Obama and the Oil Market
I'm curious as to what some of you think about this latest attempt by the administration to control oil "manipulation". How much manipulation actually occurs? As opposed to speculation which is an important part of the futures market.
Seems like another short sided idea. Kind of reminds me of when they hiked up gold margins in an attempt to drive down prices.
http://www.bloomberg.com/news/2012-04-17/obama-wi…
Any thoughts?
Oil? Manipulation? HAHAHAHAHA
Think one month before the 2004 election when oil prices dipped: Bush makes a few phone calls to some old family friends and promises some sweet new military gear if they open the taps up a bit for a few months.
This time around, they'll try to subsidize it because that's how Dems typically roll. I didn't read this bill, but I'd venture that's the plan.
"Evil Oil Speculators" = QE infinity
Political move. When nothing gets done, he can tell the voters that he tried, but the Republicans negelcted to pass anything and therefore the American public is paying higher gas prices.
Yeah, after OPEC, the world's biggest oil manipulator is often the federal government. Three months before the 2000 election, Clinton opened up the SPR and Cheney started complaining about it, claiming the reserve was strategic. More recently, the Keystone Pipeline veto helped ensure that WTI stays about $15/barrel cheaper than Brent, benefitting Midwestern refiners, farmers, and motorists at the expense of the Canucks. This is arguably one of the biggest, most long-term price manipulations in the oil markets of the past decade.
That said, you guys also forget Enron and Amaranth. It is possible to attempt abusive market corners, and I think we have a more efficient market when we try to get commodities to trade on fundamentals rather than letting T. Boone pickens come in, reserve all of the pipeline capacity crossing the Appalachians, and charge New York $10/therm for natural gas.
So spending more money on transparency and more consistent enforcement isn't a bad thing.
What do you guys think of this article? I don't know much about commodities and such, so I didn't know what to make of it.
http://www.nytimes.com/2012/04/11/opinion/ban-pure-speculators-of-oil-f…
There's a place for passive speculation. If you can consistently make money betting on oil's fundamentals, we need you in the market, because you're going to send signals to tell people to consume less or to consume more.
The problem is when the speculation becomes activist. If you are trying to shift the fundamentals off what they should be rather than help everyone else discover them, that's when the system starts breaking down, and that's when I have trouble staying a libertarian. Buying refining spreads on 20 mbpd and then shutting down five refineries producing 2 mpbd does not create economic value even if it makes you money.
I definitely agree. You cannot do away with pure speculation because historically it is used as a gauge for the supply of a commodity. Speculating actively borders on manipulation as it drives prices up without taking in consideration of the actual supply or demand, and also those wanting to make big money in a short period of time, which is contrary to what a futures contracts are.
52 million dollars added for more whistle blowers.... In the futures mkt the amount of buys = sales. How can there be manipulation?
Understood you may try to bully the mkt come to settle but multiplying the cftc by 6fold isn't constructive.
The reason Wall Street is on Wall Street and not in Houston- and we all have jobs- is that the COMEX officials and the SEC stepped in and decided that abusive corners and market manipulation were illegal.
http://en.wikipedia.org/wiki/Silver_Thursday
how about the nat gas speculators? good for the economy?
I guess it doesn't matter what side of the political spectrum you are on, all politicians participate in some sort of blame game in the energy market. At least when it affects their re-election. But to think that the oil market is over priced due to manipulation, not a cheap dollar and the fact that demand is increasing in the emerging markets, irritates me. Even though the cornering of a market can happen, it doesn't seem like WTI at $105 is "rampant manipulation"
I am just simply tired of all political pandering that disregards the reality of the situation.
Thanks for your thoughts.
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