Best be sitting down when you read this.....
Senior User
Joined: Sep 2006
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Post Fiend
Joined: Apr 2004
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From: Great State of Texas
Isn't it amazing how truth gets in the way of sizzle. But, we always sell the sizzle.
Government Teat-sucker
Joined: Oct 2003
Posts: 9,748
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From: Virginia Beach
I just finished reading an article (ok, a blog) aboiut how oil speculators have been unfairly allowed to hold long options on oil. An opportunity that you nor I would, even if we were able to come up with several million dollars, be allowed to do. So only the likes of Goldmann Sachs and JP Morgan types of firms are able to do it.
Why Gas Is So Expensive Today (Hint: It’s Not Libya) - Chris Peterson
If you have a few minutes, it's a pretty good read (caution: couple of f-bombs sprinkled throughout... I did say it was a blog, right?). Anyway, my thinking is beginning to change on tis subject, although I still think opening up drilling is a good way to get the prices down.
Why Gas Is So Expensive Today (Hint: It’s Not Libya) - Chris Peterson
If you have a few minutes, it's a pretty good read (caution: couple of f-bombs sprinkled throughout... I did say it was a blog, right?). Anyway, my thinking is beginning to change on tis subject, although I still think opening up drilling is a good way to get the prices down.
Posting Guru
Joined: Mar 2009
Posts: 1,427
Likes: 1
From: Huntington WV
Better yet get rid of all the eco nuts an do away with the EPA an lets go drilling an while we are at it put it so when the auto industry does concept vehicles anything goes with or with out computers electronics etc.. an lets see what they got up there sleeves. We can beat OPEC an them if Washington has the backbone to do it an not give into them. We could send this country back roaring an put the rest to shame an put the American people back to work an create thousands of jobs at the ame time.
Post Fiend
Joined: Apr 2004
Posts: 6,473
Likes: 4
From: Lafayette, IN
A couple things.
One, we must remember that we don't have to double the supply of oil to halve its price. Just pushing supply a little higher than demand will cause the price to plummet.
Two, even if WE (the USA) don't increase the supply, OPEC is not as much of a lock-solid, tight-knit group as some might believe. When the price of oil starts to go high, they don't suddenly become virtuous folks that stick to their word. No, instead, they start cheating on their production quotas--when the price is high, who wouldn't want to produce more and make more? (Those "darn" free-market principles at work, even with a Keynesian-Marxist group...)
All that said, drill, baby, drill...
Jason
One, we must remember that we don't have to double the supply of oil to halve its price. Just pushing supply a little higher than demand will cause the price to plummet.
Two, even if WE (the USA) don't increase the supply, OPEC is not as much of a lock-solid, tight-knit group as some might believe. When the price of oil starts to go high, they don't suddenly become virtuous folks that stick to their word. No, instead, they start cheating on their production quotas--when the price is high, who wouldn't want to produce more and make more? (Those "darn" free-market principles at work, even with a Keynesian-Marxist group...)
All that said, drill, baby, drill...
Jason
Thread Starter
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Post Fiend
Joined: Sep 2006
Posts: 14,325
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From: Island Southeast Alaska
According to the article that Stu linked to, Drilling and producing more fuel will do no good. We already have way more fuel than we are using. Read the article guys.
Post Fiend
Joined: Feb 2002
Posts: 10,600
Likes: 3
From: Carhenge
Also does a great job explaining the current run up in food prices. And it ain't inflation, folks.
Post Fiend
Joined: Jan 2006
Posts: 20,589
Likes: 2
From: Charlotte, NC
I just finished reading an article (ok, a blog) aboiut how oil speculators have been unfairly allowed to hold long options on oil. An opportunity that you nor I would, even if we were able to come up with several million dollars, be allowed to do. So only the likes of Goldmann Sachs and JP Morgan types of firms are able to do it.
Why Gas Is So Expensive Today (Hint: It’s Not Libya) - Chris Peterson
If you have a few minutes, it's a pretty good read (caution: couple of f-bombs sprinkled throughout... I did say it was a blog, right?). Anyway, my thinking is beginning to change on tis subject, although I still think opening up drilling is a good way to get the prices down.
Why Gas Is So Expensive Today (Hint: It’s Not Libya) - Chris Peterson
If you have a few minutes, it's a pretty good read (caution: couple of f-bombs sprinkled throughout... I did say it was a blog, right?). Anyway, my thinking is beginning to change on tis subject, although I still think opening up drilling is a good way to get the prices down.
Funny how the name 'Goldman-Sachs' comes up time and time again.....Didn't they give us Credit Default Swaps too?
I'd already known that the speculative market had the most to do with the bungee-jumping commodities market.....But the article actually laid-out why this is the case. I'm probably like most folks....with only a passing and shallow knowledge of the commodities market.
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Hotshot
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Fleet Owner
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From: Rio Rico, AZ.
Government Teat-sucker
Joined: Oct 2003
Posts: 9,748
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From: Virginia Beach
You can't really lay all this at the feet of the speculators. As the blog says, speculation has its place in the market. It keeps the prices steady and keeps money flowing, but only when it is applied fairly. These companies that are getting special priveleges are hurting the rest of us pretty badly.
Hotshot
Joined: Aug 2006
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…
in 1991, J. Aron—the Goldman subsidiary—wrote to the Commodity Futures Trading Commission (the government agency overseeing this market) and asked for one measly exception to the rules.
The whole definition of physical hedgers was needlessly restrictive, J. Aron argued. Sure, a corn farmer who bought futures contracts to hedge the risk of a glut in corn prices had a legitimate reason to be hedging his bets. After all, being a farmer was risky! Anything could happen to a farmer, what with nature being involved and all!
Everyone who grew any kind of crop was taking a risk, and it was only right and natural that the government should allow these good people to buy futures contracts to offset that risk.
But what about people on Wall Street? Were not they, too, like farmers, in the sense that they were taking a risk, exposing themselves to the whims of economic nature? After all, a speculator who bought up corn also had risk—investment risk. So, Goldman’s subsidiary argued, why not allow the poor speculator to escape those cruel position limits and be allowed to make transactions in unlimited amounts? Why even call him a speculator at all? Couldn’t J. Aron call itself a physical hedger too? After all, it was taking real risk—just like a farmer!
On October 18, 1991, the CFTC-in the person of Laurie Ferber, an appointee of the first President Bush—agreed with J. Aron’s letter. Ferber wrote that she understood that Aron was asking that its speculative activity be recognized as “bona fide hedging”—and, after a lot of jargon and legalese, she accepted that argument. This was the beginning of the end for position limits and for the proper balance between physical hedgers and speculators in the energy markets.
In the years that followed, the CFTC would quietly issue sixteen similar letters to other companies. Now speculators were free to take over the commodities market. By 2008, fully 80 percent of the activity on the commodity exchanges was speculative, according to one congressional staffer who studied the numbers—”and that’s being conservative,” he said.
in 1991, J. Aron—the Goldman subsidiary—wrote to the Commodity Futures Trading Commission (the government agency overseeing this market) and asked for one measly exception to the rules.
The whole definition of physical hedgers was needlessly restrictive, J. Aron argued. Sure, a corn farmer who bought futures contracts to hedge the risk of a glut in corn prices had a legitimate reason to be hedging his bets. After all, being a farmer was risky! Anything could happen to a farmer, what with nature being involved and all!
Everyone who grew any kind of crop was taking a risk, and it was only right and natural that the government should allow these good people to buy futures contracts to offset that risk.
But what about people on Wall Street? Were not they, too, like farmers, in the sense that they were taking a risk, exposing themselves to the whims of economic nature? After all, a speculator who bought up corn also had risk—investment risk. So, Goldman’s subsidiary argued, why not allow the poor speculator to escape those cruel position limits and be allowed to make transactions in unlimited amounts? Why even call him a speculator at all? Couldn’t J. Aron call itself a physical hedger too? After all, it was taking real risk—just like a farmer!
On October 18, 1991, the CFTC-in the person of Laurie Ferber, an appointee of the first President Bush—agreed with J. Aron’s letter. Ferber wrote that she understood that Aron was asking that its speculative activity be recognized as “bona fide hedging”—and, after a lot of jargon and legalese, she accepted that argument. This was the beginning of the end for position limits and for the proper balance between physical hedgers and speculators in the energy markets.
In the years that followed, the CFTC would quietly issue sixteen similar letters to other companies. Now speculators were free to take over the commodities market. By 2008, fully 80 percent of the activity on the commodity exchanges was speculative, according to one congressional staffer who studied the numbers—”and that’s being conservative,” he said.
