Democrats were right about oil speculation.

[Joanne98]

by: Hopeful
Thu Aug 21, 2008 at 01:09:39 AM EDT

"Fool me once, shame on you. Fool me twice, shame on me."
During the California energy crisis of 2000-2001, I remember the many explanations from Republicans and free marketers of what was going wrong: Lack of new generators, a single natural gas pipeline, insufficient dedication to deregulation -- basically Democrats interfering with the benevolent invisible hand. In reality, as ordinary people suspected at the time, a large part of the problem was manipulation of the markets by Enron and other energy companies. So I have been listening to Rob Andrews, Bob Menendez, and other Democrats who have suspected speculators are partially responsible for the oil price bubble. Naturally the usual suspects on the right have said it's impossible to manipulate the market and there should be no regulations.

So I wasn't suprised to see in today's Washington Post that A Few Speculators Dominate Vast Market for Oil Trading


The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.
The CFTC, which learned about the nature of Vitol's activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency. That figure may rise in coming weeks as the CFTC checks the status of other big traders.

Vitol is a private Swiss company that bid up oil prices using as little as $1 billion in acyual money, thanks to the magic of leverage and financial trickery:


To build up the vast holdings this practice entails, some swap dealers have maneuvered behind the scenes, exploiting their political influence and gaps in oversight to gain exemptions from regulatory limits and permission to set up new, unregulated markets. Many big traders are active not only on NYMEX but also on private and overseas markets beyond the CFTC's purview. These openings have given the firms nearly unfettered access to the trading of vital goods, including oil, cotton and corn.
The most astonishing fact is "CFTC data show that at the end of July, just four swap dealers held one-third of all NYMEX oil contracts that bet prices would increase."

Capitalism can't function without fair government regulation. As the Post notes, this disaster was enabled by a new Bush rule in 1991 and a Republican law passed in 2000. We need Democrats who are willing to regulate to protect the public and every honest business.

http://www.bluejersey.com/showDiary.do?diaryId=8752

[seabeyond]

1. how does this effect the price to the consumer?

talk real slow.... lol.

[Joanne98]

3. The more the price of a barrel of oil goes up. The more the price of gas and diesel

go up. It drives everything up. Food and commodities. Oil is in fertilizer and it's takes diesel to truck food around. It drives everything up.

[Joanne98]

2. kick

[TexasObserver]

4. when Obama takes office and the war wind down is real, the price of oil will drop

even further

Fear, war, reduced production from war, speculation, and terror fears have all made oil spiral far beyond the point natural market forces would have driven it.