Gas could fall to $2 if Congress acts, analysts say by limiting speculation in energy-futures market

[EV_Ares]

Limiting speculation would push prices to fundamental level, lawmakers told.

By Rex Nutting & Michael Kitchen, MarketWatch

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.

rest of the article at link: http://www.marketwatch.com/news/story/gas-could-fall-2-if/story.aspx?guid=%7B2673C102%2D68E0%2D41D9%2D9C9A%2D10EE2E723948%7D

CNBC Poll:

Should the government crack down on oil market speculators? * 3904 responses

Yes. They are driving up prices -----------73%

No. Don't interfere with free markets------24%

Not sure-----------------------------------3.1%
Not a Scientific Survey. Results may not total 100% due

link if you want to vote: http://www.cnbc.com/id/25329659

[Donnachaidh]

1. Is there any way of finding out if our dear reps are playing in the specs market?

After all, none of them seem to have a problem with making money from the Military Industrial Complex. I'd love to see if any REAL reporters could track this down and expose ALL the players.

And yes, I won't be holding my breath.

[paparush]

2. What? Put LIMITS on capitalism? Surely you jest? Us? Regulate? HA!

Government of the profit, for the profit, by the profit laughs at these shenanigans.

[progressoid]

10. Exactly. Besides, if we regulate capitalism then there won't be any profits to trickle down on us.

or something like that. :eyes:

[Leopolds Ghost]

22. Because socialism is all about lowering the cost of oil

So we can continue to drive twice as much as they did in the 70s, right?

[rucky]

24. Free Market! (just keep those subsidies and tax breaks coming).

[SammyWinstonJack]

35. LOL! Indeed!

[Fireweed247]

3. Can't we just cancel the "Enron loophole"

Gramm has forgotten he ever pushed that legislation through in the first place.


http://www.texasobserver.org/article.php?aid=2767
Last September, Michigan Democratic Sen. Carl Levin introduced legislation to close the loophole, citing two congressional reports blaming it for excessive speculation that has “unfairly increased the cost of energy in the United States.”

In announcing his legislation on the Senate floor, Levin noted that the Enron loophole was “inserted at the last minute, without any opportunity for debate, into commodity legislation that was attached to an omnibus appropriations bill ... in the waning hours of the 106th Congress.

“The loophole has helped foster the explosive growth of trading on unregulated electronic energy exchanges,” Levin said. “It also rendered the U.S. energy markets more vulnerable to price manipulation and excessive speculation with resulting price distortions.”

Asked about Levin’s legislation, Phil Gramm expresses ignorance. “I don’t know what provision in the law he’s talking about.”

[anigbrowl]

5. That's just one of many structural problems

In itself, it won't make prices magically go back down. And neither will closing the London loophole regarding reporting requirements. I'd say these account for maybe 10-15% of the price, but closing them won't just reset it to where it used to be (although I do think they should be closed).

[Leopolds Ghost]

23. We could strip-mine the Arctic and divert 50% of NA Gas supplies to burn tar into oil.

That would help prevent peak recoverable oil from happening last year or
the year before.

[anigbrowl]

4. I'm a big fan of Masters, but this sounds over-optimistic

Back to $3, quite likely. $2, I really don't think so. Recall that not all exchanges are under US control (because some are simply not in the USA), and consider too that if the price took a nosedive OPEC countries would probably trim production severely so as to limit the effects on receipts. I really don't see the price halving in the space of 30 days. Nor do I believe Congress will pass such legislation, because of the economic blowback that would result if such a short-term correction took place. I believe they would rather let the air out of the bubble slowly rather than risk a sudden crash.

And while I share Masters' belief that index speculation is responsible for much of the recent rise in prices, it's a fact that the fundamentals of the market have been changing and demand is escalating while easily-accessible supply is dropping. Those fields like the ones in Montana and Canada are not competitive unless oil is above a certain price, but people wouldn't be investing there if they felt the high prices were only due to market manipulation.

[Initech]

6. I've been saying this for years, and I'm no econ major by any stretch of the imagination.

[Rosey]

7. Wasn't this kind of speculation regulated before?

Wasn't it just recently deregulated?

[ThomWV]

8. I watched as much of the Hearing as C-Span was able to show

It confirmed exactly what I have been saying here for damned near a year now. Speculation, nothing more, is what is causing the problem we have now. It is not Peak Oil, it has nothing to do with supply and demand, it is not based on lack of refining capacity. I will watch the entrie thing when its shown again later tonight and will certainly bookmark the section on the C-Span site where it can be found once it becomes available and I can find it.

[KG]

9. ok, 24 per cent of americans like red-hot pokers jammed up their butts as long as it

doesn't interfere w/ free markets. sheesh.

[last1standing]

14. You think it's a coincedence that about the same number still supports bush*?

I'm thinking there may be some overlap there. :shrug:

[Leopolds Ghost]

25. As long as liberals get to drive 100 miles a day on average, you mean.

Including driving across the street from one strip mall to another.

Yes, I'm pointing fingers at the capitalist enablers --> ordinary liberal consumers.

[spanone]

11. a cheap way of blaming the 'democrat' congress

[pt22]

12. So how do you enforce a law like that all over the world?

:eyes:

[hunter]

13. If we haven't hit the limits of oil production now, when?

Obviously the stuff isn't going to last forever, and what's left is going to be harder and harder to extract.

[aint_no_life_nowhere]

15. I heard someone on CNBC this morning say that commodities speculation

has multiplied 20 fold in the last 5 years. That sounds absolutely incredible to me. Another talking head this morning said that regular stocks require a 50% margin to be pluncked down by stock investors but that oil speculators get away with a 3% margin, meaning they can happily gamble away as much as they want with other people's money.

[graywarrior]

16. Do we get reimbursed for the money they've stolen thus far?

[aint_no_life_nowhere]

17. "No. Don't interfere with free markets" - very deceptive way to put it

There are no "free markets". Markets even in capitalistic countries are regulated. There are mountains of regulations imposed by the SEC on stock transactions. Congress has regulated markets virtually throughout its history. It's just that commodities trading seems to have recently enjoyed less regulation than other market areas. CNBC is making it sound like Congress is attempting to end capitalism itself.

[tridim]

18. Pretty good result for a blatant push-poll.

Why the hell can't it just say, "Yes" and "No"?

[Leopolds Ghost]

19. THIS supposed to be a GOOD Thing?!? Gas was $4 in Europe 20 yrs ago thanks to sound enviro policy.

Dems are like a frog in a pot of boiling water, asking
President Obama to lower the price of a poisonous pollutant,

NOT asking him to overturn FISA, and praising him for
his support of Clinton-style economic policy (welfare reform)..

[mrreowwr_kittty]

29. But in Europe the high prices are from taxes

Which are used to invest in government programs, including transportation. High prices that are a result of investors bilking working people help no one but those investors.

[Leopolds Ghost]

33. But how are we supposed to tax oil properly then?

If the consumer price is capped?

[lonestarnot]

37. But as it is we have neither.

[Catherina]

20. Oh but that would be so unfair to the rich! n/t

[Leopolds Ghost]

21. See above post

[Mountainman]

26. Bush would never sign such a bill, we would have to wait for President Obama

[Leopolds Ghost]

28. Not a single oil skeptic on this thread. You guys would HATE Europe.

Or anywhere they use less oil

(and electricity for unnecessary outdoor lighting.)

[Mountainman]

30. I think you are making the case for high priced gasoline.

If so I can understand that there will be no alternatives looked at if we can afford to drive by paying $2.00 a gallon. On the other hand if we have a good energy policy that was based on getting us off of carbon fuels while paying $2.00 per gallon I would like it.

[Leopolds Ghost]

32. Where else are we supposed to get the money to build mass transit?

Gas taxes... it's the only way Europe is able to pay for this stuff.

What happens to $2.00 domestic-only oil when all the overseas oil
producers become net importers and establish a Federal Reserve-style system to move oil from one vault into another, like gold and diamonds?

We'll have shortages, plus no money left over to rebuild our suburbs.

Here's an idea, high gas taxes plus price controls on wholesale oil.
Keep the price at $4 but use the money to build transit instead of
line someone's pockets. Let wildcatters invest in developing new
oil fields.

Of course Congress is too corrupt to do that.

[EV_Ares]

31. Have been in europe and certainly would not hate it and there is no comparison

between europe and here. The energy people and republicans talk about europe and what they have been paying and now paying for gas. However, they fail to mention you can go anywhere in europe via rail, mass transit of some sort. It is not spread out in suburbs like here and you can live there like in NY city without a car if you want. Europe is not cali-fornicated.

Why would anyone hate that?

[Leopolds Ghost]

34. A lot of Americans claim to hate that style of (more urbanized) living.

Of course, they then turn around and ask government to keep developers
from building parking-free, European-style housing in their town, saying:

"nobody wants it but if we let them, that's what developers will give us."

They never notice the irony.

[EV_Ares]

38. Yeah, isn't that the way is is. However, was thinking you might like a couple of docs on DVD.

They are the end of suburbia, can get it at Netflix.

"This provocative documentary, a regular on the film-festival circuit, examines the history of suburban life and the wisdom of this distinctly American way of life. A post-World War II concept, suburbia attracted droves of people, giving rise to sprawl and all that comes with it -- good and bad. How has the environment been affected by this lifestyle, and is it sustainable? Canadian director Gregory Greene dares to ask all the tough questions."


and a sequel, "Escape From Suburbia" which will be released on DVD in July.

[raccoon]

39. A lot of Americans are morans, as I'm sure you know already. nt

[Leopolds Ghost]

27. Energy FUTURES, people. Predicts the FUTURE price of oil.

Why don't we get a DU betting pool on the future price of oil post-peak?

And see whether you people step in and ask Skinner to prevent you guys
from getting fleeced by making bad business decisions by continuing to
support cheap oil?

[mdmc]

36. but didn't a deregulated free market make America what it is?

[raccoon]

40. Then we should be calling our Congresscritters! nt

[Daemonaquila]

41. Except... you'd need international regulation

I completely support regulation, but they're wrong in one key area when they're talking about regulation in US markets. It won't drop prices because the speculators will just move to an unregulated market overseas. The end result will be oil priced just as high unless it's a coordinated international effort.