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Thread: Did Speculation Fuel Oil Price Swings?

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    Did Speculation Fuel Oil Price Swings?

    Anyone catch 60 Minutes on Sunday? If not, you missed a great and important story.

    I've been one to argue that the price of gas was mostly fixated on supply and demand. However, this news piece showed otherwise, and has no doubt doubt changed my opinion on the matter.

    Again it seems, Wall Street has bit us on the ass big time.

    Why has the been allowed to happen? According to this report, regulations in the futures market are practically non-existant. Apparently, the deregulations efforts were originally enacted for the benefit of--get this--ENRON.

    Check this out:

    Wall Street bankers insisted at hearings last summer that the rising oil prices were a result of supply and demand, not excessive speculation. But prices continued to go up, even jumping by a record $25 on a single day when there were no supply disruptions to justify the increase and demand was actually going down.

    and:

    This deregulation of the futures market was originally enacted for the benefit of Enron and made it possible for that firm to manipulate the California electricity market, driving prices up by as much as 300%. It has since been exploited far more widely, and the incoming Obama administration has promised to address the regulatory loophole.

    Please take the time to read the story and/or watch the video.

    Did Speculation Fuel Oil Price Swings?, 60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand - CBS News
    Last edited by Middleground; 01-13-09 at 10:52 AM.
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    Re: Did Speculation Fuel Oil Price Swings?

    I watched this show with skeptical amusement and found that as is typical of the lack of journalistic ethics that is rampant in todays media, it appears that they were very selective whom they interviewed and had no one from the legal regulatory side to give us more information.

    For those who do not want to exert the effort to research this regulatory argument further, I have done it for you here.

    The thing that amuses me the most is watching politicians and Liberals parrot the notion that what is wrong with the markets is not enough Government oversight or regulation it is apparent that oversight is what is seriously lacking and not the regulations.

    Government oversight has never been pre-emptive or taken on a proactive enforcement, it is REACTIVE and after the fact and usually, politics and lobbying determine the outcome of any oversight rather than actual enforcement.

    Here are the regulations on Commodity trading if you think there are not enough of them, theres a bridge in Arizona I would like to sell you:

    The Commodity Exchange Act
    Law & Regulation

    The 262 page Bill:
    http://www.cftc.gov/stellent/groups/.../ogchr5660.pdf

    The Code conversion chart:
    Commodity Exchange Act Conversion Chart

    CFTCs Regulations:
    Electronic Code of Federal Regulations:

    Rules and Authority:
    http://www.cftc.gov/stellent/groups/...report2008.pdf

    The Commodity Information Act Electronic Code Regulations:
    Electronic Code of Federal Regulations:

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    Re: Did Speculation Fuel Oil Price Swings?

    Quote Originally Posted by Truth Detector View Post
    The thing that amuses me the most is watching politicians and Liberals parrot the notion that what is wrong with the markets is not enough Government oversight or regulation it is apparent that oversight is what is seriously lacking and not the regulations.
    This is generally the left's answer for everything -- more government.

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    Re: Did Speculation Fuel Oil Price Swings?

    Did speculation cause the price spike? Of course. But irrational exuberance is a natural part of the economic cycle, and speculators provide a valuable service. Rather than try to clamp down on it, people should bet against the speculators.
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    Re: Did Speculation Fuel Oil Price Swings?

    Quote Originally Posted by Middleground View Post
    I've been one to argue that the price of gas was mostly fixated on supply and demand. However, this news piece showed otherwise, and has no doubt doubt changed my opinion on the matter.
    The news piece didn't show otherwise. It just showed, whether accurate or not, that commodities speculation shifted into a big business.

    Again it seems, Wall Street has bit us on the ass big time.
    No, we have bit ourselves in the ass. Our desire for greater returns on our investments motivated traders to take actions to do precisely that. Our pension funds, our mutual funds, our investment funds all benefitted from this speculation.

    Why has the been allowed to happen? According to this report, regulations in the futures market are practically non-existant. Apparently, the deregulations efforts were originally enacted for the benefit of--get this--ENRON.
    Yeah, I was not convinced by this aspect of the 60 Minutes story. The producer never established that Enron sought such treatment, what Congress actually enacted that satisfied Enron's alleged lobbying demands, or that the commodity speculation was all of a sudden permissable with such legisaltive action.

    Check this out:

    Wall Street bankers insisted at hearings last summer that the rising oil prices were a result of supply and demand, not excessive speculation. But prices continued to go up, even jumping by a record $25 on a single day when there were no supply disruptions to justify the increase and demand was actually going down.
    No supply "disruptions." On the other hand, there were and are oil tankers just sitting offshore filled to the brim with oil that will not off-load their oil until the price of oil increases. That is a supply disruption, no?

    Speculation and supply and demand are not exclusive of one another.

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    Re: Did Speculation Fuel Oil Price Swings?

    I've been one to argue that the price of gas was mostly fixated on supply and demand. However, this news piece showed otherwise, and has no doubt doubt changed my opinion on the matter.
    Thank you for waking up to the truth of the matter, so many North Americans for some "reason" like to defend the high gas prices they're paying like it's all justified and honest and yet will complain the media lies about this and that--very inconsistent.

    YouTube - If Oil Industry Profits Are Up, Why Aren't Gas Prices Down?

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    Re: Did Speculation Fuel Oil Price Swings?

    Quote Originally Posted by GOP Socialist Soldier View Post
    Thank you for waking up to the truth of the matter, so many North Americans for some "reason" like to defend the high gas prices they're paying like it's all justified and honest and yet will complain the media lies about this and that--very inconsistent.
    Hey, nice strawman...

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    Re: Did Speculation Fuel Oil Price Swings?

    Quote Originally Posted by Goobieman View Post
    This is generally the left's answer for everything -- more government.
    And it is their answer even when the results are always the same. What was that age old saying? If you keep doing what you have always done expecting different results, you might be a moron?

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    Re: Did Speculation Fuel Oil Price Swings?

    Quote Originally Posted by Kandahar View Post
    Did speculation cause the price spike? Of course. But irrational exuberance is a natural part of the economic cycle, and speculators provide a valuable service. Rather than try to clamp down on it, people should bet against the speculators.
    We are in rare agreement again. Sometimes you actually elucidate coherently dude.

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    Re: Did Speculation Fuel Oil Price Swings?

    Quote Originally Posted by GOP Socialist Soldier View Post
    Thank you for waking up to the truth of the matter, so many North Americans for some "reason" like to defend the high gas prices they're paying like it's all justified and honest and yet will complain the media lies about this and that--very inconsistent.
    This is fascinating denial considering that we in the US pay half what Europeans and many other nations pay for gas.

    The notion that your efforts to suggest that obscene profits are the reason for the price we pay in gas while debating truth and honesty is profoundly ironic; I am betting you don't even see the irony.

    Once more we are confronted with the socialist argument that obscene corporate profits result in high prices when it is actually the opposite when Socialist nations pay DOUBLE what we are.

    Carry on; denial leads to ignorance, don't do denial. (this is what happens when our school systems fail to educate our students and citizens on basic economic theory; it should be REQUIRED at the High School level and pieces of the theory taught in the Middle Schools.)

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