I don't understand?
The money is in the oil, not the marketing of the refined product.
Posted on 06/19/2008 6:12:21 AM PDT by jveritas
US regulators have announced plans to impose limits on oil trades overseas.
The US Commodity Futures Trading Commission said the London-based electronic exchange would have to comply with US rules.
The move comes as oil prices notch up record highs, amid fears that speculators are distorting the market. As a result, fuel costs have shot up hitting the global economy. Airlines have been hit badly, with near record losses expected for 2008 in the US.
US airlines were forecast to report $10bn (£5bn) of losses this financial year as sky-high fuel costs erode profits, according to the industry group Air Transport Association (ATA).
Oil prices slipped from their record highs near $140 a barrel reached during Monday trade as investors were cautious ahead of plans by Saudi Arabia to increase production in July.
US sweet, light crude finished down 60 cents at $134.01, while London Brent settled 99 cents lower at $133.72.
Read more at:
http://news.bbc.co.uk/2/hi/business/7460310.stm
> dump the whole of the National Reserve on the oil market in one d...
That will make untold numbers of “speculators” very rich.
You can very easily short the market with futures, options, and index stocks, not to mention spiders and diamond funds - and make millions.
any investor worth a dime has his long positions countered with stop loss orders, and makes use of option puts, leaps, straddles, and stretches to cover his ass.
No, that would raise prices on everything. That's one of the dumbest ideas ever proposed.
Should companies be required to own storage tanks or could they rent?
Nothing is stopping her from sending it out of her own pocket.
Crude Oil Futures have been traded on the NYMEX since 1983.
What is different now from the 80's and 90's is the low margin of supply.
If you bought it,a truck brought it. I wonder how many “we can't drill our way out of this” slimy politicians have oil stocks? I am so frustrated with Washington I could (as my dad used to say) bite nails in half!
Another economic illiterate in the Regress...sigh.
That wold be a good way to "hedge" your fuel costs.......
Did you see Dick Morris on O’Really last night, commenting on the London ICE speculators and how they started?.....
BTTT
As long as there is a good reason to speculate there will be speculation or shortages. They need to attack the reason that there is so much speculation, Iran and the lack of reserve capacity.
Fuel is not in short supply. What is in short supply are future’s contracts. Actual world usage is only responsible for about $60/barrel of the price.
The future delivery of oil is in doubt. This is due mainly to Iran.
It is analogous to generators before a hurricane. The price does not shoot up because electricity is in short supply. It shoots up because people fear that there will be an event in the future that will put it in short supply.
Try going out before a hurricane and trying to talk down the price of a generator based on the fact that the supply of electricity is currently plentiful.
Deal with Iran, or negate the Iran problem by opening up more reserves, and the price will come down. Why? Because the future supply of oil will no longer be in doubt.
The real kick in the head is that the Fed is deflating our take-home pay by creating cheap money to loan to GS and other investment banks ... who, since they are not subject to position limits in commodities when they purchase for their clients, can loan out the money to help push commodity prices higher ... which further devalues the purchasing power of our take-home pay. So everyone who buys gas or food around the world is helping bail out the investment banks who helped create the sub-prime mess in the first place.
NYMEX has transparency and will enforce position limits where mandated (aka Amaranth). ICE has neither. That is the entire problem.
And given you only need to put up about 8 percent on margin for commodities futures, you can leverage the bejabbers out of any cash you put in.
Oh, I agree it will be an ongoing battle. But a good start would be removing the classification of investment banks as commercial traders in commodities.
I don't understand?
I thought that 44% of the motor fuel consumption in the US was attributed to the private consumer with freight transportation, public transportation, agriculture and the government using the remaining 56%?
I think the futures markets are needed now in today's world, however, there appears to bee some manipulation to some degree.
I would have thought that recently as 18 months ago OPEC spokesmen said "we don't want to see $100+ oil", but it's here. When the prices started to slip from the $130+ range, they cut back on production???
Or else what? This is as silly as suing OPEC for violating US anti-trust laws. Or the Saudis demanding that Budweiser shut down because alcohol is against Sharia law. Wait, that last hasn't happened yet, but it makes as much sense as ordering the Brits to obey our convoluted investment regulations.
At the end of the week, Friday 4 pm, a new vote will be taken in congress on removing all drilling restrictions.
Any member not voting will hang on Sat.
On Mon we will start over.
The money is in the oil, not the marketing of the refined product.
Industry practice had -- for decades -- been the letting of long-term contracts from supplier to user. Between Nixon's price controls and Carter's grotesquely stupid energy ''policy'', by 1980-81, absolutely no producer/refiner would give anyone a long-term contract to meet their needs. Users were going hand-to-mouth, with all the usual consequences: high prices, spot shortages, and general supply misallocation.
The futures mkts, along with Mr. Reagan's deregulation of much of the energy sector, turned this situation around in 3-4-5 years. Users once again could lock in costs for a couple of years, and, lo and behold, could begin once more to use their capital efficiently.
Price instability these days is almost entirely political instability and has little to do with futures mkts. Witness this very day's market action: China announces a decrease in their level of subsidy for crude and products -- and the crude mkt drops $4.00 in 10 minutes' time. Yesterday, Nigeria announced just the possibility of a strike, and crude ran up about $2.00 in half an hour.
Do you have ANY idea what those two developments would have done to the price of crude and products had there NOT been futures mkts? Multiply those prices changes by at least a factor or 2-2.5.
30 years ago we still mostly produced our own Oil. Now we are wholly subservient to world markets as part of a conscious decision of the US political class to push "conservation not consumption" as our national energy policy.
Speculators are a symptom of the disease. The disease is the inelasity of supply in the Oil markets. Fix the supply problem and the speculators will be unable to manipulate the supply. All this clowning around with the regulators is fiddling while Rome burns.
There is a simple solution.
DRILL NOW, DRILL HERE, BUILD NUKES, BUILD COAL GASSIFICATION, DO IT ALL! ENERGY INDEPENDENCE NOW!
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