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Thrill Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 03:00 PM
Original message
Gas could fall to $2 if Congress acts, analysts say
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endarkenment Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 03:03 PM
Response to Original message
1. I do believe the analysts are full of shit.
But I could be wrong.
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PBS Poll-435 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 11:33 PM
Response to Reply #1
10. Well....Half of their name is "Anal"
:shrug:
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flpoljunkie Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 03:08 PM
Response to Original message
2. Democrats need to pass this post haste, and dare Bush to veto the bill
WASHINGTON (MarketWatch) -- The price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy-futures markets, four energy analysts told Congress on Monday.

Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.

Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters' assessment at a hearing on proposed legislation to limit speculation in futures markets.

Krapels said that it wouldn't even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in futures markets.
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Bake Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 04:50 PM
Response to Original message
3. Is this the "Enron loophole?"
Bake
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Spider Jerusalem Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 04:59 PM
Response to Original message
4. No, it can't; they're wrong.
Congress CAN'T act to end speculation in energy markets. Not when the price per barrel of a gallon of oil is set on the world market and there are other exchanges besides the New York Mercantile (such as the London Petroleum Exchange). I'd LOVE for these analysts to explain why they think ANY action by the US Congress would affect speculation on international markets, or why the cost of an internationally traded commodity, of which the US IMPORTS 75% of what it uses, would become drastically lower as a result. This is, I'm afraid, total nonsense.
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quaker bill Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 07:11 PM
Response to Original message
5. Rationalizations
I see cropping up here aside, speculation in the futures markets is not harmless abstract activity. Speculation can and does artificially drive up demand and this has impacts on prices. For an example, one need look no further than the housing market. Properties were bought on enormous margins and then quickly flipped for capital gains. As long as there was someone in the market, the proverbial "greater fool" in the ponzi scheme, it worked.

The day the "greater fool" took the day off, the bottom fell out. Now, if congress acts to take speculation out of the biggest player in the market, some will still attempt speculation, but the "greater fools" will be less common and harder to find. Artificial demand will be reduced and prices will fall. It is after all a market, remove even some of the demand, and prices will invariably fall. How much will only be seen by attempting it.

I see no good reason not to do it.
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RichardRay Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 07:38 PM
Response to Reply #5
6. Equating the housing market to the oil markets is flawed.
Houses are pretty well anchored in space. The people who want them are limited by that physical anchoring of the asset and the relatively limited uses to which a house can be put. Oil, on the other hand, is highly fungible, the supply is commingled world wide and the range of uses to which it can be put is nothing short of amazing. There is no more barrier to the movement of oil than there is to the movement of oil dollars. If the U.S. government acted to end speculation in oil futures on U.S. based markets the move to other trading platforms would take about a day, mostly just to get through one trading day all the way around the globe so everybody could get their funds out of the U.S. and into the new locations.

As long as future demand is seen as increasing, and as long as supply isn't seen as growing to meet it, then the value of oil futures will continue to climb. Reduce the demand or increase the supply and the market will cool instantly. There is no need for a 'greater fool' to keep it moving, just the world markets.

If the goal is to reduce fuel costs, or even the price of a barrel of crude, the change wouldn't change a darn thing. The speculators would be untouched. About the only folks who would feel the change are the folks whose jobs are anchored in the physical locations of the markets in the U.S.

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quaker bill Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jun-24-08 06:47 AM
Response to Reply #6
15. Not as flawed as you think
yes a particular barrel of oil can be easily moved from one place to another, however this is not relevant to asset speculation, as most speculators never actually touch the stuff. In the larger concept, the final destination of oil is to the places where it is used, a relatively fixed location with minor variations around the margins. Further, location is not relevant, as again, most speculators never take possession of the product.

Houses don't move, but the funds speculating in this asset do. Now, when you slice up mortgages into tiny bits and repackage them into securities, they become almost indistinguishable as financial instruments from oil futures.

Just like oil, many folks speculating in real estate never intended, and in some cases never could have taken possession of the real property. It was simply a wager on the market in abstract paper related only vaguely to the real asset. Flipping the paper back and forth created apparent aggregate demand for housing that did not truly exist, much the same as oil futures can and do.



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RichardRay Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jun-24-08 11:56 AM
Response to Reply #15
16. Delivery is still a key issue.
I think it is germane. In the housing market the asset was real and fixed. A final 'greater fool' who would actually take possession had to be found. That party had to need and use the asset where it was located. In oil futures speculation the oil can be easily delivered to any location world wide, as a matter of fact much of it is already en route while the trading is taking place. With the rise of the economies in China and India and the continued demand in the old economies in the U.S. and Europe there is no sign of a downturn in the market, so the speculators don't need a 'greater fool'.

If there were some real international movement toward alternative energy sources that would change worldwide demand for oil within the trading horizon the speculators are working on, then there would certainly be a scramble to unload the options, but I don't see any sign of that as yet. As long as that doesn't happen the aggregate demand is real and the prie will continue to rise.

Note that I certainly don't think the speculators are creating value, and their actions are certainly causing strange events to occur in all markets, but I don't see banning such activity in the U.S. as an effective way to end the problem.
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davsand Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 08:31 PM
Response to Original message
7. Aren't the Saudis saying this same thing?
Edited on Mon Jun-23-08 08:33 PM by davsand
Didn't I just read an article in the last few days where the Saudis are also talking about the speculators driving these prices up?

I have to wonder about it...


:shrug:


Laura

Added on edit:

Yep, that IS what the Saudis are saying. Here is a link to the LBN article on the subject:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3362417
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Hippo_Tron Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 10:48 PM
Response to Original message
8. Horseshit
Edited on Mon Jun-23-08 10:49 PM by Hippo_Tron
Repeat after me "increased global demand" "increased global demand". Gas is never going to be $2 a gallon again.

(BTW, not targeted at you, targeted at the people testifying before this committee)
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Douglas Carpenter Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jun-23-08 11:32 PM
Response to Original message
9. this is simply absurd. Speculation may be a major part of what is happening, even the Saudis say
Edited on Mon Jun-23-08 11:37 PM by Douglas Carpenter
that. But the simple reality is that speculation only works when the supply and demand equation attracts speculators. Cheaper gasoline prices will only mean increased demand on the global markets where speculation matters most, Under the current world economic order, as long as the supply and demand principle attracts speculation, speculation will continue. New York and San Francisco's rent control laws hardly kept housing prices from rising.

My goodness Europeans were paying at least $4.00 per gallon 30 years ago. Even in poor, almost third world Turkey, gasoline is $10.00 a gallon and they still cannot sell the stuff fast enough.

It may indeed be a good idea for the entire global economy to reexamine the principles of so-called "free trade" and find ways to minimize speculation. But speculation cannot really be restrained significantly under the current world order since it works within the global consensus and its allowance is an inherent and intrinsic principle. To change this would only require the entire global economy working in concert to reverse the trends of the last several decades. That might be a good thing. But it would cause quite a shock to the current world economy and I cannot see the political consensus to do so in the near future.

Still even then, none of this will change the reality that the world is using up its fossil fuels. The less incentive there is to restrain that use, the faster they will be depleted.

There is NO real answer to this problem. It would however help a lot if the global community massively intervened to promote low cost non-fossil fuel consumption and low cost mass transit and prepared for the inevitable future where there is minimal and very expensive oil.
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Tillseptember Donating Member (11 posts) Send PM | Profile | Ignore Tue Jun-24-08 12:09 AM
Response to Original message
11. It's not up to congress
It's up to OPEC.
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baldguy Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jun-24-08 12:22 AM
Response to Original message
12. Does Dingall have a bag of magic pixie dust in his briefcase?
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berni_mccoy Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jun-24-08 12:57 AM
Response to Original message
13. WOW, RWers are calling for the Government To Interfere with their PRECIOUS FREE MARKET?!?!
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davidpdx Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jun-24-08 02:36 AM
Response to Original message
14. I tend to agree that this won't happen
Congress can't do much to curb speculation on oil prices. The summer before I moved to Korea (2003), gas was still around $1.79 a gallon. When I went home this past summer it was $3.00 a gallon, now up to over $4.00 a gallon. We will never see times (like 2003 or before) again.
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