Oil Speculators on Wallstreet are the Problem

[g5000]

As commodities futures and derivatives began to get more and more complicated, the SEC and the CFTC had a lot of turf wars over who would regulate these ever more complex instruments. The turf wars resulted in deadlock.

Then, the Commodities Futures Modernization Act of 2000 ended the deadlock by making all of them virtually completely unregulated.

The speculators were unleashed, after 65 years of containment.

Hello $4.00 gas.

Dodd-Frank created the Consumer Financial Protection Bureau (CFPB). Among other things, the CFPB is tasked with reining in speculators.

To do so, the CFPB has to define who are "end users" and who aren't.

Needless to say, the CFPB was completely mobbed by Goldman Sachs, JP Morgan, Morgan Stanley, and a long list of other speculators trying to get defined as "end users".

They are completely shameless about it, even though they are quite obviously not end users. But this is such arcane stuff way over the heads of the public's understanding of these issues that they can get away with it if they get the right people at the CFPB in their pockets.

And that is why Elizabeth Warren was completely unacceptable to them.

Because of speculators and because Wall Street hosed the economy so badly, derivatives contracts will have to be sold through exchanges. And if you want to buy or sell derivatives, you must make an insurance payment in the event one of the participants in the exchange defaults on its contracts.

You know, like Lehman Brothers. Lehman wrote contracts they could not fulfill. And LTCM before them. It's all about posting collateral, which they did not do. Or they multiply-posted the same collateral for multiple clients.

Because the interlopers screwed everything up and now even end users have to go through an exchange, this makes the cost of doing business go up for end users. This is completely unfair to end users.

And so the new law allows for end users to get a big discount on the amount of insurance they have to pay.

So that is why the big Wall Street firms who fucked everything up for everybody are now trying to get tagged as end users!

This is about as assholish as it gets. They screwed everything up and now they want to be treated the same as the victims. The victims being you, dear reader.

 

[g5000]

Some firms, like Goldman Sachs, now actually take delivery of precious metals. This is not only so they can claim to be end users. This is also so they can corner the market on these metals.

If you know how to Google around, you will find Sachs takes delivery of metals, but then slows the throughput to real end users to a tiny, tiny, tiny trickle. This creates an artificial drop in the "supply", and drives up prices.

 

[sealybobo]

High prices cause producers to increase production?
Really? Then why aren't more refineries operating to bring down gas prices?
No...in fact refineries are shutting down, aren't they?

Oil companies are closing refineries on purpose to jack up the price because demand is low.

Forget the theories of supply and demand. They don't exist when you have a monopoly.

 

[KissMy]

Speculators have become too much of a good thing. Not just oil speculators. Commodities speculators in general....

As I explained this to some 9-year olds, one of them interrupted. "ON A RUMOR?"

I had been using her as Farmer Jones, and a boy as Grocer Smith, and another girls as Speculator Adams. So I quickly pointed to her and said, "YES! If there is a rumor of an upcoming war with Iran (pointing at her, instantly changing her from Jones to Iran), then any country that buys oil from Iran (pointing at the boy, who had been Grocer Smith) will panic and go to the Speculator (pointing at other girl) to get locked into a future price for their oil."


All three instantly understood.

There are quite a few problems with your over simplified description of the commodities market. First of all futures contracts are for a fixed amount of product to be delivered on a certain date. If a farmer contracted 1 million apples & only raised 750,000 then he would have to go onto the market & buy those 250,000 apples regardless of the cost. That is a major deterrent that keeps farmers from contracting 100% of their production to speculators. Farmers leave a lot of margin for weather. A bumper crop can wipe out the speculator.

The speculator has to do something with all those excess apples that they contracted & will get wiped out if they jack up prices & cause a drop in demand.

As for oil, Government is causing the war & supply disruption rumors. Supply & stockpiles must be tight in order for speculators to capitalize on this. Government is restricting supply & transportation of oil. This is limiting supplies causing prices to rise.

 

[KissMy]

High prices cause producers to increase production?
Really? Then why aren't more refineries operating to bring down gas prices?
No...in fact refineries are shutting down, aren't they?

Since democrats have been attacking the oil companies about all the gasoline that we are exporting. Closing the high cost refineries in the USA & opening them near the oil source makes more sense for selling on the global market. Thank the democrats for costing the USA more jobs & shipping the oil business overseas making the oil/gas industry more opaque to us allowing more manipulation.

 

[g5000]

Speculators have become too much of a good thing. Not just oil speculators. Commodities speculators in general....

As I explained this to some 9-year olds, one of them interrupted. "ON A RUMOR?"

I had been using her as Farmer Jones, and a boy as Grocer Smith, and another girls as Speculator Adams. So I quickly pointed to her and said, "YES! If there is a rumor of an upcoming war with Iran (pointing at her, instantly changing her from Jones to Iran), then any country that buys oil from Iran (pointing at the boy, who had been Grocer Smith) will panic and go to the Speculator (pointing at other girl) to get locked into a future price for their oil."


All three instantly understood.

There are quite a few problems with your over simplified description of the commodities market. First of all futures contracts are for a fixed amount of product to be delivered on a certain date. If a farmer contracted 1 million apples & only raised 750,000 then he would have to go onto the market & buy those 250,000 apples regardless of the cost. That is a major deterrent that keeps farmers from contracting 100% of their production to speculators. Farmers leave a lot of margin for weather. A bumper crop can wipe out the speculator.

I use exaggerated examples to better illustrate how the process works.

The speculator has to do something with all those excess apples that they contracted & will get wiped out if they jack up prices & cause a drop in demand.

And that is exactly what happened in the fall of 2008. The oil speculators (who are your bank and your fund manager) got badly damaged. The same thing happens in the food commodities markets, but that does not get nearly the same attention.

As for oil, Government is causing the war & supply disruption rumors. Supply & stockpiles must be tight in order for speculators to capitalize on this. Government is restricting supply & transportation of oil. This is limiting supplies causing prices to rise.

"Wars, and rumors of wars."

 

[g5000]

Speculators have become too much of a good thing. Not just oil speculators. Commodities speculators in general....

As I explained this to some 9-year olds, one of them interrupted. "ON A RUMOR?"

I had been using her as Farmer Jones, and a boy as Grocer Smith, and another girls as Speculator Adams. So I quickly pointed to her and said, "YES! If there is a rumor of an upcoming war with Iran (pointing at her, instantly changing her from Jones to Iran), then any country that buys oil from Iran (pointing at the boy, who had been Grocer Smith) will panic and go to the Speculator (pointing at other girl) to get locked into a future price for their oil."


All three instantly understood.

There are quite a few problems with your over simplified description of the commodities market. First of all futures contracts are for a fixed amount of product to be delivered on a certain date. If a farmer contracted 1 million apples & only raised 750,000 then he would have to go onto the market & buy those 250,000 apples regardless of the cost. That is a major deterrent that keeps farmers from contracting 100% of their production to speculators. Farmers leave a lot of margin for weather. A bumper crop can wipe out the speculator.

I use exaggerated examples to better illustrate how the process works.

The speculator has to do something with all those excess apples that they contracted & will get wiped out if they jack up prices & cause a drop in demand.

And that is exactly what happened in the fall of 2008. The oil speculators (who are your bank and your fund manager) got badly damaged. The same thing happens in the food commodities markets, but that does not get nearly the same attention. And in that case, the traders set the deals so the speculators were only able to speculate in one direction. So each time they rolled over their options, they had to go higher and higher. A crash was inevitable. At all of our expense.

As for oil, Government is causing the war & supply disruption rumors. Supply & stockpiles must be tight in order for speculators to capitalize on this. Government is restricting supply & transportation of oil. This is limiting supplies causing prices to rise.

"Wars, and rumors of wars."

 

[g5000]

How Goldman Sachs Created the Food Crisis - By Frederick Kaufman | Foreign Policy

This newfangled derivative product was "long only," which meant the product was constructed to buy commodities, and only buy. At the bottom of this "long-only" strategy lay an intent to transform an investment in commodities (previously the purview of specialists) into something that looked a great deal like an investment in a stock -- the kind of asset class wherein anyone could park their money and let it accrue for decades (along the lines of General Electric or Apple). Once the commodity market had been made to look more like the stock market, bankers could expect new influxes of ready cash. But the long-only strategy possessed a flaw, at least for those of us who eat. The GSCI did not include a mechanism to sell or "short" a commodity.

This imbalance undermined the innate structure of the commodities markets, requiring bankers to buy and keep buying -- no matter what the price. Every time the due date of a long-only commodity index futures contract neared, bankers were required to "roll" their multi-billion dollar backlog of buy orders over into the next futures contract, two or three months down the line. And since the deflationary impact of shorting a position simply wasn't part of the GSCI, professional grain traders could make a killing by anticipating the market fluctuations these "rolls" would inevitably cause. "I make a living off the dumb money," commodity trader Emil van Essen told Businessweek last year. Commodity traders employed by the banks that had created the commodity index funds in the first place rode the tides of profit.

 

[GHook93]

Same thing Dick Morris and Bill O'Reilly screamed about when gas went up during the Bush years. Funny the libs didn't care about that then.

Here is the causes:
(1) Government actions! Things like opening up drilling offshore, ANWR, in the Gulf etc and publicizing them would trend. Shooting down a pipeline from Canada is another. not allowing drilling CO is another. Government action to show a commitment to drilling stateside would help 10 fold.

(2) Disallowing oil exports is another cause. More 50% of the oil drilled in the US is exported, because they can sell it at a greater profit overseas. Don't fore them, but give them disincentive, such as a 30% oil export tax

(3) EPA viewed as out of control raises prices.

(4) Oversea instability. Syria civil war. Iranian threats hurt.

(5) Speculation: Yes you are correct. No matter what whether they are speculating up or down adds to the price. Obama, as Bush could have, could end speculation. I believe he won't do it, because he truthfully doesn't want it lowered.

 

[KissMy]

And that is exactly what happened in the fall of 2008. The oil speculators (who are your bank and your fund manager) got badly damaged. The same thing happens in the food commodities markets, but that does not get nearly the same attention. And in that case, the traders set the deals so the speculators were only able to speculate in one direction. So each time they rolled over their options, they had to go higher and higher. A crash was inevitable. At all of our expense.

In order to roll over a futures contract the oil must be stored & re-contracted into the futures market. This excess oil stored in inventory drives down oil price & screws speculators who roll over those contracts. This is why in 2008 investment banks rented oil tankers to store oil out in the ocean to keep it from showing in inventory. This also served to create a shortage of oil tankers to deliver oil to markets driving up prices. This is how an Enron type scam works. President Bush screwed these speculators when he lifted the oil production ban on the OCS. They panicked & had to deliver this oil driving prices from $147 down to $33. Market moving events move prices both ways. If government would quit restricting supply prices would drop.

Looking at the Baltic Dirty Tanker Index I see no evidence of tankers currently being leased to store oil. This means that speculators are not the problem.

 

[g5000]

Looking at the Baltic Dirty Tanker Index I see no evidence of tankers currently being leased to store oil. This means that speculators are not the problem.

I watch the Baltic indices fairly regulary. The Baltic Dry Index in particular. It's a good leading indicator of the economy.

If it makes you feel better, I do not believe rampant speculation is playing as large a role today as it did in early 2008 in driving up price. I think most of today's increase is fear of a war with Iran more than anything else.

2008 was driven by panicked investors leaving the stock market due to the tanking real estate derivatives market and into commodities. All that money sloshing around had to go somewhere. Anyone paying at the attention at the time could see an almost dollar-for-dollar movement from one to the other.

 

[sealybobo]

Looking at the Baltic Dirty Tanker Index I see no evidence of tankers currently being leased to store oil. This means that speculators are not the problem.

I watch the Baltic indices fairly regulary. The Baltic Dry Index in particular. It's a good leading indicator of the economy.

If it makes you feel better, I do not believe rampant speculation is playing as large a role today as it did in early 2008 in driving up price. I think most of today's increase is fear of a war with Iran more than anything else.

2008 was driven by panicked investors leaving the stock market due to the tanking real estate derivatives market and into commodities. All that money sloshing around had to go somewhere. Anyone paying at the attention at the time could see an almost dollar-for-dollar movement from one to the other.

Today Economy car drivers are paying on average, $7.30 per fillup more because of speculation and just over $10 if you drive an SUV. I don't know what the number were back in 2008 but these are todays numbers. Remember back then they used that hurricane in Texas in 2008 and said it shut down offshore production in the gulf as a reason and I recall them using an Israeli flyover of Iran to make up an issue for McCain to use against Obama? Speculation played a part back then too no doubt.

 

[sealybobo]

High prices cause producers to increase production?
Really? Then why aren't more refineries operating to bring down gas prices?
No...in fact refineries are shutting down, aren't they?

Since democrats have been attacking the oil companies about all the gasoline that we are exporting. Closing the high cost refineries in the USA & opening them near the oil source makes more sense for selling on the global market. Thank the democrats for costing the USA more jobs & shipping the oil business overseas making the oil/gas industry more opaque to us allowing more manipulation.

Why should we build the refineries? Why don't the oil companies build them? Its not like they are doing us any favors. What ever happened to free market capitalism? Why are you asking the American people/Obama to subsodize the oil companies and do their work for them? If they need more refineries, build them. And fact is sister, the oil companies closed two refineries and cost us 2000 jobs because they want to manipulate oil supplies. In other words, jack up the prices. And Obama is going to handle it, don't worry babe.

 

[KissMy]

Looking at the Baltic Dirty Tanker Index I see no evidence of tankers currently being leased to store oil. This means that speculators are not the problem.

I watch the Baltic indices fairly regulary. The Baltic Dry Index in particular. It's a good leading indicator of the economy.

If it makes you feel better, I do not believe rampant speculation is playing as large a role today as it did in early 2008 in driving up price. I think most of today's increase is fear of a war with Iran more than anything else.

2008 was driven by panicked investors leaving the stock market due to the tanking real estate derivatives market and into commodities. All that money sloshing around had to go somewhere. Anyone paying at the attention at the time could see an almost dollar-for-dollar movement from one to the other.

Today Economy car drivers are paying on average, $7.30 per fillup more because of speculation and just over $10 if you drive an SUV. I don't know what the number were back in 2008 but these are todays numbers. Remember back then they used that hurricane in Texas in 2008 and said it shut down offshore production in the gulf as a reason and I recall them using an Israeli flyover of Iran to make up an issue for McCain to use against Obama? Speculation played a part back then too no doubt.

If supply was not restricted, every price run up on speculation would be followed by the price crashing below production cost. When government restricts production, prices mostly go up. There is no danger of speculators having to take delivery.

 

[sealybobo]

Notice the Republicans want to blame Obama for gas prices but then call him a socialist if he tries to get involved?

This is why I like Obama. He's not weak and he will show the oil barons who's boss. You republicans think a monopoly should be able to gouge us to the point that it causes another Depression? Government is the boss! Call it socialism, but Government is the referee in the game of Business. Corporations only do business in the US if they benefit the country too. Not just the stakeholders. And if they don't, then we will pul a Hugo Chavez and Nationalize them. Just like we ultimately will Healthcare. At least they need to be more heavily regulated.

Edwin Black: Barack Obama Prepares for War Footing

Executive Order, titled "National Defense Resources Preparedness," renews and updates the president's power to take control of all civil energy supplies, including oil and natural gas,

If Iran was struck by Israel or the West, it would create an international and economic calamity of unprecedented severity.

Obama's Order sets forth as its rationale that "the United States must have an industrial and technological base capable of meeting national defense requirements and capable of contributing to the technological superiority of its national defense equipment in peacetime and in times of national emergency."

In other words, if we need to, rather than go into another recession, we will make the American oil companies sell our oil on the American market for under $4.

Just like ABC doesn't own the airwaves it broadcasts from, oil companies don't own the land or oil the are pumping. They are contractors. If we need we will pull a Hugo Chavez on them, rather than let them crash our economy again and make record profits and the CEO's get paid millions. Fuck that.

Corporations only exist in America if they serve the publics interest too. This is why free unregutated capitalism is a fairytale. One the GOP loves to tell.

If the oil market collapses, we will require the American oil companies to sell us oil for a fair price. In other words, all bets are off.

Much like ABC doesn't own our airwaves, oil companies don't own our land or oil. Not if it means the distruction of the American economy.

 

[KissMy]

High prices cause producers to increase production?
Really? Then why aren't more refineries operating to bring down gas prices?
No...in fact refineries are shutting down, aren't they?

Since democrats have been attacking the oil companies about all the gasoline that we are exporting. Closing the high cost refineries in the USA & opening them near the oil source makes more sense for selling on the global market. Thank the democrats for costing the USA more jobs & shipping the oil business overseas making the oil/gas industry more opaque to us allowing more manipulation.

Why should we build the refineries? Why don't the oil companies build them? Its not like they are doing us any favors. What ever happened to free market capitalism? Why are you asking the American people/Obama to subsodize the oil companies and do their work for them? If they need more refineries, build them. And fact is sister, the oil companies closed two refineries and cost us 2000 jobs because they want to manipulate oil supplies. In other words, jack up the prices. And Obama is going to handle it, don't worry babe.

 

[TakeAStepBack]

 

[KissMy]

Notice the Republicans want to blame Obama for gas prices but then call him a socialist if he tries to get involved?

This is why I like Obama. He's not weak and he will show the oil barons who's boss. You republicans think a monopoly should be able to gouge us to the point that it causes another Depression? Government is the boss! Call it socialism, but Government is the referee in the game of Business. Corporations only do business in the US if they benefit the country too. Not just the stakeholders. And if they don't, then we will pul a Hugo Chavez and Nationalize them. Just like we ultimately will Healthcare. At least they need to be more heavily regulated.

Edwin Black: Barack Obama Prepares for War Footing

Executive Order, titled "National Defense Resources Preparedness," renews and updates the president's power to take control of all civil energy supplies, including oil and natural gas,

If Iran was struck by Israel or the West, it would create an international and economic calamity of unprecedented severity.

Obama's Order sets forth as its rationale that "the United States must have an industrial and technological base capable of meeting national defense requirements and capable of contributing to the technological superiority of its national defense equipment in peacetime and in times of national emergency."

In other words, if we need to, rather than go into another recession, we will make the American oil companies sell our oil on the American market for under $4.

Just like ABC doesn't own the airwaves it broadcasts from, oil companies don't own the land or oil the are pumping. They are contractors. If we need we will pull a Hugo Chavez on them, rather than let them crash our economy again and make record profits and the CEO's get paid millions. Fuck that.

Corporations only exist in America if they serve the publics interest too. This is why free unregutated capitalism is a fairytale. One the GOP loves to tell.

If the oil market collapses, we will require the American oil companies to sell us oil for a fair price. In other words, all bets are off.

Much like ABC doesn't own our airwaves, oil companies don't own our land or oil. Not if it means the distruction of the American economy.

Enjoy being a surf renter slave

 

[sealybobo]

I watch the Baltic indices fairly regulary. The Baltic Dry Index in particular. It's a good leading indicator of the economy.

If it makes you feel better, I do not believe rampant speculation is playing as large a role today as it did in early 2008 in driving up price. I think most of today's increase is fear of a war with Iran more than anything else.

2008 was driven by panicked investors leaving the stock market due to the tanking real estate derivatives market and into commodities. All that money sloshing around had to go somewhere. Anyone paying at the attention at the time could see an almost dollar-for-dollar movement from one to the other.

Today Economy car drivers are paying on average, $7.30 per fillup more because of speculation and just over $10 if you drive an SUV. I don't know what the number were back in 2008 but these are todays numbers. Remember back then they used that hurricane in Texas in 2008 and said it shut down offshore production in the gulf as a reason and I recall them using an Israeli flyover of Iran to make up an issue for McCain to use against Obama? Speculation played a part back then too no doubt.

If supply was not restricted, every price run up on speculation would be followed by the price crashing below production cost. When government restricts production, prices mostly go up. There is no danger of speculators having to take delivery.[/QUOT]

How do I make this simple for you.

What you are talking about will save us less than ten cents.

What I am talking about is costing you $10. Why are you crying about ten cents?

 

[KissMy]

How do I make this simple for you.

What you are talking about will save us less than ten cents.

What I am talking about is costing you $10. Why are you crying about ten cents?

It is clear that you have no idea what you are talking about.