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Old 04-28-2011, 06:57 PM  
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Oil Roulette

Rising Oil Prices Harm American Families but Enrich Serial Speculators

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http://www.americanprogress.org/issues/2011/04/oil_roulette.html
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The oil shock of 2008 helped drive the U.S. economy into the Great Recession. Oil at that time cost a record $147 per barrel, and gasoline prices surged to $4.11 per gallon in July 2008?the highest price ever. This squeezed families? budgets because it is very difficult for most people to significantly reduce driving in the short run when prices rise. And the U.S. Commodity Futures Trading Commission, or CFTC, found that the 2008 oil record was partly driven by speculators driving up prices to make a quick killing.

This year ?it?s like d?j? vu all over again.? Oil prices are rising to heights not seen since 2008. Oil rose from $85 per barrel to $112 per barrel in a little more than two months?a whopping one-third leap. Gasoline prices have followed along, rising by 70 cents per gallon?or 23 percent?during this same time. As our economy struggles to recover from the Great Recession, Americans are again forced to pinch pennies to afford their commute to work, school, and worship. Meanwhile, oil companies prepare to reap record profits in the first quarter of 2011.

As in 2008, there are serious indications that speculators are driving up oil prices. CFTC Commissioner Bart Chilton released data that found that:

Hedge funds and other speculators have increased their positions in energy markets by 64 percent since June 2008 to the highest level on record.

Similarly, a dozen U.S. senators wrote to CFTC Chairman Gary Gensler that ?speculators are seizing on recent political turmoil in North Africa and the Middle East to drive energy prices to unwarranted levels,? citing numbers from the CFTC?s weekly ?Commitment of Traders Reports? that indicate since January 25:

Money managers have increased their long positions in NYMEX West Texas Intermediate crude oil futures contracts by more than 35 percent, or the equivalent of 75 million barrels of oil.

According to Investopedia, a long position in a commodity futures contract is made when an investor ?enters a contract by agreeing to buy and receive delivery of the underlying [commodity] at a set price - it means that he or she is trying to profit from an anticipated future price increase.? By buying oil futures long, speculators are betting that they expect oil prices will increase over the life of the futures contract so the oil is more expensive at delivery time compared to the original purchase price. Political instability in an oil-producing nation or region often leads end users and speculators to increase their purchase of long oil positions due to the anticipation that future prices will be higher. The fear that prices will continue to rise leads oil end users to pay more now for future delivery of oil to lock in a lower price than the one they expect upon delivery.

Indeed, two weeks ago Goldman Sachs & Co. researchers caused a stir in the commodities trading world when it named ?excessive speculation? the culprit for inflating oil prices ?$20 higher than supply and demand dictate,? and advised its clients to sell off their oil-related assets because they were being overvalued due to speculation.

Oil market analysts note turmoil in the Persian Gulf as a factor for higher oil prices, beginning with a small price bump around the January democracy protests in Egypt. The uprisings soon spread around the region.

Prices then took another leap up when regional political unrest hit Libya, disrupting its production of 1.8 million barrels per day, or about 2.1 percent of the world?s daily production. A decline in Libya?s prized sweet crude (the best for refining into gasoline) certainly rattled Europe and its market for crude oil. But market fears about potentially declining global oil supplies should have been ameliorated when Saudi Arabia used its vast reserves to fill the supply gap. But as Marcela Donadio, Americas Oil and Gas Leader for Ernst & Young, observes:

When Saudi Arabia increases production, as they just did, it is clear that oil supplies are plentiful and that the current pricing volatility is driven by market psychology and not necessarily real-time fundamentals.
Oil Roulette-oil_roulette_onpage.jpg 

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Old 04-29-2011, 06:34 AM  
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Interesting.... I now have a better understanding as to how the whole oil speculators thing works.... I do not however, think that they are buying with the intention of causing oil prices to go up. They buy with the hopes that the value of what they just bought will go up (outside factors influence when the buying frenzy starts).
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Old 04-29-2011, 07:07 AM  
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During this whole thing... I keep thinking of when Obama said something along the lines of "....making alternative energy more competitive......".. Now, there are two ways to do that.

1. Make the production of these alternative energies cheaper somehow. (How exactly do we do that in the SHORT TERM?)

2. Make the current energy sources more expensive.


Actually, there is likely a 3rd (and most probable option...)

3. A little of both 1 & 2.....







or



(The last one is more of a joke...I hope)


Oh, and yes, the speculators are likely taking advantage of the situation (making it worse..)
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Old 04-29-2011, 08:20 AM  
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it's a hard thing to answer, if we don't allow speculation by stating the only people that can buy futures are people actually taking delivery of crude, corn, soybean, whatever then the price will be lower. however by doing so we may open ourselves up to more extreme price fluctuations

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Originally Posted by YelloJeep View Post
During this whole thing... I keep thinking of when Obama said something along the lines of "....making alternative energy more competitive......".. Now, there are two ways to do that.

1. Make the production of these alternative energies cheaper somehow. (How exactly do we do that in the SHORT TERM?)

2. Make the current energy sources more expensive.


Actually, there is likely a 3rd (and most probable option...)

3. A little of both 1 & 2.....







or



(The last one is more of a joke...I hope)


Oh, and yes, the speculators are likely taking advantage of the situation (making it worse..)
and the first pic wasn't a joke? you really think Obama is behnd this market speculation.............
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Old 04-29-2011, 08:33 AM  
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Originally Posted by RedJeepXJ View Post
........ you really think Obama is behnd this market speculation.............
No, I do not think he is behind the market speculation. (Again, I don't think the market speculation is the only thing driving the prices.)

And as far as the first picture, it is not a joke because I think that increasing prices goes right along with the "making alternative energy more competitive" agenda. Now how responsible he is for the prices, eh, that is debatable. I do not think he is completely blameless.

Let me ask you this... If Obama could snap his fingers and make gas prices $1 per gallon...Do you think he would do it?
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Old 04-29-2011, 09:00 AM  
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Originally Posted by YelloJeep View Post
No, I do not think he is behind the market speculation. (Again, I don't think the market speculation is the only thing driving the prices.)

And as far as the first picture, it is not a joke because I think that increasing prices goes right along with the "making alternative energy more competitive" agenda. Now how responsible he is for the prices, eh, that is debatable. I do not think he is completely blameless.

Let me ask you this... If Obama could snap his fingers and make gas prices $1 per gallon...Do you think he would do it?
that would all depend on the "how", and not much he can even do about it. If he positions to end speculation he will be called an anti-capitalist, if he works to allow more drilling, we "may" see a small decrease eventually years down the road.... But the big question for your question is the "how", otherwise no one could answer that, even obama.

I see what you are getting at but there is no way to make it happen due to supply and demand, there are significantly more pressures to increase supply and the oil is becoming harder and harder to get to. So if you are saying if obama could temporarily subsidize cheap oil, should he? no, we need the drive to create alternatives so that when "true" peak oil occurs we don't fall as a society.
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Old 04-29-2011, 09:10 AM  
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For the most part, I agree with you about the "how" stuff, but......Let me rephrase the question.

ALL POLITICAL AND MARKET DETAILS ASIDE.... If he could (only by snapping his fingers) make gas at the pump cost $1 per gallon, how would it effect his "green" energy agenda?With the agenda in mind, would he do it?
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Old 04-29-2011, 09:19 AM  
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Quote:
Originally Posted by YelloJeep View Post
For the most part, I agree with you about the "how" stuff, but......Let me rephrase the question.

ALL POLITICAL AND MARKET DETAILS ASIDE.... If he could (only by snapping his fingers) make gas at the pump cost $1 per gallon, how would it effect his "green" energy agenda?With the agenda in mind, would he do it?
Again, no one could answer that realistically without the "how"? And I am not dodging the question, it's just a very unrealistic unanswerable hypothetical question.
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Old 04-29-2011, 09:55 AM  
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Originally Posted by RedJeepXJ View Post
Again, no one could answer that realistically without the "how"? And I am not dodging the question, it's just a very unrealistic unanswerable hypothetical question.
Well, I will answer it for you. If gas was $1 a gallon, it would be hard to convince most people to spend more money on (for example) electric cars or hybrids than on normal cars. If you cannot convince people to buy them then companies won't make them. If companies won't make them and people won't buy them then the money that the government has been throwing at the green initiative will have been largely wasted because it would be virtually impossible to make green energy (as Obama SAID) "...more competitive..." with fossil fuels. So in my opinion, he WOULD NOT make gas prices $1 a gallon. So, the higher prices are going to make it EASIER for his agenda to proceed (as planned?). Therefore I do not believe that he is entirely unhappy with the high gas prices (except possibly the political repercussions of it).

I forgot to mention ethanol.... (I hate that stuff...)
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Old 04-29-2011, 10:23 AM  
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Quote:
Originally Posted by YelloJeep View Post
For the most part, I agree with you about the "how" stuff, but......Let me rephrase the question.

ALL POLITICAL AND MARKET DETAILS ASIDE.... If he could (only by snapping his fingers) make gas at the pump cost $1 per gallon, how would it effect his "green" energy agenda?With the agenda in mind, would he do it?
I remember the gasoline shortages in 1973, and we all scrambled to conserve with smaller cars, and alternative energies were on the table front and center at that time. Then the whole "Crisis" was over and we went right back to our old ways. It seemed that everytime the price of fuel would go up, we'd race around yelling FIRE FIRE, but then when the prices went down, we'd revert right back to our habits again. I think that if we had one dollar a gallon gasoline these days, and it was guaranteed forever...........Yes! Alternative energy could be burried. But as it turns out, Obama and a lot of others see that not only will gasolene ever be $1 again, but that it's going to get more and more expensive, as China and India, as well as the speculators continue to drive up prices and demand for the stuff. I think that the call to alternative energy, whether by Obama or Jimmy Carter or whoever, is indicitive of the writing on the wall.......... That the oil will run out eventually, so let's turn lemons into lemonade! Gear up for it now, while the time is right, rather than waiting till the last drop, and then wondering what the heck we are gonna do! To me, it just makes sense, irregardless of whose agenda this is.
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