Archive for Wednesday, June 11, 2008

Task force to probe oil speculation

June 11, 2008

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— The nation's top regulator of oil trading on Tuesday announced the creation of a special federal task force to study the role of speculators and the investment practices of large institutions that critics believe are running up oil prices.

The announcement came as a special advisory committee went before the Commodity Futures Trading Commission to discuss ways to make the oil markets more transparent. Increasing reporting requirements and other transparency measures would reduce concerns that oil traders are manipulating the trading of contracts for future delivery of oil, called futures, in ways that drive up oil prices. The CFTC announced in late May that it was investigating whether there has been price manipulation during this year's steep run-up in global oil prices.

With the average price of gasoline nationwide now above $4 a gallon, Congress is studying a number of measures to quash what many believe is speculative behavior that is pushing up oil prices. The CFTC, which regulates the futures markets, has said it doesn't believe that speculation causes today's high oil prices but has promised the task force will take a good look.

Critics dismissed the task force as a public relations move that won't lower prices.

"That's a great way to appear to be doing something when you are not," said Michael Greenberger, a University of Maryland law professor who was the CFTC's director of trading during the Clinton administration.

The new task force will include representatives from the Federal Reserve, the Treasury Department, the Securities and Exchange Commission and the Departments of Energy and Agriculture. The task force will examine investor practices, fundamental supply and demand factors and the role of speculators and index traders in commodity markets.

Comments

Godot 7 years ago

Want to bet the KU Endowment Fund has grown quite nicely this year, thanks to investments in oil futures?

Godot 7 years ago

Having members from the Fed, Treasury and the SEC on the "task force" is a guarantee that they will miraculously find that the big institutions did absolutely nothing wrong."The task force will examine investor practices, fundamental supply and demand factors and the role of speculators and index traders in commodity markets."What they should be investigating is how the financial institutions and investment banks used the $280billion the Fed has made available to them since January. Did they take that money, which they borrowed at a mere 2%, and invest in commodities? Did they use taxpayer money to run up the price of oil in order to restore balance to their balance sheets?

Richard Heckler 7 years ago

Try this instead:While the USA oil cartel is a major contributor so are consumers.When figuring the war and military security for pipelines it is estimated americans are actually $14-$21 per gallon of gasoline:.more than any other portion of the world.The largest contributor to increased gasoline prices is all americans who continue to buy no matter the cost.All americans who honestly believe the USA government can dictate the cost of doing business with oil suppliers Americans who refuse to walk,bike or use public transportation when in fact that is smart dollars and sense.Americans who refuse to drive fuel efficient automobilesAmericans who believe oil products do not pollute in order to justify their desire to drive gas hogs. This is called denial.Americans who say I can afford gasoline no matter what. That my friends drives inflated pricing which screws everyone and makes zero dollars and sense .All who refuse to make that very very tough decision of relocating closer to employment. The current housing market may be a best opportunity.Wars for oil contol are not free!All americans who believe it's okay for soldiers to die or become permanently disabled so long as it is not them or their children all for oil.Yes folks it is us screwing up our own cost of living instead demanding an end to all of the madness stated above. Instead we believe politicians!

Godot 7 years ago

In January, for the first time since the Fed was established, the Fed allowed investment institutions and brokerage houses (not just banks) to tap into a newly created loan facility, and agreed to take sub prime mortgages as collateral for their 2% loans. More than $280,000,000,000 has been loaned to these institutions through this facility.Since then, the price of oil has skyrocketed due to what most believe is a huge influx of money into the futures market.If I were Fed Chairman Bernanke or Treasury Secretary Paulson, I would make darn sure that any task force looking into the role speculators have played in the runup in the price of oil did not conclude that it was my action, and the unintended consequences, that contributed to the problem.A real conspiracy theorist would say that Bernanke and Paulson knew, in advance, that the institutions would take that money and invest it in oil futures.

monkeyhawk 7 years ago

Try this, merrill-"The largest contributor to increased gasoline prices is all americans who continue to buy no matter the cost." Wrong, US gas consumption is actually down."All americans who honestly believe the USA government can dictate the cost of doing business with oil suppliers"Only the delusional think that." Americans who refuse to walk,bike or use public transportation when in fact that is smart dollars and sense."How do you haul those lawnmowers around town? Is there a mower rack on the MT? Do you strap them on your bike?"Americans who believe oil products do not pollute in order to justify their desire to drive gas hogs. This is called denial."I think Marion stated the effects of your horrendous mowers on the environment were far worse than any auto emissions."Americans who say I can afford gasoline no matter what. That my friends drives inflated pricing which screws everyone and makes zero dollars and sense ."Those who can afford gas, will. The rest will depend on mass transit. Less demand = stable or lower prices."All who refuse to make that very very tough decision of relocating closer to employment. The current housing market may be a best opportunity."Another socialist telling you how to live."Wars for oil contol are not free!"No idea what that means ..."All americans who believe it's okay for soldiers to die or become permanently disabled so long as it is not them or their children all for oil.*Yes folks it is us screwing up our own cost of living instead demanding an end to all of the madness stated above. Instead we believe politicians!"More Bush BS.Everyone should be investing in oil futures.

bondmen 7 years ago

It looks like the hedge funds and even pension plans have gotten in on the oil and commodity bubble action. Some folks just buy whatever's hot and help cause the price explosion. The reverse is also true when it looks profitable to sell. Asymptotic price increases always end in a crash, history shows. Check out Mish's excellent comments and wonderful graphs detailing this bubble:http://globaleconomicanalysis.blogspot.com/2008/05/quantifying-commodities-speculation.html

monkeyhawk 7 years ago

There you go again, Godot. Always looking for some deep, dark conspiracy.Funny thing is - you are regularly spot on and thought evoking. Some people with enormously deep pockets will manipulate anything, at any cost, to get their people elected.

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