The reasons for high priced oil/gas
 

...according to Mark Cooper who will be testifying before congress today.

Supply and demand plays a role...OPEC plays a role...the weakened dollar plays a role...but the primary cause of the high price of oil is future speculators.

Commodity trading was deregulated in 2000 and this opened the doors for future speculators to basically just go wild. They can invest at 5% with a 95% margin call and no required reserve because of deregulation. This is basically a house of cards...a scam if you will...but as long as the house does not fall they are making money head over heels.

According to Mark Cooper fundamentalists believe that oil should be between $40-$60 per barrel as a natural growth because of supply and demand...OPEC believes that it should be around $80 per barrel...where as it is around $140 per barrel and the difference is because of futures speculators.

He and others...today...will be urging congress to re-regulate the commodity trading in the futures market.

BTW...some have suggested "why not just ban futures speculation" but according to Mark Cooper futures speculation does have a healthy role to play as long as it is regulated.

My paraphrasing may not be 100% correct but none the less discuss please.

Why is he still alive?

He shouldn't be alive. This vexes me. I am terribly vexed

Yup, said this in the majority of threads regarding oil prices. When production is no where near 100% capacity I don't understand how people can try to tell us that it is simple supply and demand.

You more a less hit it dead on. It's been the REAL reason for this mess. But, it doesn't get a lot of news play.

Funny how the mainstream news always cherry picks their angles, typically, based on sensationalism versus facts of the matter.
:disgust

yes I agree... in asian when rice was becoming 'scarce' the first thing the govs over there did was pull rice of the commodities markets.

Great movie

the reason? BUSH!

if everyone just stop driving thier cars for a week, the price would go way down.

The President has little if anything at all to do with the high price of oil.

The price of oil would not go down...because China and India just pick up what we don't use at least that is what is being said during the hearings...that is where supply and demand comes into play.

I would say, both of them. Higher demand then supplies and speculation. But the problem with speculation is, its not only specullation on tight supplies, its speculation on dollar weakness.

from my another post here:

http://www.telegraph.co.uk/money/mai.../ccview109.xml

"Crude is now moving almost reflexively as a sort of "anti-dollar", a currency on steroids with eight times leverage. No matter that the global economy is slowing hard. Bad is good for oil in the topsy-turvy world of commodity funds."


Now everyone and his gradmamma are speculating in oil on futher dollar debasment.
This is what you got, when you have FED and Treasury trying by low interest rate policy, to bailout wallstreet banks, without any respect to average Joe, while those yet to bankrupted banks are trying now to get out of their own mess by playing a commodity boom too..

Of course there supply problems too, but the speculation factor is big too as we can see on $16 surge in the price of oil on small dollar devaluation in a two days two weeks ago

The Central Eurobank head told it few weeks ago: "to cut interest rates at this point would be the same as taxing the people to bail out the banks. Cost of extra inflation would be the ultimate sign of moral hazard to save banks."

In addition to supply problems, now you guys in the US got a pay for monetary policy of your institutions and we too as oil simply moves also as currency hedge with huge leverage.

Most people are stupid through out the bible belt. They are so stupid that they stand around the gas pump and pray in groups.

The media doesn't report it because most people can't wrapped their brains around "futures trading" markets hence, making it a boring subject...it is easier to blame the Mexicans for the rise of gas.

Or the oil companies...who make between an 8%-9% profit on their investments. Their over all profits are so large because of volumn not because of an exorbidant return on investment.

GS just posted outstanding ER today. They made money most money as follows :
* betting on oil
* underwriting fees for under-capitalized banks
* reduced taxes

while GS is not BK candidate , I bet every other IB is trying to do the same, betting on commodities, since in current market its one of the last places where money can be made.

According to Cooper the responsible ones that used to trade in the futures market have been driven out...for the most part...because since deregulation it has become a wild man's market with more and more players...basically a casino/gambling type market (it always was to some extent) and yes they are making money head over heel. Put up 5% cash...with no required reserve and go for the ride. Of course their will be a time when the house of cards falls but when...$200 per barrel $300 per barrel...who knows. In the meantime they will be making a great return on their 5% cash investment and since their is no required reserve to meet a margin call...when the house of cards falls...I really do not see how they can be hurt very much. They of course are damaging the economy and hurting the little man's wallet. I don't know why in the hell commodities trading was ever deregulated.

Speculation, pure and simple:mad:

it's true....

How many of you were even aware of the deregulation that occured in 2000. If I ever was aware...I can't recall it now. I wasn't invested in stocks at that time so I didn't pay much attention to what was taking place in the market...so I may never have known about the deregulation.

It's really expensive!

Whats sad, that even resposible authorities wont do anything with it. Destroying productive economy for a profit of few big players is never good in the long run.

FED should start to rise interest rates in order to help a dollar, as oil trades nowadays as some sort of "anti-dollar" with around 10X leverage, due all their devaluation policy.
When Trichet told to markets, that they are going to raise rates in EU, oil went up $6 dollars in a hour as dollar went down against EUR.

Instead of it, Bernake is defending with 300 bilions of dollars (around 5x times more money then used on averaged) current interest rates so banks can be "recapitalized". If let to market forces real interest rates would be higher.
They are simply destroying productive economy in order to save a bad economy (banks) and they wont do anything to support a dollar nowadays. The FED is not here for average Joe, but for its wallstreet shareholders....

Nowadays, I dont work much in adult, but I mainly invest and trade oil/gas stocks and 140$ oil dont make me happy...but in the long run it was inevitable, while we are heading to peak oil. Its time to bring more energy efficient economy....

and why do speculators go to oil? because they know the dollar will continue to go down.

I thought the right wing says government regulation is a bad thing that hurts us all. lol

Oil and gold usually do the opposite of the market/economy. So if you sensed the dot-com bust coming, a smart investor would have moved to positions of gold and oil.

please shut the fuck up already

I read something about that today, that these guys are only making about a 10 cent profit per gallon. This true?

Here's some background... it's amazing that no one has fixed this thing given how much chaos it's caused

--------------------------------------------------
http://www.star-telegram.com/ed_wall...ry/651928.html
http://www.star-telegram.com/ed_wall...ry/659081.html

The late, infamous Enron head, Ken Lay, realized in the eighties that he could make more money bidding up energy in the futures market than by actually creating and selling energy. But, under then-current rules, how much you could make swapping paper was limited. Fortuitously, Lay had excellent Texas political connections; and in November of 1992, the head of the Commodities Futures Trading Commission moved to exempt energy-derivative contracts and related swaps from any government oversight.

A vote was hurriedly put together before the Clinton White House would take over, and so Lay could finally start "dark" – unregulated – futures trading. The head of the CFTC was Wendy Gramm, wife of Texas Senator Phil Gramm; five weeks after she left, she became a board member of Enron in Houston.

Fast-forward to late 2000 and H.R. 5660, the Commodity Futures Modernization Act of 2000, sponsored by Republican Congressman Thomas Ewing of Illinois. That bill went nowhere, even though Tom Delay’s wife Christine was then working for a Washington lobbying firm, Alexander Strategies – which Enron had paid $200,000 to push through legislation for permanent energy deregulation in these "dark" markets.

Six months later came Senate Bill 3283, also named the Commodity Futures Modernization Act of 2000. This time around the sponsor was Republican Sen. Richard Lugar of Indiana, and now Phil Gramm was listed as one of the bill’s co-sponsors. Like it had in the House, this bill was destined to go nowhere until, late one night, it was attached as a rider to an 11,000-page appropriations bill – which was signed into law by President Clinton.

Now traders had an officially deregulated market for energy futures. Worse, that bill also deregulated many financial instruments – including the collateralized debt obligations that are at the center of today’s mortgage crisis, which may well cost us more than $1 trillion before it’s over.

I was too young to invest then, but I started to invest later around when bush took office :thumbsup

And I am not telling anyone when I am selling either lol

This makes my fucking blood boil

I have been cashing in the past two years. I would rather get in on the action than whine from the sidelines like a bitch.

Get ready to short crude. The USD will bounce soon and oil will decline. The DUG ETF provides 2x exposure.

There is money to be made. Don't be a sucker.

thats the point people are missing. deregulation has been good for the investor ie most everyone with a 401k and what not. start to regulate and you start hurting a lot more people.

Let the market work, gas is getting to expensive, then people will go to what most lefties want, electric, solar, wind and whatever else there is. change hurts sometimes.

make the money when you can, dump some of the cash made into other futures.

Serious question: are you mildly retarded?

Thank you for believing in the free market. That too is becoming a scarce commodity, especially when there is rhetoric like this...........

Rep. Maurice Hinchey (D-NY), member of the House Appropriations Committee...."We (the government) should own the refineries. Then we can control how much gets out into the market." EnergyInvestingNews

greed ??

2010 the electric cars role out :thumbsup

The family is neck deep in OIL. Do you really believe that they have nothing to do with it??

The President and family...have little if anything to do with the price of oil/gas.

its really fucked up.

Take a look on top sponsors of both US political parties and you will find out that nothing is going to change....as there are mostly big wallstreet banks and some of them have in this game big stakes of course.

Supply = Controlled at the source predominantly by OPEC. Obviously more oil could be pumped. Secondarily manipulated by how quickly the oil moves through the world's refineries. Obviously we cannot know how efficiently this is controlled/regulated/manipulated.

If oil futures speculators had to take possession of the oil or were governed by stakes similar to those required in the option's market things could change overnight.

One positive thing about high oil prices is that it will now be profitable to develop alternatives to fuel, we certainly have the technology to be able to do it.:thumbsup