Posted on 05/25/2008 7:16:24 PM PDT by Fred
German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.
It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.
Car lights are seen streaking past an oil rig extracting petroleum Speculators are split, with some betting that oil will fall
Uwe Beckmeyer, transport chief for Germany's Social Democrats, said his party would call for joint measures by the G8 powers to prohibit leveraged trading on energy contracts. "It's an extreme step but it has to be done," he told the Berlin media.
Mr Beckmeyer said the last 25pc rise in the price of oil to $135 a barrel had nothing to do with underlying supply and demand. “It’s pure speculation,” he said.
Oil has doubled in price over the past year and the concerns are echoed on Washington’s Capitol Hill where irate Democrats want rules compelling traders to take delivery of crude oil, a move which would paralyse the market.
There is now broad support in Germany for a clampdown on “locust” funds. President Horst Köhler said modern capitalism had turned into a “monster”, bringing the entire financial system to the brink of collapse this spring.
The Social Democrats form part of Chancellor Angela Merkel’s ruling coalition. Her own Christian Democrat Party shares concerns that funds are causing a fresh bubble in commodities, risking further havoc for the real economy and society.
In the long run, any scheme to ban futures trading would be extremely hard to enforce as the markets would tend to move offshore. Hedge funds are probably not the culprit in any case.
Speculators are split, with some betting that oil will fall. The mass of money coming into the commodity indexes is mostly from pension funds and long-term investors.
Oil markets are likely to shrug off the moves as political posturing, instead focusing on Norway’s suspension of crude output at three platforms, cutting supply by 138,000 barrels a day.
The news comes as Lloyd’s Marine Intelligence reported Opec oil shipments fell by 1m barrels per day in the four weeks to May 4, confirming suspicions that the market has been chronically short of supply.
Try your childish insults over at DU!
http://www.star-telegram.com/104/story/651928.html
Gives some insight about Amaranth.
The same thing is happening with oil now, it’s simply spread across many institutional buyers. Demand certainly is a big part of it but speculation cannot be shrugged off. This is costing billions of people directly. When that happens govt’s will take notice and they will get involved and it won’t be good for anyone.
Just another form of Nationalizing a Private industry.
It won’t work. Because then, dictatorships take the rest of the World hostage because it gives them unequivocal power to control the market and the price. And it always goes up, not down.
Like Chavez, he gives his underlings cheap gas to keep them happy and him in power, and then, sticks it to the rest of the World who have to buy his oil. (Saudis included.)
There is no one, so called ,reasons for the futures market when it was established, that is valid in todays world. It is nothing more than a gambling house scam on the consumer.
What’s your solution after you shut down the free market?
I believe it’s called Nationalist Socialism.
(Talk about directing other FReepers to DU!)
Rather loose usage of the term industry. The futures market is gambling, I buy something today, betting it goes up tomorrow, I buy at todays price, betting a price goes down tomorrow.
There were no computers and very little reliable transportation when it was established. That is not the case in a world wide market and electronic instant communication world.
The futures market and speculators are living in a horse and buggy world. They no loner serve any purpose, except to shaft the consumer.
Did the world shut down when the livery stables went out of business, it is a new world.
I would guess then that includes the Stock Market. We should close that down also because because it’s an unecessary gamble for people who are making a living just trading stocks.
After all, it is all about “gambling” isn’t it? But “Gambling” is taking money and risking the outcome of random numbers.
Speculation is not even close to that. It is taking commodities at one price, using knowledge and information in the free market system, that the price will increase at a later date, rendering a profit to the risk taker. Kind of like Farming, Commercial Fishing, etc....
To remove speculation from the free market renders it no longer a free market. Which also tends to drive prices up over all because the element of competition has been removed. The risk factor is transfered to the producer which further diminishes supply.
I'm sorry, you really know nothing of the subject, and I suggest you learn.
Let me ask you something: Would you ban the insurance business? An automobile insurer is simply making a bet on how many of the people they insure will get in accidents. It's just speculation by your standards. Except, of course, they offer a valuable service. In exchange for you paying them a hefty sum, they remove the risk that you will take a 200K hit that you can't afford.
Speculators in commodities futures are just insurers. The oil producer doesn't want to bear the price risk. Doesn't want to bear the chance that oil goes way down between when they start a project and when they extract a lot of the oil. The speculator who goes long oil futures so that the insurer can go short is no different than the automobile insurer.
Your ignorance is simply astounding, and you ought to be embarassed that you are speaking so authoritatively about something you are so simply wrong about.
Sorry instead of insurer (the 4th word) I meant to say oil producer.
Not wrong about, have no use for, !!!!
If I had wanted to say stock market I would have and I would have posted about it on a stock market thread, Unlike you I know the difference.
How can speculation possibly be stopped? Make everybody use what they bought and not allow reselling?
So then, do you think automobile insurance should be banned because the insurers are speculating on your liklihood of getting into a crash? Why do you want to ban those who insure the price risk of oil suppliers?
ROFLOL, there is no risk in the oil futures market. As it exists today, other than to the individual gambling his money. They are not drilling for oil, actually they are buying and selling oil already out of the ground are that which is coming out of producing wells.
Please explain that difference.
All they have to do is increase the percentage
a speculator has to put up on a futures/option deal.
I think that is what Germans want, but it is hard
for bought and paid for politicos, to fight the money
people. The amount required is 10% on trades, but many
on here in reference to the housing market problems
say that buyers should put up 25% or more, so why
not force speculators to risk more.If the worlds
governments and regulators did that oil and
corn, would drop like a rock. Ed
The difference in what, are are you also wanting to compare the boil on the ass of society, speculators, with auto insurance.
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