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(ABC News)   Goldman Sachs releases statement denying they are speculating on oil and gas and thereby driving up gas prices. Unfortunately the statement is unreadable as they were apparently giggling too much to type legibly   (abcnews.go.com ) divider line
    More: Obvious, Goldman Sachs, Oil and gas law in the United States, Commodity Futures Trading Commission, crude oil  
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1516 clicks; posted to Business » on 05 Mar 2012 at 12:28 PM (4 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-03-05 10:10:06 AM  
You can't have zero futures trading. What global event are they speculating over?
 
2012-03-05 10:11:36 AM  
Buying and selling is how information about current and expected future oil supply and demand conditions is transmitted through the market, allowing the oil market to adjust the oil price in order to balance supply and demand. This is how a market works.

Yes, between parties who ACTUALLY RECEIVE DELIVERY OF THE GODDAMN PRODUCT!

Allowing other buyers and sellers who do not actually take delivery into the market distorts the price on an exponential scale. You know this. You lie by omission.

I guess I'd justify my heart out to if I made as much money as they do on the trades. Reminds me of the mob. "We are just legitimate business men, and if you question that we'll destroy your whole damn financial system. Capiche?"
 
2012-03-05 10:17:02 AM  
In our view, this is the mechanism by which the oil market becomes better informed and reaches a consensus on issues such as the likely impact of the improving world economic outlook on oil demand

They talk about the oil market like it's their pet.
 
2012-03-05 10:17:20 AM  
In other news, the dollar's value is at an all time low. Film at 11.
 
2012-03-05 10:18:34 AM  

cman: In other news, the dollar's value is at an all time low. Film at 11.


Which is great for U.S. exports, but you already knew that.
 
2012-03-05 10:20:13 AM  
Another article about Obama's cabinet?
 
2012-03-05 10:41:03 AM  

sweetmelissa31: In our view, this is the mechanism by which the oil market becomes better informed and reaches a consensus on issues such as the likely impact of the improving world economic outlook on oil demand

They talk about the oil market like it's their pet.


Well, they are trying to make it all warm and fuzzy

/it's what good propagandists do
 
2012-03-05 10:52:26 AM  
Why doesn't Obama just lower the prices so we can all have more money in our pockets? WTF is this guy's problem?
 
2012-03-05 10:53:49 AM  

sweetmelissa31: In our view, this is the mechanism by which the oil market becomes better informed and reaches a consensus on issues such as the likely impact of the improving world economic outlook on oil demand

They talk about the oil market like it's their pet.


Which we know isn't true since they have about 487 of them in Washington.
 
2012-03-05 10:54:12 AM  

make me some tea: Why doesn't Obama just lower the prices so we can all have more money in our pockets? WTF is this guy's problem?


I still cant believe that people think the President has such controls.

/Yes, I know you were kidding
 
2012-03-05 10:57:38 AM  

make me some tea: Why doesn't Obama just lower the prices so we can all have more money in our pockets? WTF is this guy's problem?


Grandma, I thought we had this discussion on the phone yesterday. (really did)

***

She also said she's afraid of him and that she's going to get pushed out of her house because he's President.

I love our Sunday calls :-\
 
2012-03-05 11:07:02 AM  

Diogenes: Grandma, I thought we had this discussion on the phone yesterday. (really did)

***

She also said she's afraid of him and that she's going to get pushed out of her house because he's President.

I love our Sunday calls :-\


Oh jeez. :(
 
2012-03-05 11:09:06 AM  
So they're willing to get the hell out of the commodities markets then?

Why are investment banks allowed in anyway? They never take delivery.
 
2012-03-05 11:09:28 AM  

cman: I still cant believe that people think the President has such controls.


Well sure. When all you read is garbage like this (^) all the time, of course you're gonna think that way.
 
2012-03-05 11:11:28 AM  

make me some tea: Diogenes: Grandma, I thought we had this discussion on the phone yesterday. (really did)

***

She also said she's afraid of him and that she's going to get pushed out of her house because he's President.

I love our Sunday calls :-\

Oh jeez. :(


As she gets worse mentally, her anger and fear get more unfocused.
 
2012-03-05 11:22:15 AM  

I_C_Weener: Another article about Obama's cabinet?


so this week, obama is a corporatist wall street shill. got it.

you have to understand the confusion, though, since last week he was a socialist communist leftist communist socialist.
 
2012-03-05 11:36:01 AM  

Diogenes: As she gets worse mentally, her anger and fear get more unfocused.


I worry about my mom and dad. Dad's always been a little off with the conspiracy theory crap, but now my mom has fallen into that stuff too.
 
2012-03-05 11:58:30 AM  
Bibi raises hell, Lloyd profits.

/It's a con$piracy
 
2012-03-05 12:14:32 PM  

FlashHarry: I_C_Weener: Another article about Obama's cabinet?

so this week, obama is a corporatist wall street shill. got it.

you have to understand the confusion, though, since last week he was a socialist communist leftist communist socialist.


I'm pretty sure your confusion is unfathomable.
 
2012-03-05 12:35:19 PM  

NewportBarGuy: Buying and selling is how information about current and expected future oil supply and demand conditions is transmitted through the market, allowing the oil market to adjust the oil price in order to balance supply and demand. This is how a market works.

Yes, between parties who ACTUALLY RECEIVE DELIVERY OF THE GODDAMN PRODUCT!

Allowing other buyers and sellers who do not actually take delivery into the market distorts the price on an exponential scale. You know this. You lie by omission.

I guess I'd justify my heart out to if I made as much money as they do on the trades. Reminds me of the mob. "We are just legitimate business men, and if you question that we'll destroy your whole damn financial system. Capiche?"


Even if you had a requirement that companies take delivery of said oil, I'm sure a huge firm like GS would just build an NFL stadium sized vat to hold it in temporarily. There's just too much damned money in it.
 
2012-03-05 12:44:58 PM  

cman: the dollar's value is at an all time low.


That will generally be the case. If it ever wasn't, people would sit on their cash.
 
2012-03-05 12:45:00 PM  

mavexe: Even if you had a requirement that companies take delivery of said oil, I'm sure a huge firm like GS would just build an NFL stadium sized vat to hold it in temporarily. There's just too much damned money in it.


*sigh* There really is no way around it, but I'd love to see the CFTC at least take a shot at it.
 
2012-03-05 01:03:43 PM  

Diogenes: As she gets worse mentally, her anger and fear get more unfocused.


Have fun with that. My grandmother did the same thing, and by the end she was a raving lunatic that probably should have been in a facility. Her anger used to be reserved for certain people and circumstances, then she started turning it on everyone for bizarre reasons.

My father-in-law is heading in the same direction and he's only 53.
 
2012-03-05 01:11:30 PM  
 
2012-03-05 01:22:31 PM  

mavexe: Even if you had a requirement that companies take delivery of said oil, I'm sure a huge firm like GS would just build an NFL stadium sized vat to hold it in temporarily. There's just too much damned money in it.


I have no doubt that they'd find plenty of inventive ways of skirting such regulations... like renting the tanker that the oil is already sitting in.
 
2012-03-05 01:39:15 PM  

NewportBarGuy: Yes, between parties who ACTUALLY RECEIVE DELIVERY OF THE GODDAMN PRODUCT!


Exactly.
 
2012-03-05 01:54:36 PM  
I'm only glad to that Enron went tits up so there aren't all sorts of other arbitrary things (like power or bandwidth) that can have their prices manipulated through speculation.
 
2012-03-05 02:02:40 PM  

NewportBarGuy: Buying and selling is how information about current and expected future oil supply and demand conditions is transmitted through the market, allowing the oil market to adjust the oil price in order to balance supply and demand. This is how a market works.

Yes, between parties who ACTUALLY RECEIVE DELIVERY OF THE GODDAMN PRODUCT!

Allowing other buyers and sellers who do not actually take delivery into the market distorts the price on an exponential scale. You know this. You lie by omission.

I guess I'd justify my heart out to if I made as much money as they do on the trades. Reminds me of the mob. "We are just legitimate business men, and if you question that we'll destroy your whole damn financial system. Capiche?"


It is obvious from your post that you know very little about market liquidity or even future markets in general.
 
2012-03-05 02:09:16 PM  
Just sayin' - nobody pays more for something than they have to. So for futures trading, you're promising to buy a product in the future at a price you pay today. If you think the price will go up you buy it. These are very smart individuals, and I seriously doubt that they would pay more for the product than they have to. So this "speculation" line strikes me as being so much uninformed drivel from Congressmen who should be doing their jobs instead.
 
2012-03-05 02:09:27 PM  

NewportBarGuy: Buying and selling is how information about current and expected future oil supply and demand conditions is transmitted through the market, allowing the oil market to adjust the oil price in order to balance supply and demand. This is how a market works.

Yes, between parties who ACTUALLY RECEIVE DELIVERY OF THE GODDAMN PRODUCT!

Allowing other buyers and sellers who do not actually take delivery into the market distorts the price on an exponential scale. You know this. You lie by omission.

I guess I'd justify my heart out to if I made as much money as they do on the trades. Reminds me of the mob. "We are just legitimate business men, and if you question that we'll destroy your whole damn financial system. Capiche?"


Actually, it's the opposite - parties who CAN receive delivery of the product can influence the price a lot more because they can hoard the resource - assuming of course that they can store enough of it to actually cause a shortage.

Parties who are unable to take delivery are forced to sell their contract before it comes due, which pushes the price down.
 
2012-03-05 02:11:42 PM  
dailydish.typepad.com

Because the president not only controls US gas prices, he control's the world's gas prices.
 
2012-03-05 02:18:44 PM  
actually, Goldman might be telling the truth, at least when it comes to oil.

swap dealers (primarily banks) are actually SHORT oil at the moment.

av.r.ftdata.co.uk
 
2012-03-05 02:50:19 PM  

dragonchild: That will generally be the case. If it ever wasn't, people would sit on their cash.


When people say the value of the dollar is at an all time low they don't generally mean nominal value, they mean relative value compared to other world currencies.
 
2012-03-05 03:01:47 PM  

neaorin: Actually, it's the opposite - parties who CAN receive delivery of the product can influence the price a lot more because they can hoard the resource - assuming of course that they can store enough of it to actually cause a shortage.

Parties who are unable to take delivery are forced to sell their contract before it comes due, which pushes the price down.


Yes, and that's why oil futures have been consistently inexpensive, as compared to the rest of the last decade, over the last few years.

/they haven't been, you say?
//most expensive they've been in decades, you say?
///started happened after the housing bubble collapsed and people needed something else to speculate on, you say?
////demand has been down for 2 years and supply has been trending up, you say?
//it's almost like... almost like... what you said is full of shiat
 
2012-03-05 03:30:03 PM  
demand has been down for 2 years and supply has been trending up, you say?

IEA disagrees with you (source - PDF warning)
Both 2010 and 2011 set record highs in global demand and 2012 forecasts call for yet another record high.

As always the usual suspects are China and India. They want their nice things too, and they want'em now.
Before that economic crisis we'd just about started having an energy crisis... and guess what? It's still there!
 
2012-03-05 03:30:59 PM  

NewportBarGuy: Buying and selling is how information about current and expected future oil supply and demand conditions is transmitted through the market, allowing the oil market to adjust the oil price in order to balance supply and demand. This is how a market works.

Yes, between parties who ACTUALLY RECEIVE DELIVERY OF THE GODDAMN PRODUCT!

Allowing other buyers and sellers who do not actually take delivery into the market distorts the price on an exponential scale. You know this. You lie by omission.

I guess I'd justify my heart out to if I made as much money as they do on the trades. Reminds me of the mob. "We are just legitimate business men, and if you question that we'll destroy your whole damn financial system. Capiche?"


I don't know about exponential, 20-40% sounds about right. This is not just about oil, grain and other essential commodities should be free from speculators like it used to be. Your point is correct about taking delivery of the product if you buy it, that is the entire point of a futures market even if you are a middleman.
 
2012-03-05 04:43:07 PM  
Volatility in oil prices are the new norm, and for anyone with any sense, they should have been making changes in their life to reduce their personal vulnerability to rising oil prices by using less. You have had years to make changes in your lifestyles to get by with less oil for transportation.

I personally

1) sold my truck
2) bought a used motorcycle, and small used car
3) moved closer to work
4) use public transportation when it makes sense (going downtown)
5) Buy goods that can be delivered (Amazon mostly)
6) Moved to a place where there is local shopping

I did all this since 2008. I spend about $70/month for fuel.

It is funny that Oregon gets a lot of grief for our Urban Growth Boundaries, and large investment in light rail and bike lanes, but it is paying off. I do spend about 40-50 dollars a month on public transportation.

Not only am I saving on fuel costs, but much lower vehicle maintenance. Changing the way we live in relation to oil is not the end of our "freedoms." It is just the personally responsible thing to do from a self interest standpoint.
 
2012-03-05 04:57:55 PM  
Well, it certainly has nothing to do with Republicans herping and derping BOMB IRAN! 24-7
 
2012-03-05 05:10:00 PM  
I'm an Obama supporter, but his caving to wall street is by far my biggest issue with him.

still, the alternative is the group on the GOP side who are trying their hardest to out stupid each other.
 
2012-03-05 08:24:59 PM  

mavexe: Even if you had a requirement that companies take delivery of said oil, I'm sure a huge firm like GS would just build an NFL stadium sized vat to hold it in temporarily. There's just too much damned money in it.


Fine. Make them get a permit from the SEC (or whoever is supposed to be regulating this crap) that shows they've met the requirements to take delivery, distribute, and function as an oil company to the satisfaction of a government inspector.

Some things are just too important to screw with... when gas goes up so does everything else. Argue all you want about how it forces innovation, but we're not there yet and $8/gal gas isn't going to force the issue much faster, it's just going to make a very few people very rich and a lot of people very poor.
 
2012-03-05 08:59:43 PM  
Ummm, how do I make money off oil speculating if I think the price will go up?
/serious
 
2012-03-05 09:03:10 PM  

cefm: Just sayin' - nobody pays more for something than they have to. So for futures trading, you're promising to buy a product in the future at a price you pay today. If you think the price will go up you buy it. These are very smart individuals, and I seriously doubt that they would pay more for the product than they have to. So this "speculation" line strikes me as being so much uninformed drivel from Congressmen who should be doing their jobs instead.


Yep. Just populist raving. Every few years, this happens. Then indignant congress critters demand investigations, looking for market manipulations/speculation that drove the price up. Every time they find exactly jack shiat.

Lather, rinse, repeat.
 
2012-03-05 10:29:25 PM  

NewportBarGuy: cman: In other news, the dollar's value is at an all time low. Film at 11.

Which is great for U.S. exports



And terrible for wage-earners.
 
2012-03-05 11:47:56 PM  

Goodfella: And terrible for wage-earners.


Very, very, very true.
 
2012-03-06 12:39:28 AM  

FlashHarry: so this week, obama is a corporatist wall street shill.


Not just this week.

Bill Moyers on PBS:
President Obama's new chief of staff - arguably the most powerful office in the White House that isn't shaped like an oval. He used to work for the giant banking conglomerate Citigroup. His predecessor as chief of staff is Bill Daley, who used to work at the giant banking conglomerate JPMorgan Chase, where he was maestro of the bank's global lobbying and chief liaison to the White House. Daley replaced Obama's first chief of staff, Rahm Emanuel, who once worked as a rainmaker for the investment bank now known as Wasserstein & Company, where in less than three years he was paid a reported eighteen and a half million dollars.

The new guy, Jack Lew ran hedge funds and private equity at Citigroup, which means he's a member of the Wall Street gang, too. His last job was as head of President Obama's Office of Management and Budget, where he replaced Peter Orzag, who now works as vice chairman for global banking at - hold on to your deposit slip - Citigroup.

Still with us? It's startling the number of high-ranking Obama officials who have spun through the revolving door between the White House and the sacred halls of investment banking.

President Obama may call bankers "fat cats" and stir the rabble against them with populist rhetoric when it serves his interest, but after the fiscal fiasco, he allowed the culprits to escape virtually scot-free. When he's in New York he dines with them frequently and eagerly accepts their big contributions. Like his predecessors, his administration also has provided them with billions of taxpayer dollars - low-cost money that they used for high-yielding investments to make big profits. The largest banks are bigger than they were when he took office and earned more in the first two-and-a-half years of his term than they did during the entire eight years of the Bush administration. That's confirmed by industry data.

And get this. It turns out, according to The New York Times, that as President Obama's inner circle has been shrinking, his "rare new best friend" is Robert Wolf. They play basketball, golf, and talk economics when Wolf is not raising money for the president's campaign.

Robert Wolf runs the U.S. branch of the giant Swiss bank UBS, which participated in schemes to help rich Americans evade their taxes. During hearings in 2009, Michigan's Senator Carl Levin, chairman of the permanent subcommittee on investigations, described some of the tricks used by UBS: "Swiss bankers aided and abetted violations of U.S. tax law by traveling to this country with client code names, encrypted computers, counter- surveillance training, and all the rest of it, to enable U.S. residents to hide assets and money in Swiss accounts.

"The bankers then returned to Switzerland and treated their conduct as blameless since Swiss law says tax evasion is no crime. The Swiss bank before us deliberately entered United States, actively sought U.S. clients and secretly helped those U.S. clients defraud the United States of America."

And so it goes, the revolving door between government service and big money in the private sector spinning so fast it becomes an irresistible force hurling politics and high finance together so completely it's impossible to tell one from the other.
 
2012-03-06 01:00:19 AM  

NewportBarGuy: Yes, between parties who ACTUALLY RECEIVE DELIVERY OF THE GODDAMN PRODUCT!

Allowing other buyers and sellers who do not actually take delivery into the market distorts the price on an exponential scale. You know this. You lie by omission.


This behavior was illegal until recently. You could not speculate in the market unless you actually took delivery of the product.

However, like other good ideas to regulate the financial markets that came out after the Great Depression era financial shenanigans, this was killed off during the Clinton administration. (along with Glass-Steagall)

As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a "traditional speculator," who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.

In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue.

A new law empowered the Commodity Futures Trading Commission - the very same body that would later try and fail to regulate credit swaps - to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops - Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap - the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.


Now here's the thing. The people who supposedly ran the CFTC had no idea this had happened. When Congress was informed of it over a decade later and asked for documentation, the CFTC told Congress they would have to clear giving them the documentation with Goldman Sachs first.

What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. "I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC," says Greenberger, "and neither of us knew this letter was out there." In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.

"I had been invited to a briefing the commission was holding on energy," the staffer recounts. "And suddenly in the middle of it, they start saying, 'Yeah, we've been issuing these letters for years now.' I raised my hand and said, 'Really? You issued a letter? Can I see it?' And they were like, 'Duh, duh.' So we went back and forth, and finally they said, 'We have to clear it with Goldman Sachs.' I'm like, 'What do you mean, you have to clear it with Goldman Sachs?'"


Hardly sounds crooked and underhanded at all, does it?

Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an "oracle of oil" by The New York Times, predicted a "super spike" in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commodities trading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply.

It wasn't the consumption of real oil that was driving up prices - it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees' Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn't just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World.


Obama could fix this, just as Bush before him could have. The CFTC is part of the Executive Branch. They could rescind the exemptions to commodities laws that they have made.

However, that might not sit well with their obscenely wealthy friends.
 
2012-03-06 03:00:35 AM  

Sun Worshiping Dog Launcher: Diogenes: As she gets worse mentally, her anger and fear get more unfocused.

Have fun with that. My grandmother did the same thing, and by the end she was a raving lunatic that probably should have been in a facility. Her anger used to be reserved for certain people and circumstances, then she started turning it on everyone for bizarre reasons.

My father-in-law is heading in the same direction and he's only 53.


Ack. I can't restrain myself from giving an unsolicited PSA: Unless your elderly folks have gone through a detailed formal diagnosis of dementia or alzheimers, contact their doctor and tell them you've noticed a mood change. There's a bunch of things that can cause anger/paranoia: a reaction to meds, underlying depression, thyroid problems, or low levels of vitamins. You don't automatically turn into a cranky old bastard when you get old, there's usually a medical reason ... it would suck to assume it was non-treatable if it was something with a simple cure. (If it is alzheimers or something along those lines, then my sympathies.)
 
2012-03-06 03:46:30 AM  

BullBearMS: Obama could fix this, just as Bush before him could have. The CFTC is part of the Executive Branch. They could rescind the exemptions to commodities laws that they have made.


People trade oil outside the US, and speculation in one oil market has a flow-through effect on other markets (because people who DO want to take physical possession of oil aren't stupid ... if one market is massively overpriced then they'll buy from another one.)

I honestly don't understand how US regulation is going to be effective. Even the G20 couldn't do much because that'd skip the markets in Dubai, Africa, Singapore etc.
 
2012-03-06 05:27:03 AM  

LiquidSky: BullBearMS: Obama could fix this, just as Bush before him could have. The CFTC is part of the Executive Branch. They could rescind the exemptions to commodities laws that they have made.

People trade oil outside the US, and speculation in one oil market has a flow-through effect on other markets (because people who DO want to take physical possession of oil aren't stupid ... if one market is massively overpriced then they'll buy from another one.)

I honestly don't understand how US regulation is going to be effective. Even the G20 couldn't do much because that'd skip the markets in Dubai, Africa, Singapore etc.


lots of hedge funds trade out of Switzerland these days
 
2012-03-06 01:35:03 PM  

LiquidSky: People trade oil outside the US


Let them pay inflated speculator driven prices if they want to. Meanwhile, we can buy directly from the Saudis and the Libyans.

Senator Sanders:

Forget what you may have read about the laws of supply and demand. Oil and gas prices have almost nothing to do with economic fundamentals. According to the Energy Information Administration, the supply of oil and gasoline is higher today than it was three years ago, when the national average for a gallon of gasoline was just $1.90. Meanwhile, the demand for oil in the U.S. is at its lowest level since April of 1997.

Is Big Oil to blame? Sure. Partly. Big oil companies have been gouging consumers for years. They have made almost $1 trillion in profits over the past decade, in part thanks to ridiculous federal subsidies and tax loopholes. I have proposed legislation to end those pointless giveaways to some of the biggest and most profitable corporations in the history of the world.

But there's another reason for the wild rise in gas prices. The culprit is Wall Street. Speculators are raking in profits by gambling in the loosely regulated commodity markets for gas and oil.

A decade ago, speculators controlled only about 30% of the oil futures market. Today, Wall Street speculators control nearly 80% of this market. Many of those people buying and selling oil in the commodity markets will never use a drop of this oil. They are not airlines or trucking companies who will use the fuel in the future. The only function of the speculators in this process is to make as much money as they can, as quickly as they can.

I've seen the raw documents that prove the role of speculators. Commodity Futures Trading Commission records showed that in the summer of 2008, when gas prices spiked to more than $4 a gallon, speculators overwhelmingly controlled the crude oil futures market. The commission, which supposedly represents the interests of the American people, had kept the information hidden from the public for nearly three years. That alone is an outrage. The American people had a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today.

Even those inside the oil industry have admitted that speculation is driving up the price of gasoline. The CEO of Exxon-Mobil, Rex Tillerson, told a Senate hearing last year that speculation was driving up the price of a barrel of oil by as much as 40%. The general counsel of Delta Airlines, Ben Hirst, and the experts at Goldman Sachs also said excessive speculation is causing oil prices to spike by up to 40%. Even Saudi Arabia, the largest exporter of oil in the world, told the Bush administration back in 2008, during the last major spike in oil prices, that speculation was responsible for about $40 of a barrel of oil.

Just last week, Commissioner Bart Chilton, one of the only Commodity Futures Trading Commission members looking out for consumers, calculated how much extra drivers are being charged as a result of Wall Street speculation. If you drive a relatively fuel-efficient vehicle such as a Honda Civic, you pay an extra $7.30 every time you fill your tank. For larger vehicles, such as a Ford F150, drivers pay an extra $14.56 for each fill-up. That works out to more than $750 a year going directly from your wallet or pocketbook to the Wall Street speculators.

So as speculators gamble, millions of Americans are paying what amounts to a "speculators tax" to feed Wall Street's greed. People who live in rural areas like my home state of Vermont are hit harder than most because they buy gas to drive long distances to their jobs.

It doesn't have to work this way. The current spike in oil and gasoline prices was avoidable. Under the Wall Street reform act that Congress passed in 2010, the Commodity Futures Trading Commission was ordered to impose strict limits on the amount of oil that Wall Street speculators could trade in the energy futures market. The regulators dragged their feet.

Finally, after months and months of law-breaking delays, the commission in October adopted a rule. It was a weak version of a proposal that might have put meaningful limits on the number of futures and swaps contracts a single trader could hold. Even the watered-down regulation adopted by the industry-friendly commission was challenged in court. The Financial Markets Association and the International Swaps and Derivatives Association wanted free rein to continue unregulated gambling in the oil markets.

So today, Wall Street once again is laughing all the way to the bank. Once again, federal regulators should move aggressively to end excessive oil speculation. We must do everything we can to lower gas prices so that they reflect the fundamentals of supply and demand and bring needed relief to the American people.

The time for real action is now.


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