We Must Address Oil-Market Volatility

The Wall Street Jounral ^ | 07-07-09 | GORDON BROWN and NICOLAS SARKOZY

[GOP_Lady]

Erratic price movements in such an important commodity are cause for alarm.

For two years the price of oil has been dangerously volatile, seemingly defying the accepted rules of economics. First it rose by more than $80 a barrel, then fell rapidly by more than $100, before doubling to its current level of around $70. In that time, however, there has been no serious interruption of supply. Despite ongoing conflict in the Middle East, oil has continued to flow. And although the recession and price rises have had some effect on consumption, medium-term forecasts for demand are robust.

The oil market is complex, but such erratic price movement in one of the world's most crucial commodities is a growing cause for alarm. The surge in prices last year gravely damaged the global economy and contributed to the downturn. The risk now is that a new period of instability could undermine confidence just as we are pushing for recovery.

[GOP_Lady]

See also:

Oil Speculators Under Fire

http://online.wsj.com/article/SB124700398437207969.html#mod=testMod

[BGHater]

'growing cause for alarm' Lol. WSJ.

The Great American Bubble Machine

[doc1019]

You can dump (outlaw) speculators in this country, but the world is full of speculators. ;-)

[gidget7]

Again, we hear from Sarkozy, and now Brown, what we SHOULD be hearing from zero and congress critters here!

[umgud]

Drill here, drill now would only enhance stability.

[GOP_Lady]

Yep. I’m liking President Sarkozy.

[calico_thompson]

bring back the Texas Railroad Commission, and set the market demand factor to match production with demand.

[gidget7]

Me too! You don’t hear him blaming medical bills for the economy. He tells it like it is, and oil did start it all.

[alecqss]

You can dump (outlaw) speculators in this country, but the world is full of speculators. ;-)

Wild speculation is inevitable at the level of uncertainty created first by Dems Congress and now by this idiot of a president... Nobody knows what tomorrow can bring - ban on domestic drilling, oil regions going ablaze thanks to administration stupidity, etc. The name of the root cause of volatility starts with zero and ends with "bama".

[doc1019]

Amen.

[Ghost of Philip Marlowe]

It sounds as though they are resorting to their old “point the finger at the greedy one over there” game.

The OFTC studied the price surge from 2006-2007 and found that the speculators (low-level traders) had no impact on the price of oil. Essentially, they bet on the price. It is no different than betting on the point-spread of a football game. Some buy low hoping to sell high (typical trading of Crude as an ETF). Others plan to short. Either way, like betting on the final score of a football game, the bet does not effect the final score.

Now, what we are seeing recently is quite different, but the Statists are trying to call it “speculating” in order to demand more regulation from the federal government.

The “speculating” going on today is that of the mega-firms (Goldman Sachs, JPMorgan, etc.) who are doing two things: they are buying actual crude inventories. Last I read, GS had three full oil tankers of crude that they'd purchased and REFUSED TO ALLOW TO COME TO SHORE TO UNLOAD. What they are also doing is trading in huge blocks (over 60%) their proprietary stocks. They are doing this for one simple reason: to manipulate the stock market to make it look healthier than it is. A large part of their proprietary stock deals with Crude.

So, what they are doing is NOT “speculating” it is “manipulating” the market, which is FRAUD, and they are monopolizing Crude inventory in order to drive the price up, which is a violation of anti-trust laws.

Oh, and don't forget that they are doing this in large part with money from you and me via the TARP funds.

So now that these mega-firms are driving up the price of Crude (though supply is very high at present and demand is still pretty low), what does the federal government do (and all their lackeys)?

They demand more regulation over the little traders.

Don't you feel better now that fascists are in control?

[Ghost of Philip Marlowe]

Good link. See my post 12.

[Uncle Miltie]

We need a government price setting panel to ensure price stability.

< / '70s price controls>

[GOP_Lady]

Thank you.

[Redbob]

There’s two ninnies if ever there were!

Gordon Brown and Nick “I Married a Porn Star” Sarkozy!

[who_would_fardels_bear]

This is another reason why there most likely should be a wall between traditional lending banks and investment corporations.

With no wall, the bank part of the conglomerate can loan the investment part of the conglomerate as much as it wants. They can allow the investment part to invest on margin.

The way the government is backstopping businesses these days, if the investment works out then they make scads of money. If it doesn't they just go and get scads of money from the taxpayer to make things "right".

If banks and investment houses were two different animals, then investment houses would have to make a good case for a bank to lend it money. And if an investment house was engaging in fraud, then banks would hopefully be unlikely to fund the fraud for fear of prosecution.

[M. Espinola]

"The OFTC studied the price surge from 2006-2007 and found that the speculators (low-level traders) had no impact on the price of oil. Essentially, they bet on the price. It is no different than betting on the point-spread of a football game.

You are absolutely correct. What's next, soybeans, orange juice, silver, live cattle, coffee, currencies, stock indexes?

The real mega-manipulators are on the bailed-out corporate boards of Goldman Sachs, Citibank and the rest of those totalitarian elitists who bankrolled Obama, but there are no meaningful investigations concerning massive bailout fraud. This is just smoke and mirrors.

[dalereed]

Drill and consume on shore and offshore Califonia oil and quit buying foreign oil!!!

[jiggyboy]

Back to basics:

1) To buy a contract, you must be pre-approved as someone able to take delivery.

2) To sell a contract, you must be pre-approved as someone able to deliver the commodity.

3) Delivery to occur on contract expiration.

4) You can not be both a buyer and a seller.