1. Attention: We have put together a thread with tips and a tutorial video to help with using the new software. Please take a moment to check out the thread here: Trapshooters.com Tutorial & Help Video.
    Dismiss Notice

Tell Your Representatives to Stop Oil Speculators

Discussion in 'Uncategorized Threads' started by GunDr, Jul 9, 2008.

Thread Status:
Not open for further replies.
  1. GunDr

    GunDr Well-Known Member

    Joined:
    Jan 29, 1998
    Messages:
    2,913
    It IS speculator AND media driven. Until I see lines at gas stations and /or rationing stamps, there's no shortage.

    When the specs start paying up front for their comodity purchases, the price will go down.

    The last few weeks the Wall Street Journal has been running editorials by "economists", saying it's not speculators, but if you read further, into the comments page (on the wbsite), you will see those stories shot full of holes.

    We're all not that stupid.
     
  2. pendennis

    pendennis Well-Known Member

    Joined:
    Jul 26, 2007
    Messages:
    1,567
    Location:
    Southeast Michigan - O/S Detroit
    Before anyone gets their hopes up that ANY action can be taken to eliminate "speculation" in U.S. oil markets, please remember that this would only effect the U.S. commodity exchanges, and it would have no effect on other world commodity exchanges. Congress, for all of its stupidity, doesn't have the horsepower to stop market speculation.

    Also remember that speculation is part of every market, regardless the investment. Everytime you buy a mutual fund, stock, or other investment, you are engaging in speculation. You are speculating that your investment will increase in value over time. Whether that time is in days, months, or years, is a function of your action and that of the market.

    There is a supply-side problem in oil. Rapidly expanding demand in emerging markets such as China and India account for most of the increase in demand. China is also consuming more oil in an effort to clean up their air in advance of the 2008 Olympics. Gasoline consumption is also artificially high in China and India because their governments subsidize gasoline so that the cost to their citizens ends up at about $.80/gallon. When those subsidies end, because Chinese and Indian governments can no longer afford them, their usage will drop and demand will fall some.

    We import 70% of our domestic oil, up from 40% in 1980. Look no further than Congress and the Greenies for our lack of oil production. We also import gasoline, something that was nearly unheard of in 1980.

    There is also the problem with the Fed and their money policy. Having the "prime" rate at 2% creates a Dollar which is probably artificially low compared to other world currencies. Being that oil is expressed in U.S. Dollars, the price of a barrel of oil is high. The Fed should raise the prime rate to at least 3% in the next six months. That would strengthen the U.S. Dollar, and help drive down oil prices.

    No economic actions happen in a vacuum, and blaming oil speculation is an attempt to buttonhole one facet of an extremely complicated market, which is, in turn, tied to an extremely complicated world economy and financial market.

    Best,
    Dennis
     
  3. phirel

    phirel TS Member

    Joined:
    Jan 29, 1998
    Messages:
    9,556
    When any retailer purchases inventory with the hope of selling it at a profit, they are speculating. If you believe gasoline prices will increase on Friday, and you fill up your tank on Thursday, you are an oil speculator.

    Pat Ireland
     
  4. grnberetcj

    grnberetcj Active Member

    Joined:
    Jan 29, 1998
    Messages:
    5,680
    I bought into oil futures last October ('07) so I guess that makes me a "Speculator".

    I could have sold after 6 months, but decided to stay in until this October at which time I have to resell/cash-out.

    It's been a good investment for me. Beats the hell out of a 2.5% CD.

    Curt
     
  5. dward

    dward Member

    Joined:
    Jan 29, 1998
    Messages:
    291
    Pat - I might disagree a tad with your comparison. I purchase a large volume of grain and in general I would identify the participants in commodity markets as 1)commercials 2)producers and 3)speculators. The commercials buy the commodities from the producers. Thus in a simple sense commercials create the real demand for the base commodity.(ie.. the products they purchase will actually be consumed)

    True speculators don't actually take possession of the commodity and have no intention of ever taking delivery. This is a good thing when markets are functioning properly as it creates liquidity within the markets which would otherwise not exist. Without speculators a farmer would be at the mercy of a large grain company and be rather limited in how and when he could hedge his sales.

    The problem we have now is the stock market is performing so poorly that the large hedge funds are looking elsewhere for places to put there money and have found commodities of late to be a good place.

    The topic is so complex that it would take more words than I know to explain, but in general the speculators have played a role in pushing this thing way too far, and I'm certain that there are some unethical hedge fund managers (can you believe it) that will be found to have colluded.

    Remember back when Arabian horse owners got together and created a self supporting society by buying eachothers horses at astronomical prices?? There is a bit of that going on with commodities. Although ethanol, and the Chinese and Indian people wanting to eat better food, and drive cars, (can you believe it) gives an underlying demand story that is real and allows the fire to rage.

    Dan
     
  6. phirel

    phirel TS Member

    Joined:
    Jan 29, 1998
    Messages:
    9,556
    Dan- I certainly do not disagree with your comments. I was viewing "speculation" on a broader level than the commodities market.

    Curt- Good for you. I lack the courage to invest in the futures market. My investments are much too conservative and restricted to things I understand.

    Pat Ireland
     
  7. dmarbell

    dmarbell Active Member

    Joined:
    Aug 26, 2006
    Messages:
    1,572
    I generally believe in capitalism and free-markets. However, oil is such a globally valuable commodity, that it might require exclusion from normal rules.

    Some believe investing is a "zero-sum game," so that the winners and losers are equally balanced. Oil trade, and speculation in oil, might be the same. However, people and businesses depend on oil for production of revenue. When prices are regulated by supply and demand, things balance out (sort of).

    When a precious commodity, like oil, which is used by ordinary people and business, has its price driven by speculation or manipulation, the world economy can be badly affected.

    The recent run-up in world oil prices is transferring and concentrating wealth into the hands of a few entities.

    I actually think limiting trading in oil futures to people and companies, that actually need to use futures as hedges, would be appropriate.

    If there ever is a WW III, it will be over 1) religion or, 2) oil.

    Danny
     
  8. GunDr

    GunDr Well-Known Member

    Joined:
    Jan 29, 1998
    Messages:
    2,913
    Of course we all speculate. I will fill my gas cans today to use at a future date, BUT, I have to pay for it now, not when I decide to put it in my lawnmower.

    How many businesses purchase new inventory with hopes of selling it in the near future. Don't they have to take the risk by paying for it upfront, either by cash or a loan?

    T. Boone Pickens is watching out for T. Boone Pickens.
     
  9. JerryP

    JerryP Active Member

    Joined:
    Jan 29, 1998
    Messages:
    1,753
    I think pendennis gave a pretty good assessment of the situation. The Feds would like to raise interest rates now but don't want to be seen as influencing the election. Interest rates will go up after the election.
     
  10. highflyer

    highflyer TS Member

    Joined:
    Feb 1, 2006
    Messages:
    2,474
    I remember when the stock market was rising fast. We were warned there would be a bubble. There was. Then the money went to real estate. It was rising fast. We were warned there would be a bubble burst. It did. Now the craze is commodities. Grain, metals, and oil. Up, up up. They will come down. They always do.
     
  11. gusto777

    gusto777 Member

    Joined:
    Jun 15, 2006
    Messages:
    177
    Oil speculation is currently the primary cause of the "out of control" rises in oil prices. Other factors like increasing global demand for oil are a contributating factor but not the primary one at this time. Current production exceeds current demand. Allowing speculators (Wall Street)to control huge amounts of oil for almost no out of pocket expense is what is driving the current increases. We must demand that Congress raise the current margin on oil commodities immediately to 50%. This would cause a dramatic decrease in the current price of crude. Experts agree that without the low margin speculators that crude would trade somewhere between $70 and $80 per barrel.

    The next step is to send a clear and urgent message to OPEC and other oil cartels that America is committed to energy independence. We must use all available resources we have to limit or elimate our dependence on foreign energy sources and make sure that these folks understand that we are dead serious about it. We must start drilling offshore, drill in Anwar, build at least 3 new oil refineries, start construction of new and efficient nuclear power plants, increase our production of coal and coal shale that contains oil. We must also commit our nation to the research and development of alternate energy sources such as solor, hydrogen, wind and thermal power.
     
  12. gun fitter

    gun fitter TS Member

    Joined:
    Jan 29, 1998
    Messages:
    2,959
    Pendennis is correct. I would add that the lack of domestic production stems from a mostly unproductive environmental policy. Let's increase domestic production and see what happens to the price of oil. Just my oppinion Joe
     
  13. Jeff P

    Jeff P Well-Known Member

    Joined:
    Jan 29, 1998
    Messages:
    1,689
    Ah, give me a freaking break. I'll stipulate that YES, there is speculation in the oil - indeed, in all commodity - markets.

    But I"M STILL WAITING for someone to explain the following: Oil is a physical commodity. If you buy it on a contract, that contract has a future DELIVERY date. You HAVE to take physical delivery of the oil, or sell the contract to someone who will.

    So if it's 'speculators' who are buying all this oil, WHERE IN THE HELL ARE THEY PUTTING IT??? yes, I'm yelling. Sorry. Oil inventories are flat over the last six months or so....so where's all the oil the 'speculators' bought going?

    you can't keep all the balls in the air...why don't the legitimate users of oil just offer a bargain basement price to a speculator for the oil he's about to have to take delivery of and has no place to put?

    Sure, there's a premium in the price of oil for the speculation...everything I read says it's about $10 a barrel. big hooptie.
     
  14. GRR

    GRR TS Member

    Joined:
    Mar 14, 2007
    Messages:
    245
    I live in Wisconsin and I've been writing my Senator several times asking him to open up our oil fields. Each time the reply is more double talk than anyone could wish for. The last time I got an answer, now that the price of oil is high enough that makes alternative fuels become cost effective. My Senator is Russ Feingold and he is as close to a communist as you could get. If the bill will help the people He's against it, if it's bad for the people He's for it. This imposter must go..... Most of his votes came from Milwaukee county, Dane county (Madison) and Jackson county. If any of you are reading this, Please pass it on... GET RID OF THE BUM
     
  15. dward

    dward Member

    Joined:
    Jan 29, 1998
    Messages:
    291
    jeff p - Futures contracts held by speculators are most times rolled into the next periods contract for a carrying charge. Many futures contracts are sold by entities that hold a certain volume of the commodity in inventory, but make a business of owning the short side of the future and count on being paid the carrying charge when the contracts are rolled forward. It's basically a transferrance of the contract to the next period that both parties agree to. Obviously there is a risk for the holder of the long that he will be "delivered" on and there is also a risk that the short will have to "deliver". But these are the risks that are understood and usually prepared for.

    But for the institutions that speculate in commodities futures, these transactions are well rehearsed. And as the holder of a "long position" will eventually want to sell out of the position, the holders of the contracts wait for an event that makes things seem like there won't be enough and they find someone who will buy the contract from them. There is also the "selling to eachother" option.

    If the bottom falls out, commodities futures can fall quite a bit faster than they rise. They always say you have to feed the bull, or markets will drop.

    So the bottom line is that there have always been more commodity futures sold in any commodity than are ever delivered. It's just that the current percentage is much higher.

    Dan
     
  16. 100straight

    100straight Member

    Joined:
    Jan 29, 1998
    Messages:
    584
    Here's the answer our legislators came up with!!!

    WASHINGTON (Reuters) - The House of Representatives overwhelmingly approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure.

    Democratic Rep. Steve Kagen of Wisconsin, who sponsored the legislation....

    said Americans "are at the mercy" of OPEC for how much they pay for gasoline, which this week hit a record average of $3.79 a gallon.

    -------------------------------------------------------------------------------------------------------

    Of course OPEC's response was to basically say that if we don't want their oil they will sell it to someone who does.

    Shoot well and often,

    Mark.
     
  17. highflyer

    highflyer TS Member

    Joined:
    Feb 1, 2006
    Messages:
    2,474
    That is funny. The answer to every American problem, sue someone.
     
  18. pendennis

    pendennis Well-Known Member

    Joined:
    Jul 26, 2007
    Messages:
    1,567
    Location:
    Southeast Michigan - O/S Detroit
    Gusto777, I heartily agree with your response. Money, in the commodities market is very cheap. You can get rid of a lot of riff-raff by upping the ante to get in. 50% sounds like a fair buy-in.

    As to Congress, you would have to sue the OPEC countries in the country of origin, or in the World Trade courts. Care to guess how fairly you'll be treated in Saudi Arabia's Sharia law courts, or how long before your case would be heard in world trade courts?

    T. Boone is in it for T. Boone. Make no mistake about that. And the conversion cost as 100straight wrote, would be prohibitive. Most homes would require new furnaces, air conditioning, water heaters, electric ranges, etc. This will cost most homeowners somewhere in the neighborhood of $10k, including the rewiring for a minimum of 200-300 amp service. The current utility infrastructure would not handle the increased load. So utility companies will raise electric rates to compensate, and those rates will go up well before the first wire is strung. And don't think for a New York minute that your NG bill will just go away. That infrastructure will be supported until the last customer goes offline.

    Run the numbers at $10K per home. Say, 150 million homes. That would equal at least $1.5 TRILLION dollars, or 10% of the total US GDP for one year. These numbers do not include the cost increase based on higher demand for electric appliances, so add at least 25%. That runs the total to nearly $2 TRILLION. Oh, and by the way, what about the disposal costs for all those gas appliances?

    Drill here; drill now; save money!

    Best,
    Dennis
     
  19. bocephus

    bocephus Member

    Joined:
    Jan 29, 1998
    Messages:
    527
    I would love to put in a PV system, but I have been spending all my money on fuel.
     
Thread Status:
Not open for further replies.