Sick of high gas prices? Blame a Speculator

[sixmile]

Up to 60% of the price of a gallon of gas is PURE SPECULATION and GAMBLING BY WALL STREET!

snip

'Michael J. O'Connor, president of the Virginia Petroleum, Convenience and Grocery Association, agreed that market speculation is behind the price spike, but he is convinced that it has little to do with events overseas.

O'Connor pointed out that the U.S. imports less than 1 percent of its crude oil from Libya. Although an uprising against longtime ruler Moammar Gadhafi has created chaotic conditions there, the loss of the tiny portion of our supply from Libya doesn't explain why crude prices have jumped some 20 percent in the past week, he said.

Instead, O'Connor said, the price spike has been "caused, aided and abetted" by the commodities trading desks of the Wall Street investment banks. "It's not Libya, it's not OPEC," he said. "The people doing it are right here in the United States."



Read more: http://progress-index.com/news/unrest-speculators-blamed-for-jump-in-gas-prices-1.1110806#ixzz1F5aKYDFV


http://www.boston.com/business/articles/2011/02/26/galvin_criticizes_oil_market_regulator/

'Financial speculators, such as hedge funds, were widely blamed for helping push oil and gasoline prices to record levels in 2008. Oil peaked at more than $145 a barrel in July 2008, gasoline above $4 a gallon. Turmoil in Libya and unrest across the oil-producing Middle East has recently sent prices soaring. Crude has jumped more than $10 a barrel over the past week, closing at just under $98 a barrel in New York yesterday.'

[Hawkowl]

1. A direct result of the US Federal Reserve

When the Fed creates money by the boatload, through its "quantitative easing" program, the money MUST go somewhere! Since the banks/brokerage houses/hedge funds (they are all one and the same anymore) won't lend it out to the citizenry to grow their small businesses or purchase houses or consumer goods, they plow the cheap money into commodity speculation. This forces all prices up because the speculators never have to take delivery of the commodity contracts. They simply roll over the contracts into ever increasingly pricier and dicer future contracts.

Until we separate banks from brokerage houses, and limit speculation, as was done before Bill Clinton fucked us all, our economy will continue its slow motion collapse until we get a very sudden super-crash.

I think Obama couldn't tell the difference between a coherent economic policy and a ham sandwich. We are well and truly fucked.

[sixmile]

4. Well said.

Think Glass-Steagall...

[Xicano]

5. Exactly..

Sad but true.

[Xicano]

2. I see the causation coming more from inflation than speculation

Not that I am defending speculators. Just that if you price oil against other commodities, especially precious metals which of course are a good hedge against paper currency inflation, you'll see that the price of oil has decreased, not increased.

In my opinion this shows the primary factor is monetary inflation and the turmoil in Libya is acting more as a catalyst to speed up the market correction with respect to oil prices vs paper currency. In my opinion these wall street bets more represent the falling value of the US Dollar as opposed to a bet on oil value.

Commodity Watch:

Price in Gold................... Week ago ............ Year ago

Crude Oil: 1.91 g/bbl ........ -2.1% ................ -13.1%
Uranium: 1.62 g/lb ........... -2.4% ................ +40.7%
Silver: 0.718 g/oz ........... +5.0% ................ +63.0%
Copper: 99.9 mg/lb ........... -2.2% ................ +11.8%
Coffee: 61.1 mg/lb ........... +6.3% ................ +63.7%
Cotton: 44.3 mg/lb ........... +2.2% ................ +106.8%


http://pricedingold.com/

US Dollar Outlook for 2010 2011: Euro, Yen, Aussie and Loonie Rise To Record Levels Against Greenback

Dollar Destruction Continues as Greenback falls to lowest level since 2009 against several major currencies.

The dollar’s widespread sell-off continues with the Euro hitting its highest level against the greenback this year and the Japanese Yen reaching a 15-year high. If the dollar drops below ¥79.75, it will be its weakest since the yen was allowed to trade freely in the early 70s. The dollar index (DXY) also reached it’s lowest point of the year, confirming a global anti-dollar stance as investors chase better yields elsewhere. Another sign of US dollar weakness is demonstrated by the number of currencies passing parity (i.e $1 of their currency buys more than $1 USD). The Canadian dollar moved through parity with the U.S. unit for the first time in six months, while the Australian dollar recently hit parity having risen to its highest level since the early 80′s when it was made free-floating.

The US dollar’s decline also highlights the contrast between countries recovering from the global slump versus a sputtering American economy. In fact, to addressing tightening credit conditions the US Fed is expected to undertake another round of bond-buying (further devaluing the greenback), as confirmed by Fed Chairman Bernanke’s recent comments. This approach of loosening monetary policy (quantitative easing) is also happening at other central banks facing similar challenges to those in the US, as shown by recent actions of the Bank of England and the Bank of Japan. Hence it is no surprise that they currencies of these nations are also falling versus nations like Australia, where central banks are tightening monetary policy through raising interest rates.


http://www.savingtoinvest.com/2008/05/us-dollar-outlook-2008-2009-and-beyond.html

[sixmile]

7. Isn't it convenient that you can bet against the Dollar too?

My point is that everything on the planet (and often in the abstract) is securitized for the benefit of the wealthy to trade.

Those trades affect real prices. Rarely is it supply/demand, it is more often 'opinion'.

[Xicano]

8. Only proves these banks/wall street have no loyalty to our country

Their only loyalty is to themselves and nothing else. Sickening isn't it.

[Spider Jerusalem]

3. Not this again.

It's not speculation. Speculation wasn't behind the rise in oil prices ion 2007-2008 and isn't behind the rise in oil prices now. Blaming speculation is an easy out for people who don't know or don't want to believe what's actually happening, which is that demand for oil on the world market is hitting against supply constraints. There's always BEEN enough oil that Americans have been able to have cheap gasoline, after all, why should that change? So goes the thinking, never mind that conventional crude oil production hit a peak in 2006 and has been flat since then, never mind that global demand has grown by 20 million barrels per day in the past 15 years, mostly driven by China (fun fact: more Chinese bought cars last year than Americans did) and India; never mind any of that, because it must be speculation, that's the only possible reason.

[sixmile]

6. I must disagree with your premise

I'm sure you'll agree that when breaking down the true price of ALL commodities, speculation plays an overly important role.

It's the World casino.

[Spider Jerusalem]

10. No, demand and resource scarcity play an important role.

There's only so much oil. There is market competition among oil-importing nations on the world market for that oil. That would be pretty much all of the G8 (minus Russia) plus China, Australia, etc. There's a finite supply, demand is constant and inelastic--because modern, industrialised countries need oil, modern economies cannot grow without oil, and none of the world's ten largest economies by GDP, again with the exception of Russia, is an oil exporter.

[ensemble]

9. yup...

Crude oil is an internationally traded commodity with low elasticity of demand - if supply is cut anywhere, prices rise substantially everywhere.
Notice what was happening to crude prices as the economy has (somewhat) improved (before Libya's uprising).
I suspect the in times of instability, short term activities by speculators increase prices (basically hoarding), but there is a bigger trend due to other forces.

[sixmile]

13. So clearly there was an event in 2008?

I can't remember one. But $4 gas still helped push us into recession.

[Spider Jerusalem]

17. Demand at the limits of available supply would have been the event

America is not the world, you know; lots of other countries use oil. China and India are using a lot more of it. And oil production, again, *peaked* in 2006. Competition on an open market for a limited resource means price increases, it's very basic economics.

[sixmile]

18. So you're against regulation of commodities markets?

Because I am not. And they are NOT well-regualted.

[Spider Jerusalem]

19. How do you propose to regulate an international market?

America imports 11 million barrels of oil a day, more than half of all US consumption. The US is in no position to demand regulation of the market in its favour. Prices are set on international markets and set by bidding for future delivery contracts; if China, India, the EU, etc are bidding up the price of oil because of supply constraints and inelastic demand then the US is really in no position to start whingeing and saying "hey no fair!"

[Xicano]

21. ^ What Spider Jerusalem said

Not only do we not have a right to tell other countries how to trade. We ourselves are broke and choking on debt so we don't bring much to the negotiating table except for other countries to take on more of OUR liabilities.

I hate to say it, but, it is not looking good for us in the coming years this decade. Wall street/Washington sold out our manufacturing jobs while inflating us into a debt we cannot pay back.

[Xicano]

14. "Crude oil is an internationally traded commodity"

Yes and its mostly traded on the US Petrodollar system, but, because we have become a debtor/consumer nation as opposed to a savings/production nation. We are seeing the value of our dollar evaporating. We had it good on other people's money for so long now that the world knows we can't pay them back, especially when we produce hardly anything anymore.

As a result, soon, we will no longer have a permission slip from the world to just print dollars. When (not if) the petrodollar system ends there will be a swift and severe market correction on the value of the US Dollar. Middle East turmoil raises the question of how these oil producing nations will trade their oil. If they trade in other currencies, our dollar will suffer greatly. But at this point its still a question of when, not if.

[progressoid]

12. Speculation, suppy, demand, war, politics, greed, etc.

[BeFree]

23. Eh? SJ

"...global demand has grown by 20 million barrels per day in the past 15 years.."

Lets do the math: 20M x 365 x 15
That would be 109,500,000,000... as in trillion barrels per day now?

I, uh, don't think so. You may want to check your facts, SJ.

Besides, there is, at present, no shortage of oil.

Its is speculation driving the price.

See: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=530954&mesg_id=530954

[pampango]

11. I didn't see in the story where up to 60% of the cost of gas was pure speculation.

"the retailer keeps just 6.5 cents of each dollar consumers spend on gas.

The largest chunk of the consumer's dollar, 57 percent, goes to the oil companies, along with fees paid to banks and card processors every time a customer uses a credit card; O'Connor said credit cards currently are used for 80 percent of all gasoline sales in Virginia.

The remaining piece, 36.5 percent, goes to state and federal fuel taxes."

57% in Virginia goes to oil companies, but much of that goes to buy the oil, pay for refining it into gasoline and transporting both. It's not all speculation.

"the U.S. imports less than 1 percent of its crude oil from Libya".

The problem is that those countries that are affected by the cutoff of Libyan oil don't just suffer in silence and do without oil. They go out and try to buy oil from exporters that the US does buy from. The increased competition for this remaining oil drives up the price for our imported oil even though we don't import much from Libya. Similarly if, for some reason, our sources of imported oil suddenly had to cut back or stop, the US wouldn't just do without the oil, we would go to other oil exporters whom we hadn't been getting much if any oil from and see if we couldn't buy it from them.

[sixmile]

16. It's about the PRICE of the commodity

In June 2006, oil traded in futures markets at some $60 a barrel and the Senate investigation estimated that some $25 of that was due to pure financial speculation. One analyst estimated in August 2005 that US oil inventory levels suggested WTI crude prices should be around $25 a barrel, and not $60.

[Xicano]

20. "pure financial speculation"

I have to disagree on the bases that if increased oil prices were mostly due to pure speculation then we would also see oil prices increase against gold and silver prices, not decrease.

The trend line we see with oil, gold, silver, etc. is a trend line which reflects a dropping dollar value, not a trend line reflecting pure speculation on the oil or gold & silver markets. So in my opinion I believe the biggest effect on the market we're seeing is mostly due to the fundamental analysis of the falling value of the US Dollar and the sentimental analysis concerning the petrodollar system amidst middle-east turmoil much more so than just speculation on its own.

Well, that's the way I see it anyway.

[kentuck]

15. More specifically..

traders that work for Goldman Sachs.

[taterguy]

22. So if it's all the Speculators fault why don't we screw them by not buying the commodity?

Oh wait.

We can't get very far without gas.

They play a role in the price but they're not the only reason the stuff is expensive.