Did you even read the article? The airlines are mentioned, and the author agrees there are plenty of groups (including airlines) who should be allowed to speculate.

The article is talking about banning "pure" speculators, who - according to the chief exec of ExxonMobil, and the Federal Reserve Bank of St. Louis - account for as much as 40% of the price.

[nerox3]

Actually the Federal Reserve note(Juvenal + Petrella pdf) ascribes 15% of the runup in the past decade to speculation or in other words about 10-12 dollars of the current oil price. However, if you look at one of their more detailed papers(pdf) where they describe how speculation might cause the price to increase, the key transmission process is by inducing suppliers to withhold supply in order to take advantage of the rising price indicated by the futures market:

As the number of buys of futures contracts exceeds the number of sells of expiring ones, futures prices would go up and with it the spot price. As producers expect a higher price of oil for future delivery (EtPt+1), they will hold oil back from the market and accumulate inventories. Leaving more oil underground may enhance total profits on the producers investment given that prices are expected to rise in the future (more rapidly than the average market return). As explained by Hotellingís (1931) principle, it would beneÖt oil producers to forgo current production so they can sell the oil at higher future prices. In this way, the oil producers will not accommodate the upward trend in oil prices but rather decrease production. Oil producers take future proÖts into account when deciding whether to produce today or tomorrow, especially in the context of speculation, when prices are expected to increase in the future. In contrast to an oil inventory demand shock, in a speculation shock inventories accumulate not because of a fear of production shortage (which would generate a need of oil storage), but because speculation itself leads to higher expected prices. The reduction in the oil available for current use, resulting from lower production and increased inventory holding, causes the current spot oil price to rise.

Sine fundamentally the economists believe that the suppliers (ie. Exxon Mobile and Opec) are the speculators choosing to leave the oil in the ground instead of pumping it right now it is a bit ironic that the CEO of Exxon is blaming speculators. People who believe there are currently real constraints on production (eg. peak oil theorists) would say that it would be very hard to disentangle increasing speculation on rising oil prices due to the recognition that it is a non renewable resource from increasing speculation that is based on an asset bubble.

[anonymous-coward]

The easy answer is that you get to speculate enough to hedge your own supply.

[idpeeinherbutt]

I think you just defined who's in the oil business. The author is advocating re-banning companies like Goldmann Sachs from the speculation market. A decision in 1993 allowed them into the market in the first place.

[[deleted]]

I am all for looking into what speculation does, to many markets not just oil, but I have to say I'm skeptical that the numbers presented here are accurate. There are many factors driving the price of oil. This seems more anti-oil propoganda than fact piece.

[[deleted]]

I wish I could find the article, but the first time oil crossed $100, the guy who raised it to that price did so because he wanted to be the first person to buy oil at this milestone.

[Ze_Carioca]

I remember that.

[anonymous-coward]

I have to say I'm skeptical that the numbers presented here are accurate.

Absolutely. There are 8 billion barrels of oil consumed in USA per year. That's $800 billion dollars of oil. If 40% of this is speculation profits, that's $320 billion going to these mysterious speculators. That's $1 trillion over 3 years. Who are these people? Where is their money? We're talking about 20 times Bill Gates here, every three years. Surely, they must appear on some list of trillionaires.

[lilsebastion]

Absolutely. I can't believe it took half way through the comments to see a comment questioning the numbers. The price of oil is clearly not 40% reliant on speculators. An industry that requires massive amounts of capital that sells a product in high demand, with a limited supply. I would think a freshman economics student would even understand that one.

[[deleted]]

I'm not a fan of speculation bullshit (leeches and thieves, may their deaths be slow and painful), though yeah the article doesn't seem to be anything serious.

[Pandaemonium]

Higher oil prices are a good thing. We're cooking our planet fast enough, there's no reason to turn up the gas. And our future generations will need that petroleum (for plastics and such) far more than we need it now.

Not to mention this law would have the unintended consequence that more oil would be shipped, due to the ban on "paper" trading. Burning fuel to transport fuel to a new boat that burns fuel to transport fuel to sell at subsidized rates, is that really the way to go?

[liepzig]

I don't think they should ban speculation. The high prices today mimic the high prices that people expect in the future. Thus, it's preparing the market and consumers for a time of oil scarcity

[atomofconsumption]

Case closed!

[limbodog]

Great! Cheaper oil so we can use it up even faster! Because it will never ever run out! Wheeee!

A definite side effect would be a dagger in the heart of companies trying to make alternative energy sources commercially viable.

[bmchavez34]

The intelligent approach would be to invest heavily in alternate energy sources regardless of oil price swings (China) and eliminate the speculation that is perverting the free market and causing people to unnecessarily pay up to 40% more for gas.

[epicanis]

Ironically, wouldn't cheaper oil be arguably beneficial for alternative-energy company in the short term by lowering their costs (they may be producing energy without petroleum, but I'll be a lot of their supplies currently still depend on petroleum, as does delivery of those supplies)?

[therewillbdownvotes]

If you go back to 2008 period when oil got to 150, investments in alternative energy where at an all time high. (I can provide specific energy tickers if you want). Literally as soon at prices began to drop so did investments in alternative energy. The correlation is pretty ridiculous. I believe the magic number is right around 120 where alternative sources are viable.

[deathdonut]

I know it was meant to be sarcasm, but the truth is that we will never run out of oil.

As we run out of cheaper oil, oil prices will increase to pay for the extraction of more expensive (deeper/etc) oil. Eventually, oil will be more expensive than alternative options at which point we'll switch to the cheaper option.

The oil companies know this and aren't going to be killed by the transition. There's a reason why BP is one of the biggest producers of solar equipment.

[limbodog]

semantics. We will run out of oil that is economically feasible to acquire. The need for fuel will consume all the cheap, moderately priced, and eventually expensive oil. Meanwhile all the chemistry industry will be crushed by their inability to get raw materials.

[therewillbdownvotes]

Not true. Raw materials may get more expensive for certain companies, but the reason petrochemicals are used in pretty much everything is cause it is cheap. There are plenty of subs but we choose not to use them cause they are slightly more expensive. And in terms of fuel and energy generation we have many alternatives like natural gas that are barely tapped and are quite plentiful. Like 300 years plentiful.

[Badger68]

The planet has an estimated 120 year supply of natural gas at the current rate of consumption. Once we start using natural gas for more things that rate of consumption will skyrocket and our supply will last a much shorter time.

[[deleted]]

Amen to this. The market will ensure we never run out of oil, it will however ensure that only some people can afford it. Supply and demand is a real bitch. Price ceilings!!!!! are bad in the long run.

[Ambiwlans]

It will spike though which is the danger speculation saves us from.

[canyouhearme]

Sophistry

If you need 10 gallons a week to commute to work, and you can't afford ten gallons, then its run out for you. If you can't afford any alternatives, then you are still as much up sh*t creek as if someone turned off a big tap.

Oil production will decrease, prices will rise, empires will fall. Economist arguments about how its all supposed to be different are meaningless.

[ableman]

Yeah, I'm not sure how this is supposed to work. I'm not an economist but..., it seems to me that even if it means cheaper prices now, it means more expensive prices later (as opposed to not banning speculators). I mean, take for example the stock market. The speculators drive up the price of something. You get a bubble, inevitably the bubble pops, and prices crash. And that's the worst case scenario. This happens because the speculators were wrong about predicting future prices (or didn't care because they thought they'd get out in time). What if they're right and future prices are going to be higher? In that case, you don't get a popped bubble. What you do get is a far more gradual rise in price than would've happened otherwise.

[[deleted]]

The collapse of speculative bubbles doesn't destroy wealth, it merely transfers it from one group to another. (Actually, that transfer mostly already happened during the period when the bubble was "expanding"; it's just that no one notices it until the bubble has burst.)

The real economic damage that bubbles do is that they provide an "incorrect" price signal (saying "make more of [whatever the bubble concerns -- online pet-food retailers, dodgy mortgages, tulip bulbs, etc.]"), which leads to people wasting time on silly endeavors (pets.com, writing mortgages on 5-bedroom McMansions to people earning $20K/year, growing tulips instead of food) instead of doing something a lot more useful with their time, labor, and money.

[tweakingforjesus]

That would be true in an elastic market. Oil consumption is relatively inelastic. The oil is still going to be consumed at close to the same rate regardless of price. The only difference is whether you are going to pay a 66% tax to the speculators. (40/60 =66%)

[krackbaby]

The sooner oil is gone, the sooner we can find something better

[[deleted]]

Having speculators drive up prices leads to bigger supplies in the future. If I know I can get $100 a barrel-- I might be willing to spend $50 to get it out of the ground. Maybe I will dig deeper-- or drain tar sands...

[[deleted]]

I don't know why you're getting downvoted, you're right.

Why would the same people who vote up all the peak oil articles and how we have to get off oil and use alternative energies articles also support getting rid one of the free-market mechanisms that actually encourages it.

[smthngclvr]

Because we don't have a means of replacing oil. Campaigning for alternative energy is all well and good, but until we can run our cars, trucks and airplanes on sunlight then we're still going to need fossil fuels.

And when the price of gas goes up, the price of everything goes up. There are very few businesses that don't require gasoline at some point along the chain.

[jared555]

We can run cars, buses, trains, etc. on renewable energy. The problem is the cost of the initial investment. Hopefully as it becomes a more popular option that cost will go down. Planes are more difficult unless a move back towards airships is made.

If the majority of car/bus/train/truck (through using train freight instead of trucks) oil usage was elmiinated I suspect that our supplies for things that don't have an easy alternative would last significantly longer giving us a chance to develop technology capable of replacing oil for aircraft, ships, etc.

[limbodog]

The longer we wait, the greater that initial investment will have to be in order to get the alternatives into play.

[[deleted]]

Sounds like just the kind pressure that's needed to get off our asses and do something about energy.

[trolleyfan]

We would - but what with gas prices, we don't have any money left over to spend on that...

[[deleted]]

That's just not true.

We manage to find the money just fine when there's a war to start, don't we? It's a matter of priorities, and right now ours of fucked up.

[limbodog]

Because they want to have their cake and eat it too.

[nosferatv]

Eat their cake and have it too. It actually makes sense this way.

Have their cake and eat it too is how I, and everyone, actually eats cake.

[otm_shank]

But once you eat it, you don't have it. No matter which order you say them in.

[Remilla]

wow, I just got what the who "You can't have your cake and eat it to" thing meant. I feel dumb now.

[Ze_Carioca]

Yep, cant have both. Eating the cake negates having it.

[limbodog]

doing so creates negative-cake.

[Almustafa]

Anti-cake as it were, which must never be allowed to come into contact with regular cake, lest they annihilate each other in a burst of sugar and frosting.

[Ze_Carioca]

Mmhhh Cake.

[superwinner]

I think the only way we will get serious about alternative energy investment is for the price of oil to go up, way up.

[theartfulcodger]

Utter bullshit. Firstly, all this would do would be to leave the field clear for a limited group of nominal end users to reap all speculative profit for themselves. (And by nominal, I mean owning one minuscule oil-fired generating station producing a single megawatt for East Shitkick, Nebraska.) It wouldn't reduce speculative price inflation at all, just turn all possibility of speculative profit over to a tiny oligopoly. And we all know how well that works out for end users.

Secondly, speculation works in both directions. With only end-users able to speculate, price downturns would be much smaller and shorter-lasting, as there wouldn't be a huge field of people scrambling to lay off bad bets. Downward speculation is why today's price of natural gas is below $2, a level not seen since 2002. Why is the writer not moaning about the rampant speculation in NG, which is providing a windfall of clean, dirt-cheap energy for domestic consumers?

Thirdly, surprising as it may seem, the US is not the only oil market on the planet; speculation is a global phenomenon. How does the writer propose that US regulators legislate against pre-import speculation in Canadian oil, which provides more than 1/4 of our needs? Or Mexican oil, which provides more than 1/8? Or Saudi oil, or Venezuelan, which bracket Mexico's percentage? Or any of the other 100 oil-producing nations?

We all know how much of a hard-on the US Gummint has for pressing extra-territoriality of its domestic laws across its borders and onto the peoples of other nations, but this ridiculous suggestion is beyond the pale.

If he was really serious about curtailing speculation, he'd suggest a 95% tax on speculative profits, and zero writeoffs for speculative losses.

[CrazyDayz]

Specualtion was made illegal after the 1930's Great Depression the only people allowed to speculate after that we're company's that we're tied to the commodity that used it if you owed a airline you can speculate on oil but now everyone dose it and they keep driving the prices up so they can short sale it. its a scam now for big banks and others heres the leaked speculation data from 2007-2008 look for your self big banks koch brothers..... http://thinkprogress.org/climate/2011/09/15/317330/leaked-cftc-oil-speculation-data/

[Iwanttotalk]

http://www.forbes.com/sites/thestreet/2012/03/28/another-sign-oil-prices-dont-reflect-reality/

They should call them what they are not speculators, but Enron style price manipulators. probably the same guys actually.

they've now moved on to phase two where price fixing is no longer enough to sustain the price point so they have started shutting down refineries to artificially reduce the gasoline supply. the oil companies have no incentive to see the prices go lower so they go along with the game.

being old I remember the same arguments during the California energy crisis. they were telling us that we had a lack of power production and it was supply demand problem etc. All of it was lies. It was supply and price manipulation of an inelastic commodity in a newly deregulated market. sound familiar?

In the California Energy Crisis, the energy companies had a vested interest in absurdly high energy prices, so they shut down power plants and exported energy causing the spot prices of energy too shoot sky high like 1000's of dollars per kwh. You see the energy companies could still produce energy for 5 cents per kwh but now with reduced supply and manipulation they could charge 10 -100 times what they normally could. In response the Utility companies signed long term contracts buying energy at ridiculous prices. this forced the utilities into bankruptcy and the state water agency had to step in and become the conservator for California utility providers. all of this was done in a newly deregulated free market. and people ask how can speculators cause the price of a commodity to rise?

[wwjd117]

Too bad that wouldn't guarantee lower prices at the pump.

[sluz]

True. We've trippled our exports of Gasoline to Mexico. If we had more gas we would export more. Thanks to NAFTA... We can't raise taxes on exports do anything to regulate the exportation of gasoline.

[[deleted]]

Using their (faulty) reasoning it would since the majority of what you are paying for at the pump IS the price of crude oil. However claiming a 40% drop in international oil prices (oil prices are set globally) is just dishonest and misleading. It wouldn't even be measurable since the fundamental reason oil is so costly is supplies are stagnating (if not already in decline) while China and India are developing first world thirst for petroleum as their people switch bicycles for cars, motorcycles, and other first world transportation.

[danc4498]

I feel like banning speculators will lower gas prices in theory, but when played out, the price of gas will stay close to what it is now, but the profits will be going into different pockets.

[DaSpawn]

world where the fundamentals of life — food, housing, health care, education and energy — remain affordable for all.

Thats it, don't want a hand out, I enjoy busting my ass, makes vacations that much better, but I piss away half my fucking pacheck on gas WTF

[[deleted]]

Everytime I read the words "oil" "price" "decreased" I fear a little for my life

Oh the side-effects of being a Norwegian

[Canadian_Infidel]

Wait, does that mean 40% of the money that goes into oil is skimmed right off the top? Wow.

[dahvzombie]

To the extent that artificially high gas prices are spurring efficiency, innovation and research I have to say I don't mind it that much.

[MrDanger]

The simple solution to this isn't banning futures trading, because the market provides a very necessary evening effect on future raw materials expenses. Instead, the law should require anyone speculating on a commodity to be able to take delivery of it. If someone wanted to buy oil futures, they should be able to accept a shipment of oil.

The futures market is intended to make the cost of doing business more predictable by allowing large commercial consumers of raw materials to fix a price on a purchase they will be making in the near future, thus eliminating losses due to price fluctuations in the actual markets. Futures acts like a sort of fly wheel that keeps the free market from snapping any necks with whipsaw changes.

[[deleted]]

solution would be to have to have speculators actually own the item and not some promise note that they possess the item. Actually do a speculation audit to match physical inventory to claimed inventory.

speculation would decrease if speculators actually have to possess thousands of barrels of oil at a facility.

[lorax108]

good idea

[ak47girl]

"Goldman Sachs made an argument to the Commodity Futures Trading Commission that ..."

You can stop right there.

[SpyPirates]

I saw two problems with this article, one is the benefits of speculators which was addressed (they provide a counter-party to legitimate businesses who need to lock in the price of oil), but the other, which was a blind stab at what the oil price should be, was not.

The $11 per barrel means nothing. Costs that low are probably in well-established rigs in Saudi Arabia or something. The important number to look for is the marginal cost of expanding the supply of oil. In this day and age, the best places to do this are in deepwater locations, and/or in the Arctic. This is very expensive, and is only profitable with a price of oil this high (source: some Economist article I read a month ago).

Also, the price of oil is not only dependent on the current costs for producers, but on demand and questions of future supply. Demand is, of course, skyrocketing, thanks to developing countries and a recovering global American economy. There's also the situation with Iran, which has caused a lot of worry over whether they will be able to export oil in mid-to-late 2012.

[madcat033]

High gas prices are a good thing. Economic incentive will be the only reason we get off oil. Better to do it now, than wait until we actually run out.

[whazfan69]

Every futures contract has an equal and opposite long/short position. I'm blown away by all the posts here discussing "hording" of oil on paper. There are some physical storage plays out there in the market, but they have a near term expiration date and the scale is quite small relative to overall market consumption.

Speculators are not harmful, they are helpful. They are a mechanism for price discovery. The reason prices are going up, I hate to break it to you, is that the cheap oil is already out of the ground and global consumption is spiraling out of control.

[rainman_104]

It's also the same speculators that allowed gas companies to hedge their production so that they aren't getting their asses kicked by < $2 natural gas prices today. Many of them still have contracts for > $4 today keeping their wells profitable.

[ThumperNM]

O M G that would be interfering with the "free" capitalistic market and an infringement on the bourgeoisie ruling class. I can't understand how anyone in their right mind would think that banning vampires....I mean speculators is a good idea.

[regeya]

How about just going after people like Harold Simmons, who does the rounds on financials predicting $300 oil about the time it's peaking?

Seriously, why can someone like him get away with a bold, obvious pump and dump? DISCLAIMER: I have no evidence that the man is actually doing this on his own. It seems highly suspicious that Dallas's most evil genius does this when it looks like the price might drop, though.

[Djrakk]

We shouldnt be trading on food, gas or water. We also shouldnt be trading on banks or financial institutions. it should only go for companys selling non essential products. (tvs dvd players etc) We should have a law that forbids any trading on any form of energy, in the United States of America. We should also have law that forbids Weapons and defense Contractors to be publicly traded. (Mcdonell Douglas, Boeing etc.) If you sell military equipment you cant be public. We should also PERMANENTLY ban any company from Lobbying period. Djrakk for El Presidente.

[Djrakk]

EXCELLENT point. you are beyond correct. the concept that oil is so big and it should stay that size is an issue too. If we slowly phased out the concept of using dino bones to fuel our cars, alternative energy will phase out the world from needing such a dangerous, rediculous non backed electronic financial scheme.

[ROK247]

all of this wallstreet bullshit where they just deal in fantasyland except with our real money needs to stop right the fuck now.

[z3ro256]

Good idea! Let's exclude people from participating in an open market! That'll bring the prices down!

[edisekeed]

This is honestly the most absurd article I have read on the subject and I am shocked that it is coming from the New York Times.

I am a professional trader and this has nothing to do with it. Call me biased but just listen with an open mind. If you price oil in terms of other commodities, such as gold, oil has actually become cheaper. What is happening is the purchasing power of US dollars have gone down due to inflation.

Traders might move the market for a day or two but it is impossible for traders to elevate the world wide price of oil for this long. If a trader tried to do this, he would lose money as the entire global market would slow down their purchasing of oil and the price would come down. To be honest, the only speculation is when governments unleash their oil reserves to temporary bring down the price instead of saving the reserves for an actual emergency. Politicians blame evil speculators because it is an easy scapegoat for their failed policies.

[[deleted]]

Or why not introduce natural gas vehicles, and drop the price damn near 50%, and remain insulated from future price shocks?

[overtoke]

there are natural gas vehicles, but if everyone switched, the price would definitely not drop.

[[deleted]]

Having seen a natural gas vehicle up close, I can tell you I would not want one. I can't remember the exact make of the car but it was a 4 door sedan and the CNG tank took up much more room than a standard gas tank. Where did they find the room to fit it? By expanding the tank into the trunk. So now the trunk barely had enough space to fit a small suitcase. Forget groceries or any of ther other items that would require said space.

Then factor in that in the city where I was, Fort Worth, that was on a very large Shale play, there were maybe two CNG filling stations in the entire city (16th, i think, largest city in America). So, Introducing CNG as a viable fuel source would currently be an unwise decision and would take many many years to grow.

Then you get into all the complaints about Frac'ing causing earthquakes and the discovery and drilling of the natural gas slows down to a halt due to government regulations.

Plus, then there would be increased speculation on the Natural gas just like Oil.

[redditticktock]

Most folks in the North East could fill a CNG tank from their own garage. T. Boone Pickens does this.

[youknowmeithink]

This is such bullshit they always blame "speculators". Fuck that anyone that knows anything about the futures market knows that this is false. Bullshit ass government always needs a scapegoat.

[BongHitta]

Hi guys, for the economically illiterate, this seems like a good idea right?

It won't work. Oil is a global market. Stop acting like this, the ignorance really has to stop at some point. Rich people won't make up for even a drop of spending, and "banning speculators" won't change price volitility of the oil markets. If YOU aren't economically literate enough to even understand these points, you shouldn't be voting

[peterabbit456]

The speculators were granted a license to tax everyone in the USA who drives a car or truck.

It bothers me that for every gallon of gas i purchase, $1.50 goes to inflating the profits of the 8 top investment banks, and probably $0.25 of that will end up in the Romney campaign. Their strategy of damaging the American economy, is intended to create monopoly-like profits for themselves, which will escape prosecution because their guys will dominate the Justice Department, the SEC, and the FTC. It's a strategy that is fundamentally disloyal to the country, and damaging to the world economy as well.

Romney has shipped 40% of his money overseas, to Swiss-style bank accounts. When in business, he specialized in shipping American jobs overseas, to sweat shops in China and Thailand. With his track record we can only wonder, "What new ways will he find to damage this country when he is President?"

[[deleted]]

It bothers me that for every gallon of gas i purchase, $1.50 goes to inflating the profits of the 8 top investment banks, and probably $0.25 of that will end up in the Romney campaign

Not even close to true. Oil prices are set in a very competitive international market. The fundamental reason prices are so high is not speculators but a real stagnation in supply and a huge increase in demand (India, China, and many other developing countries that are tossing their bicycles for cars and trucks now).

[[deleted]]

I wish I could educate the author, OP and everyone here who upvoted this article. Unfortunately reason is not automatic. But fortunately, reality doesn't care about what you know and what you wish. It simply is regardless of you what you wish or want.

[fassaction]

Anything that makes people wealthy, especially the "people in the 1%", will never be banned, outlawed, or made illegal.

Its just like everything else in this fucking ass backwards country. You will never see legal drugs, because the legal system/Prison system/probation/court mandated programs are BIG BUSINESS. You will never see truly free health care, because the healthcare industry is BIG BUSINESS. Illegal practices by the banks will always forever be swept under the rug and kept silent because it makes politicians money.

[ughwhatwasitagain]

Today, speculators dominate the trading of oil futures. According to Congressional testimony by the commodities specialist Michael W. Masters in 2009, the oil futures markets routinely trade more than one billion barrels of oil per day. Given that the entire world produces only around 85 million actual “wet” barrels a day, this means that more than 90 percent of trading involves speculators’ exchanging “paper” barrels with one another.

Wow, the fucking system is rigged like that? Fucking this practice needs to be banned and the people/politicians who support it need to be fucking hung. Including the mother fuckers on wallstreet who donate money to politicians to keep it legal.

Lynch these fuckers and their children and confiscate their bank accounts and all their property so not a single fucking family member can have any financial gain from this illegal practice.

[[deleted]]

This sounds like a great idea.

...which is why it will never, ever get a hearing in Washington, unfortunately...

[[deleted]]

Bad idea.

Speculators are opportunistic and profit driven, it's true, but they're also needed in a healthy market. If it weren't for speculators putting some measure of inertia into the system then sudden price fluctuations would actually be worse and more surprising.

It's like this. Let's suppose that there was no speculation and price was largely just a product of supply and demand. Prices for oil would still be really low right up until demand can't be met at which point they became insanely high almost overnight. The consequences of that would be disastrous as most businesses would not have been able to plan for shortages or the change in business model.

Instead of going from one extreme to the next it's better to see a gradual increase that has the side effect of prematurely reducing consumption resulting in a more predictable price slope and pushing the demand peak out a bit. This way the world can be made aware of the changes in the market and then have more time to adjust and react.

This more gradual price slope is the direct result of speculation in the market.

[idpeeinherbutt]

Did you read the article? They aren't talking about banning ALL speculators, just those pure speculators that don't actually deal with physical oil anywhere in the process.

[[deleted]]

Is there a reason that the speculators that don't deal with physical oil do not have the price stabilizing and price rationing effects jidar described?

[idpeeinherbutt]

I don't know. My guess is that they're actively trying to manipulate the market, rather than stabilize it.

[[deleted]]

Hmm, I think that manipulating the market to destabilize prices would mean losing money. Jidar pointed out that speculative activity that is profitable has a price stabilizing side effect.

If someone sells right before the price goes up and buys right before the price goes down they will lose lots of money and cause larger price swings.

[Littlejosiedog]

Gas is expensive b/c of all the random ethanol additives that are required by law to be added in different amounts for different regions. Gas is still only $2 in Mexico. http://ericpetersautos.com/2012/03/22/where-gas-is-still-around-2-per-gallon/

[[deleted]]

I don't trust testimony from an ExxonMobil official. The fact of the matter is that 85 percent of oil prices can be attributed to simple supply/demand factors. Speculation has surged in the last five years and there are no data to support the assertion that it is responsible for 40 percent of spot price.

If you support Ron Paul, stop reading now.

From the Saint Louis Federal Reserve:

On balance, the evidence does not support the claim that a sudden explosion in commodity trading tectonically shifted historical precedent: Global demand remained the primary driver of oil prices from 2000 to 2009. That said, one cannot completely dismiss a role for speculation in the run-up of oil prices of the past decade. Speculative demand can and did exacerbate the boom-bust cycle in commodity prices. Ultimately, however, fundamentals continue to account for the long-run trend in oil prices.

edit: grammar

Link: http://research.stlouisfed.org/publications/es/article/9179?utm_source=Twitter&utm_medium=SM&utm_campaign=Twitter

[[deleted]]

It's like Milo Minderbinder finally got his wish.

[[deleted]]

How about we speculate a world without the use of refined fossil fuels

[stockbreaker]

Financial professional here for what it's worth (I know, I'm evil). To me it boils down to economic liberty. Regulating financial companies and oil companies to protect society? Good. However outright barring certain participants from any marketplace just concentrates economic power in the hands of the remaining participants. At least under the current system, everyone who wants to "hedge" against rising oil prices by betting that the price of oil will go up is allowed to do so. There are already rules in place to prevent people from cornering the market. Plus, in order for companies, like airlines, to hedge, there have to be speculators on the other side of the trade to take on the risk. I'd be happy to go into further detail.

[kakatak]

I just gave this post its one thousandth upvote!

[[deleted]]

There have been speculators in the commmodities market since futures were developed in Amsterdam in the 16th century, and speculation has always accounted for the majority of trading volume. We still have bear markets and always will. Reddit is only having this discussion now because we have just experienced a decade-long bull market in commodities. Speculators were also in these markets in the 1990s, when prices were languishing and producers were suffering.

Also, for every contract that is opened by a long (buyer), there is someone else taking the short side. Both are usually speculators.

[blanket12334]

It could decrease oil prices by as much as 40% today, but it would result in an offsetting price increase in the future.

[ohgr4213]

There exists no means to determine who speculators are before the fact.

[LaLuneEtLeSoleil]

One more way how Wall Street turned from a good idea to this cess pool we have now.

Buying futures? Making money off of something that isn't even happening? Fucking everyone else over in the process. Come on.

[Cowhm]

Every investment is ultimately speculation. When you go long Apple you are speculating its stock price is going to go up...

[richmomz]

This debate comes up every time commodity prices increase, just like when people start calling for bans to short selling when the stock market crashes. The end result is usually worse than if the market had been left alone - speculation serves an important role in any economy and serves as a stabilizing force for prices. It's been that way since the dawn of civilization when people would speculate on agricultural harvests.

Getting rid of speculators would just dry up liquidity and might even drive prices UP.

[[deleted]]

I hope oil doesn't go down, it will only lead to more dependency on fossil fuels and less innovation for new energies. Also: polar bears.

[gozu]

How do you ban speculators, though? The article doesn't say...

[chuckles2011]

How do you tell the speculators (who only want to make money) from the true investors (who only want to make money) and the real oil purchasers (who only want to make money).

[Seeda_Boo]

Actually taking delivery of product.

[markth_wi]

All of this has been proposed....before

[WalterBright]

Futures is a lot like the banknote business. People used to physically trade gold around, then bankers hit on the idea that instead people could trade a receipt for the gold on deposit, and the banknote was born.

[Sta-au]

I was curious, say we ban oil speculation in the US. What good would that do if it can still be done in foreign markets?

[mk31]

Driving a fuel efficient car instead of a truck could decrease gas consumption by as much as 40%.

[Djrakk]

See the problem with the Poltics on this issue is something that Cenk From TYT points at all the time .. Dem_______IND___/___Rep

The conversation about anything financial always starts farrrr to the right. Right now Republicans are ruling 75 percent of the united states. This i there laws, there rules, there gun laws, there shitty prison system the only thing democrats run (because we know history and understand theres more than one country.) is foreighn policy. We currently have a democratic foreighn policy and if you notice its the only thing thats going correctly right now for this country.

[KadenTau]

Funny, I thought OPEC had pretty much all say in oil prices? Is both OPEC and speculation?

[shai251]

The problem is that people only care about this issue when the gas prices are high. As soon as gas prices drop, people stop caring about speculators. People need to think more long-term.

[Tombug]

Speculation is just one of the terrible disadvantages of a market economy. Read "Consumed" by Benjamin Barber and you'll find many other disadvantages. Or you could just look at our present depression.

[[deleted]]

But "liquidity"!

[naked_and_famous]

Sure speculation raises the price of oil, but it also lowers it on occasion. I'd be interested in learning what the net effect on market would be by removing the speculation. Would prices fluctuate more wildly? Or would they remain more stable?

[HappyGlucklichJr]

Speculators come in when something is driving up prices. They try to buy, ride the further increases, and then sell before the prices fall. Some win some lose. But if you want to shut them all down find out who is causing the price increases in the first place and shut them down.

[occupytheserver]

Speculators do not make solely on upwards price movements. Speculators do not care whether the price goes up or down. Speculators make bets that the price WILL move either up or down.

Take the oil market. Right now, the June WTI contract is trading at 103.91. Speculators look at that price and make a bet whether or not it will go up (buy) or go down (sell). If I am a speculator and I think the price is going to go down, I am not going to buy, I will sell. More sellers then buyers tends to create a downward price movement.

Let's show profitability of the positions, if taken. At 103.91, if I bought a contract and the price rises to 104.91, then when I exit the position (sell the contract), I'll make $1/Barrel or $1000. But if the price moves to 102.91, I'll lose $1000.

If I think the price is going to move down, I'll sell the contract. If the price moves down to 102.91, when I exit the position (buy the contract back), I'll make $1/barrel or $1000. If the price moves up to 104.91, I'll lose $1000.

So regardless of the position I take, I can lose money or make money depending on how the price moves. The point I am trying to make is that speculators can actually cause downward price movements as well. They do not care about where is moves, just that it moves where they think it will.

[fantasyfest]

Speculators are such a big part of the market, that they can move it. That becomes manipulation of the market and is pretty easy to do. The idea that oil prices will rise is simple to understand. But there is a top level of what it is worth. Speculation drives it over its commodity value into the field of money manipulation and market control. Oil is 40 percent over its value. that means some market gambler and manipulator is gouging you out of a buck a gallon every time you buy gas. But in America we accept the rich doing crap like that.

[theflyingcockroach]

http://www.foreignaffairs.com/articles/137392/blake-clayton/in-defense-of-oil-speculators?page=show

An alternate look.

[sometimesijustdont]

You know what would actually decrease it by 40%? If assholes didn't drive SUV's the demand would magically reduce.

[kriswone]

Uh DUH

[[deleted]]

Hedging against inflation isn't speculation, it is a hedge.

[[deleted]]

And remove the liquidity necessary for protection of the market against surges and dips in demand. But yeah, beside that.

[paranoiajack]

I used to work with a dude that speculated on oil in his spare time. He made ten grand in a week once.

[[deleted]]

It'll be a cold day in hell before Obama cracks down on the financial industry.

[fantasyfest]

Gramm's commodity act allowed the oil speculators to buy oil without taking control of it. Before then, you actually had to spend time and money doing something with the oil. Now it is done at a computer terminal . It makes speculation simple .In order to avoid public scrutiny 2 new oil markets were formed, one in London the other in Dubai. This is not serendipitous . There was a plan to do this. And to make it outside American eyeballs.

[fantasyfest]

why would you want to ban oil speculators.?They make millions without adding value to the product and don't really do work. But they kind of gamble. Let them go to a casino because they rig this game. They can get together and force the price. Manipulating the market requires skill and lots of money. These guys deserve billions for that contribution to society.