Current supply-and-demand levels should place oil at $55 a barrel

[Fireweed247]

ANDERSON — Looking for someone to blame for high gas prices? Try speculators.

In May, in search of an answer to rampant price increases, the House and Senate both demonized oil speculation.

“A major contributor (to high oil prices) is the rise in speculation,” said Sen. Carl Levin, D-Michigan, estimating that speculation adds about $35 to a barrel of oil. “This is not a supply-and-demand issue.”

See, oil is a commodity that can be sold on the futures market. Futures are derivative investments whose price depends on the changing value of underlying products, products as varied as crops and interest rates. An investor who buys a futures contract is making a deal now to buy or sell a product in the future.

Hedgers produce or use commodities and buy futures contracts because they want to lock in a price, thereby avoiding risk. Speculators are willing to take risks that the price of commodities will go up or down.

Oil executives have told Congress that speculation might be responsible for half the current cost of oil. Leaders from five companies agreed that current supply-and-demand levels should place the price near $55 a barrel.

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http://www.theheraldbulletin.com/local/local_story_164203052.html

[Fireweed247]

1. another good LTTE

Word it getting out- they are lying about the reasons for the high cost of oil!!



The oil companies complain and swear that the problem is one of supply and demand and they have no control, but that is a lie. When the price was low, they complained that they could not make any profit from gas, but they never stopped producing the product and quietly began to buy out and even squeeze out the independent distributors. In the old days, there were about 200 independent distributors and refiners of gas. Now there are about five or six companies that own the whole system. Contrary to their lies, there was a lot of profit, and they used that profit to buy out and manipulate the system to gain control of the entire supply. They have worked to eliminate any competition, even any taxes, or to them “unnecessary costs,” by lobbying congress and rewriting tax laws to favor their end profit.

Another wrinkle is the Enron Loophole that allows non-producers of energy products to speculate on oil products and invest in the commodities including oil on the futures markets. This allows non-producers to profit from gasoline distribution without even touching the product. Today, they can add to their profits more from buying and selling oil than owning or selling stocks, and the commodities are pumping profit into the markets when stocks are lagging because the economy is really stagnant.

Big oil has found new ways to control everything on the oil market, and the real profit comes not from the oil, but from manipulation and control of the distribution of the gasoline itself.

— Robert B. Clipper,

http://www.superiortelegram.com/articles/index.cfm?id=28700§ion=Opinion

[Mojambo]

2. Congressman DeFazio was on Hartmann's show last week pointing this out.

He said Morgan Stanley actually owns more oil than anyone.

[KT2000]

9. Could this be a ploy

to recoup the losses from the mortgage securities?
The timing and speed of this suggests something - as in a planned, ccoperative effort among the big money houses to find money somewhere. Like the housing market, they seem to be creating their own "oil bubble."

[KillCapitalism]

3. $55 sounds reasonable to me.

That would put us back at $2.00 gas. Wow that seems cheap nowadays!

[NCDem60]

4. Don't forget the contribution of the falling dollar. (NT)

[Zynx]

20. Since the beginning of March the dollar is flat and oil is up 30%.

That's a fact.

[NCDem60]

33. Give me the facts from the last 18 months.

[Hawkeye-X]

5. When the new administration is installed - first thing Congress

needs to do is open investigations on speculators and profiteers - and send them to criminal court for further processing, indictments, heavy fines, and eventual forcing them to release their oil contracts, and open up SPR to get the price under control - freezing all their assets to be sent to the US Treasury immediately for relief.

HAwkeye-X

[DadOf2LittleAngels]

29. Can we start with Bill Clinton! and the 1999-2000 house?

What made the oil market speculation possible was legislation passed in the waning days of the Clinton administration. At the behest of energy-trading companies like Enron, a shadow electronic trading system was created that allowed speculators to trade oil futures contracts beyond the regulatory oversight of the Commodities Future Trading Commission. The CFTC is empowered to establish trading limits ‘‘as the Commission finds are necessary to diminish, eliminate, or prevent” the “burden” arising from speculation. Because the CFTC can’t track much of the oil trading now, it can’t stop the speculation. A U.S. Senate subcommittee report from June 2006 squarely blamed speculators for much of the rise in oil prices, estimating more than $60 billion had poured into the markets at that point.

[Speck Tater]

6. Never mind that oil experts say it's supply and demand. Let's ask a politician!

Like they know anything about anything.

So, let me guess. If you needed brain surgery you would ask your barber to perform it? After all, head, sharp instruments. Why not?

How long will people go on ignoring the real, concrete, factual, published, publicly available supply and demand numbers?

Facts? Who needs them when we have a scape goat?

[hokies4ever]

7. Makes you wonder about how the oil bubble will burst

and some speculators will be left out in the cold when that happens. I won't be shedding any tears for them. :rofl:

[SoCalDem]

8. A guy last week on CNBC said that at LEAST $75 a barrel was due to speculators

Oil should be a "protested" resource..necessary , highly regulated and NOT gambled with.

If the speculators want to "play around" with other stuff, fine..but NOT food or oil..

or let them do what Bill Bennet does..Go to Vegas and gamble with their own money...and not our money..

[readmoreoften]

10. What the market can bear, as they say.

Ain't that just like the old capitalismo!!!? Whoda thunk that it's the folks who own the means of production that control stuff!

[Monk06]

11. If the world monetary system collapses it will be derivatives that brind it down.

The futures market is three card Monty, a naked
Ponzi scheme. It produces nothing, takes productive
capital out of the market and destroys confidence in
currency.

M3 should be outlawed. No trade should be allowed outside
of asset based securities. All payment should be POS. If
you want to own it buy it. Options on future payment should
be outlawed.

[Raster]

12. Very simply put: we are seeing an unprecedented transfer of wealth worldwide.

again very simply: the inflated petroleum product prices reflect a market manipulated to yield the highest profit possible for the petroleum companies. "fair market" and "free market" are nothing more than buzz phrases. In addition, coordinated speculative action is increasing the profit capability yet again. And before I get pummeled with peak oil, I do believe. The brunt just has not hit the United States yet. Supply, infrastructure and overall demand do not rationalize oil prices this high in the US

yet.

Right now the ever-rising price at the pump can squarely be laid at the feet of deregulation and carnivore capitalism.

[lostnotforgotten]

13. Peak Oil - www.theoildrum.com - Your Looking For Scapegoats

Where none can be found.

The media is purposefully creating scapegoats to appease the sense of outrage felt by the public.

Truth is that geology is at play and we have hit a proverbial brick wall where the amount of oil we want to pump cannot be supplied by mother earth.

Sincerely, do your homework.

-----
Two good recent articles.

http://www.independent.co.uk/environment/green-living/fade-to-black-is-this-the-end-of-oil-845092.html

http://www.theglobeandmail.com/servlet/story/LAC.20080614.RCOVER14/EmailTPStory/Business

[Raster]

15. Dude, we believe in Peak Oil. Only it's brunt has not been felt in the States yet.

Soon, but not yet. We are seeing artificial price highs--RIGHT NOW, TODAY--due to price gouging, deregulation, war profiteering and RAMPANT speculation. Persons and institutions of influence, specifically the Texas-American Petroleum Mafia and their foreign cartel allies--are gaming the system to generate the highest profits for themselves as quickly as possible.

[MadHound]

25. The brunt of peak oil has been felt in the US, for decades now

Remember the '70's? Part of that oil shock was the fact that US oil wells had hit their peak and were in decline. This was confirmed when, during the eighties, oil well after oil well across this country shut down due to the lack of cheap, easy to drill oil.

The same thing is happening overseas right now, especially in the ME. The largest oil field in the world, the Gharwar in Saudi Arabia, is dying right now. They are having to pump in twice as much seawater into the field than the volume of oil they're getting out. This is the sign of an oil field in deep decline. There are no other known oil fields like Ghawar left, it was discovered nearly fifty years ago, and there has been nothing since that has come close to it.

Meanwhile, fields throughout the ME are also drying up. Iraq is sitting on the second(some say first) largest oil reserve left, but getting delivery out of there is spotty at best. The rest of the world's oil reserves aren't that great, and the world demand is quickly burning through them.

Yes, speculators are having some influence on the price of oil, but the brutal, frank truth of the matter is simple, the world is now quickly running out of cheap crude oil, there is less than half the reserves of cheap oil left, and we're in a downhill slide. We absolutely have to develop alternatives to oil, now. Otherwise the entire world is going to be screwed.

[Zynx]

18. What the price should be 10 years from now has little to do with what it should be right now.

[theboss]

22. Peak oil does not explain a doubling of price in one year

And a quadrupling since 2003.

[lostnotforgotten]

26. Suer Does If The Refiners Are Competing Globally For Available Supply

Which is the case right now since oil is a fungible commodity, at least for light sweet crude.

Heavy Sour and Bitumen sources require special refinery capacity.

[midnight]

14. It can be summed up by one word " MANipulation".

[the other one]

16. Interesting NONSENSE!!!!!!!!!!!!!!!

The "blame the speculator" meme is all over the place, but according to the market, the price according to supply and demand is THE CURRENT PRICE!! And if it is just speculation, then the price will quickly drop back to normal levels, as prices always do after a bubble.

Every sale requires a seller and a buyer. If the prices that were being asked were too high, demand would drop to a level that would require price to drop to match.

The truth is, that the price of oil has been ARTIFICIALLY LOW for many years, and it is now beyond the power of the US to keep that price low. What we are seeing is the price of oil merely seeking its proper level. And folks, its proper level is still higher than it is now. Believe me, in 18 months we will all look back fondly at the days when one could buy gas as cheap as $4.00 a gallon.

(At a July 4 party in 2006 I said that we would look back and wish for the days of $3.00 gas. I was laughed out of the room. Frankly, I think in five years we will be telling our children about the days when ANYONE could just go out and buy their own gas for ANY AMOUNT of money. After $200 per barrel comes rationing, and then unabailability, and then comes a total breakdown of society.)

These are the good old days.

[taterguy]

17. Way to be a buzzkill

[Zynx]

19. There's so much wrong with what you said I'm not sure where to begin.

First of all, you demonstrated an Econ 101 understanding of prices. The fact of the matter is that oil consumption is probably just about the most inelastic demand out there as a 300% price increase has not resulted in reduced demand at all. People cannot simply forgo consumption, they have to take it as given. As such, speculators can indeed drive the price irrationally high and the price will be accepted regardless because people don't have a choice. It would be similar to if a water utility raised rates 150%. People would bitch and moan, but would have to take it, except people can probably actually cut their consumption of water more easily than they can cut their consumption of fuel.

The idea that any current price is also the efficient market price is total nonsense. Oil is not a perfectly competitive market. In fact, virtually no perfectly competitive markets exist when you look at the conditions necessary. Prices in the oil futures market, like any financial instrument, can go well beyond the point of fundamentals and the pricing can have quite little to do with economics. For example, oil yesterday traded in a range of $133 up to $140 before coming back down. Did the economics of oil fluctuate that much yesterday? The price accepted in the futures pit has much more to do with the demand for oil contracts among traders than the demand for barrels of oil.

[TahitiNut]

32. I think that's the Enron shareholder gene pool you're addressing.

:silly:

[tbyg52]

21. OK. Assuming you are correct

I think we can still agree that unregulated futures trading (per that Gramm amendment) is not a good thing. How about we shine some light on what's going on (start by repealing that amendment) and see what happens?

[Rosemary2205]

23. LOL

[theboss]

24. Oil consumption is not driven by simple supply and demand

As others have pointed out, it's not the type of commodity that people can simply decide to forego like, say, coffee.

[TahitiNut]

31. Well ... I guess that's the sophomoric perspective.

:shrug: Gotta love Econ 101 ... Alice in Wonderland.

I just LOVED hearing this shit back when Enron & cronies were ripping off California for $11 billion.

:eyes:

[Fireweed247]

27. Gramm slipped in the legislation to make this possible- we are being Enroned

McCain Closely Connected with man responsible for high Gas Prices!
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x3463000

[indepat]

28. The is no speculation in the price of oil: it's all supply/demand if I heard Joe right on

CNBC'c Squawk Box this morning. After all, that's what the Secretary of Treasury had said and any word emanating from the mouth of anyone in this administration can be taken as the gospel truth and reported by CNBC as such. :D

[Fireweed247]

30. Amazing how they are all in on it together

We need to get the word out there. This is the one issue that affects everyone and maybe the way to get through to the people that just aren't getting it about the corporate control of our government and media.