Well Now, This Is Reassuring

A

azmastablasta

New member
But wait Mr Kenyan, you said $5.00 was the right price per gallon,,wuzzup?

US to probe spiking gasoline prices
Thurs Apr 21


RENO, Nevada (AFP) – President Barack Obama announced a probe into oil price fraud and speculation Thursday, hoping to limit a rise in gasoline pump prices that has energy-hungry Americans up in arms.

Pointing the finger at "speculators," Obama said a new Justice Department task force would "root out any cases of fraud or manipulation" that may have caused higher prices.

"We are going to make sure that nobody is taking advantage of American consumers for their own short-term gain," Obama said at a town hall meeting in Reno, Nevada.

Americans have seen oil prices rise over eight percent in the last month. The average gallon now costs 35 percent more than it did a year ago.

Obama has sought to tap into unease at these rising costs -- which risk weighing down the US recovery and could dampen his 2012 reelection hopes.

"Folks are out there dealing with gas at $4 a gallon. It's just another hardship -- another burden -- at a time when things were already pretty tough," he said.

Earlier this week Obama insisted the lack of supply was not the main reason petroleum prices are rising.

"The problem," he said, "is that oil is sold on these world markets, and speculators and people make various bets, and they say, 'you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply.'"

Attorney General Eric Holder said there could be legitimate market reasons for price rises, but he promised swift action where gouging and other illegal practices are found.

Besides investigating retail prices, his group will look into commodities markets, examining the role of speculators and index traders in the oil futures markets.

But it is not the first time US lawmakers have tried to tackle oil market speculation.

Rules currently being considered by a government watchdog would place caps on the number of oil derivatives contracts any one company can control.

The rules have been bitterly opposed by big traders, including many companies that use oil contracts to hedge against risks to their business.

But there is a fierce disagreement about the impact speculation actually has on prices, with some estimating it could add as much as $20 a barrel to prices and others claiming the market price reflects real risks.

"(Oil) has been looked upon as an attractive investment for financial houses, hedge fund managers etc and that has been the primary driver of oil prices for much of 2011," said Troy Green a spokesman for the American Automobile Association.

"Even though gasoline stocks have fallen below five year averages recently, this is pretty much about money flowing into commodities."

Most market participants disagree.

Andy Lipow, a Houston-based oil analyst, said crises in the Middle East and growing demand had been the prime driver of price rises.

"The fact of the of the matter is that crude oil and petroleum products have been rising during the course of the year and got an extra boost from the turmoil that is happening in Libya, which led to a disruption in crude oil supplies," he said.

But Goldman Sachs recently turned on its peers, stating that oil prices should be around $20 a barrel lower than they are given market fundamentals.

http://news.yahoo.com/s/afp/20110421/pl_afp/useconomypoliticsconsumerenergyprobe_20110421200656
 
Geez another strawman to hold up as a shield to deflect from the failed policies and obvious destructive effort on the part of this idiots administration to take down this country- Now oil speculators are bad, earlier today I read an article where this loser stated "global warming deniers" are the cause of oil-gas prices being high...blaah blaah blame blame blame.

New trend coming...tar, feathers, rail ...some assembly required....oh Caca I said tar: Is that RACIST?

T2G

 
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"We are going to make sure that nobody is taking advantage of American consumers for their own short-term gain," Obama said at a town hall meeting in Reno, Nevada.

Maybe Obamy the commie should take a look at the guy in the mirror. How many consumers are paying more for every kind of product because of his idiocy. Remember "Energy prices with necessarily skyrocket under my energy plan". I'm thinking that's the only campaign promise this scum has kept.
 
President Barack Obama announced a probe into oil price fraud and speculation Thursday, hoping to limit a rise in gasoline pump prices that has energy-hungry Americans up in arms.

OH WOW!! If the government is investigating oil price fraud and speculation, then that must be the reason for the high prices right? I mean if there's smoke there must be fire RIGHT?

Well...except that they have conducted these investigations every time there's a price spike (more than 2 dozen times now), most of them extremely hostile investigations, with the (not always unvoiced) intent of taking over (nationalizing) the oil companies, and so far they've found ZERO!! The government pulls these investigations every time they need to deflect attention from themselves. How many more times will the American electorate believe it when the government says the sky is falling? (remember that "big oil" owns or controls 7% of world supply, while about 80% is owned by state oil companies in countries who don't like us very much)



"The problem," he said, "is that oil is sold on these world markets, and speculators and people make various bets, and they say, 'you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply.'"

He's actually (almost) honest there as concerns the futures markets. That 20% is called a risk premium. It's also in this specific case something that he himself has caused at least in part by invading Libya. Obama's general foreign policy and his domestic energy policies, not to mention making the dollar worth less by flooding the market with them (dollars). In other words, Obama's actions and policies have increased the cost of oil, and the risk (near certainty) that oil prices will increase in the future.

In any case, while he could have a large effect on the price of oil in the future if he were to change his energy policies and allow us to develop our own resources (starting in about 6 months when the first wells would come online), current prices are a reflection of the Mideast disruption and increased demand. The story that the Saudis cut back because of "oversupply" is BS, they are playing self-defense politics because of Obama's ineptitude. "The market is overbalanced... Our production in February was 9.125 million barrels per day (bpd), in March it was 8.292 million bpd. In April we don't know yet, probably a little higher than March. Anybody notice when the run-up in oil prices took off? If we weren't importing most of our oil do you think it would matter what the Saudis did? Supply and demand baby.

If we were a net exporter of oil, even though our oil would be sold on the world market, anybody else reducing supply would have much less effect on our prices.

Don't drink the futures "speculator" kool-aid. While today's spot prices have a great deal to do with futures prices, futures contracts (what "speculators" deal in) have very little to do with the spot market (what you can buy actual oil for today). They are instead a contract to buy (or sell) oil at some point in the future, maybe a year from today.

The price of actual physical oil for sale and delivery right now (or within days) is the spot market price. It is determined literally at an auction of sorts. Watch the Eddie Murphy movie, "Trading Places". That mob scene when they are in "the pits" selling orange juice(?) is a pretty accurate representation of the way commodities are traded.

Let's say (for example) that the Sultan of Brunei will have some of his oil sold in advance (futures) to "hedge" and lock in his profits (he's got big expenses
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). He'll also load some unsold oil into the same tankers that he's shipping the (pre sold "contract") oil he sold a year ago, so that as the tanker gets near Yokohama (or wherever) he'll put it up for sale to the highest bidder through a commodities broker who will sell it in "the pits". Users (refineries) have at the same time told their brokers that they need to buy an amount of oil this week. The price is entirely dependant on how many other tankers are delivering at the same time, and how many users (refineries) need how much additional oil (other than what they have being delivered on contract). It's pure supply and demand. The only "speculation" that occurs is if there's a (momentary) oversupply in that location. In that case the Sultan might pay the tanker to sit offshore until the oversupply is used up and his oil becomes worth more. He probably won't do that for very long though, since tankers lease by the day at enormous cost.

How is the price determined for that "future oil"?

If the Sultan is going to sell a contract for 1000 bbls of oil for delivery in April 2012, the first thing he looks at is the price that oil is selling for today. That's his starting price. Then he's going to look at the world supply and demand situation, including his own pumping capacity. He'll look at the disruption happening around the Mideast oil producing countries and he'll try to predict (speculate) whether or not any of it will affect the flow (volume) of oil, and he'll study their drilling programs, inventory, potential inventory, etc (supply). He'll look at the economies of the major importing countries and he'll speculate as to whether they will be buying more or less oil this time next year (demand). He'll then add in the transportation costs and the time value of money, in this case 12 months worth (time is literally money), and VOILA, he has the price he's willing to sell an April 2012 oil contract for.

He puts the contract out for sale on the market, and let's say there's an oil refinery that figures they are going to need 10,000 bbl of oil next April. They look at his price, making all the same calculations he did, and they say to themselves, "We think we'll be able to buy oil on the spot market for less than that if we just wait, but we have calculated that there's a 10% chance that oil will be higher than what the Sultan is asking for his contract, so we're going to buy that 1000 bbl contract just in case (as a hedge).

The "speculator" meme comes in because it's not just the Sultan (or other producers) who are selling "futures" contracts, you or I can also write (or buy) contracts.

Since I don't actually produce oil, if I sell a contract, at some point I will have to buy an oil contract to cover the one I sold (maybe from the Sultan). If I can buy one for less than I sold one for, I have made money. If I have to buy one for more than I sold for, I lose.

In any case, the only way this trade has any effect on the "spot" price, is that next April the refinery will be buying 1000 bbl of oil less than they would normally have purchased on the spot market.

The reason that there are commodity markets where you and I are allowed to participate, is that there aren't enough users and producers willing to buy and sell commodities at any given moment in order to provide a robust market. Only about 20% of the commodities contracts put onto the markets are ever "exercised" (actually delivered). The other 80% are just "offset" by buying or selling an equal but opposite contract.

What your or my writing (or buying) an oil contract has done in the market is provided the refinery (or producer) a way of hedging their risk. It has provided them with the market liquidity to be able to do that. On any given day they can easily buy or sell oil for future delivery, only because 80% of the futures market is "artificial". If it were just "real" oil being traded, what sold today for $50 might easily sell tomorrow for $100 and vise versa. The "speculators" provide liquidity and stabilization for the markets. Without them you would expect enormous price spikes each way daily, and neither producers or users could make any sorts of accurate plans. Since there must be a buyer for every seller, "speculation" has a near zero sum price influence on the market itself.

There ARE real "speculators" who buy real commodities (not contracts for future delivery) and then store them waiting for a price swing, but even these are misinterpreted. If you have been buying physical gold or silver for the last few years and socking it away, you are one of these "commodities speculators" (you evil nasty person, you).

There is very little of this type of "speculating" in the oil market though, and all of that very short term. Unlike precious metals that you can hide or lock away in your safe, oil is very expensive to store. It is a hazardous material requiring specialized facilities and significant daily costs. If you hold oil in storage for very long, pretty soon the cost of storage will exceed it's value. If you are a producer and you let your storage facilities get full, you can't pump any more oil because you dont have anywhere to keep it, and your volume (and profit) drops off.

This is an extremely basic explanation, but hopefully enough to explain why all the talk of investigations, oil company profits, and blaming those nasty "speculators" is just a smokescreen. If nothing else, take these truths from this post.

The only people that can possibly "manipulate" the world oil market (by design or circumstance) are the net oil exporters, or a cartel of exporters (OPEC).

The only places their policies affect the price of oil to a significant degree is in oil net importing countries.

The U.S. imports 60+% of our oil...BUT WE DON'T HAVE TO IMPORT ANY!

ALL of our energy cost problems are a result of decades of greenie weenie mismanagement and political payoffs.
 
The 'obasm' said, during his campaign for POTUS, that he wouldn't mind seeing gasoline prices rise to 7 or 8 bucks a gallon.
Has he changed his mind????
I don't think so!!!!!!!!!!
'EVERYTHING' he does is a fraud. It started with his 'BC' & continues until the next election unless some 'National Emergency' emerges.
I stopped drinking 'Kool-Aid' when I was a kid.
 
While I don't buy oil futures, i am in the lumber business and do some lumber futures. All futures contracts whether it be oil, coffee, sugar, wheat, lumber or what ever is basically the same traded way. While i am a "net user" buying usually when the market may produce a profit for me, as we "land" or have delivered the product for sale. However if the market goes south, i can sell the contract for a locked in profit. However, all contracts will be delivered at some point. As for "manipulating the market" usually the producers will buy most of the contracts, and "speculators"/"users" will buy up what is available. This is so the producer can lock in profits for themselves whether the market goes up or down. It is the producers who can move the market, however, i want to caution you as this can be done, but only for a period of time and not a long time. Sooner or later disruptions in the usage of product will force the price up or down. Things beyond control such as this disaster in Japan, or hurricanes, wars, etc, these are usually temporarily disruptions in the chain of the market. These producers have found that by buying these contracts they can "hedge" the future production of product, thereby stabilizing the price of product, even in a downward trend. Granted this will translate into puttin an anchor out for spiraling prices. The problem with commodities is they are not a "free market" any more. Lumber was one of two last "free markets" and now only diamonds are the last "free market" only driven. Unfortuntly govenmemtal policys will determind how product is bought and sold, usually thru taxation, subsidies, import duties, etc. These are set again by governments. Business has to run between these policies.
One other thing, these "speculators" are just people (usually just plain people, like you and me) who are betting on the market going up or down, like when we buy a stock, your betting the stock will move up and make a profit. Well when conditions in the commodity market look like there will be a profit, then people jump in for a quick profit. They will buy and sell (and i'm not going to get into options market) these contracts. These are people who are not in the oil business. They will drive up the price based on how many contracts are left to sell as what price. Remember there are only so many contracts out there so the fewer left go for higher numbers. That is why contracts are usually due every two months the next due is May, then July then September, and so on. So if you think as an investor maybe there is more money to be made in September or November futures, then you buy usually earlier as the contract is cheaper. Lets say you bought September and there is a glut of oil on the market in June well the price of the contract will then go down and you have to either ride it out, thinking the price will be up later, take delivery of product (if possible), or sell the contract if you can find a buyer at less than you bought it for. When the prices move down these "investors" will flee the market and the oil contract will settle down to a more buyable price. In this respect these investors will "drive up the price of product".
 
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