Klobuchar, Franken aim to crack down on oil speculation

Categories: Politics
oil speculation.jpg
These days, it nearly takes a Benjamin to fill up.
Amy Klobuchar and Al Franken are sponsoring legislation aimed at reigning in oil speculators.

The average price of gas in Minnesota around $3.73, and similar pump pain being felt throughout the country, there's pressure on lawmakers to do something, anything, to bring prices down.

A group of liberal senators, led by Vermont's Bernie Sanders and including Minnesota's delegation, believes prices could be brought down if the Commodity Futures Trading Commission were forced to quickly implement speculation-combating rules. Problem is, at present it's unclear just what those speculation-combating rules would be.

Consider -- A task force examining oil and gas speculation formed by President Obama last spring has barely met in the year since. In 2010, the commodities trading commission was directed to set rules curbing speculation in energy markets by January 2011, but that deadline passed without anything happening.
franken klobuchar.jpg
Our senators are fighting the good fight, but they've been bringing bare knuckles to gun battles.

The new bill sponsored by Franken and Klobuchar would give the trading commission two weeks to implement new processes for investigating speculators, though it's not clear what the consequences would be if the commission again fails to act.

Forbes recently concluded that speculation adds 56 cents to the price of a gallon at the pump. Franken, citing the fact that Exxon Mobil, Delta Airlines and other major companies support the new bill, said, "the people who spend every day looking at these markets are the ones who say speculators are driving up the cost of gasoline."

Sanders said evidence of speculation's impact is seen in the fact that swings in oil prices seem to violate the laws of capitalism.

"We have more supply than we did three years ago, less demand than since 1997," he said. "If you're looking at the fundamentals of supply and demand, oil prices should be going down, not up."

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Don
Don

Close the Enron Loophole

Dave2
Dave2

In reply to nat x:It's the speculators demand in response to the supply. By buying futures dates an expectation of higher prices is revealed. The more futures that are sold the higher this expactation becomes and thus drives the price higher and higher, unless of course, the supply changes also. So speculators fuel the demand for a higher price for any given supply of crude. When the futures contract sell date approaches without the expected price rise the speculators sell back just as fast as they bought. This is why we have such quick up and down prices at the gas pump.Speculators scramble to buy and they scramble to sell. There have been estimates that speculation is responsible for anywhere from 40 to 70 percent of gasoline price.

nat x
nat x

You are talking about demand for futures contracts which is not the same thing as demand for oil.  I would love to see a link to a credible source showing that speculation is responsible for anywhere from 40-70 percent of gasoline price. I'd also love to see where you go to get data on oil inventory. In your world, speculators buy up oil and keep it off the market, thus oil inventories should be bulging right now.

Dave2
Dave2

Demand for futures contracts has the same effect as demand for oil. Any kind of buyers activity will push the price up or down depending on the situation. The 40 to 70 percent estimate reads as a high of 70% to a low of $40%. If you want to see more opinions on futures speculations on the price of crude, just look on the internet. There are many theories both ways but it's pretty hard to believe that speculation isn't the cause of the kangaroo highs and lows. These highs and lows alone are proof that speculating is the cause. If the natural ratio of demand to supply were the only determinate it would  be days if not weeks for prices to fluctuate the way they do in hours from speculators.  Senators Kobuchar and Franken are not  the only ones concerned about the effect of futures speculation on the price of crude.    

nat x
nat x

 whoops. meant to type that the future price is lower than the spot price. not that this makes much of a difference because you are already convinced that the price of oil is what it is because of speculators.

nat x
nat x

What do you make of the fact that the Nymex Crude Future price is higher than either the Dated Brent or WTI Cushing spot prices? Doesn't this mean that speculators think the price will soon fall? If the price does fall, I presume you will say it is "because of" speculators. I presume you will say they should be "blamed" for lower prices and I presume you will support a legislative response to prevent speculators from ever again "causing" the price to decrease.

Isaac Anthony
Isaac Anthony

Kirk. There is more supply now than there was last year and prices are higher. Those are the facts presented in the article, did you not bother to read it before posting knee-jerk conservative talking-points? That's a rhetorical question, you've shown us time and again that you're only capable of regurgitating talking points, devoid of independent thought and/or rationalization.

Dave2
Dave2

Right, there's more supply and still we have higher prices. But now there's also more speculators tying up more and more of the supply. If you have X barrels of crude and half of it is tied up by speculators it dimminishes the supply for legitimate buyers so the price keeps climbing. Doesn't matter how much you increase the supply if speculators keep buying up more and more of it. And, the higher the price gets the more speculators get on the band wangon; their own speculations then cause the price to mushroom  even more.Before the year 2000 there were only three exchanges in the world where oil futures could be purchased, now there are many. Also the front money for buying futures was much higher then; it limited the number of possible buyers. Then the price was lowered and now there are many more speculators. We need to go back to the regulations as before  2000.    

nat x
nat x

HSpeculators do not buy oil they make a bet on the future price of oil. This is the whole point of a futures market -- you can make a bet on the future price of a commodity without having to take on the risk of actually getting involed in the business of the commodity at issue. I'm not sure why so many people fail to grasp this. It's also the reason this type of legislation is pointless (other than having the point of trying to score cynical political points with voters swayed by slogans over reason.)

nat x
nat x

This comment is in reply to Dave2 below. First you say that speculators are the problem because they control supply. Now you say they are the problem because they control demand. So, which is it?

Dave2
Dave2

Buying futures shows demand and demand is what jacks the price up. Oil companies themselves sometimes do it to keep the price high; it is not always just an innocent attempt at high-stakes gambling. Futures buying is like throwing gasoline on an already out of control blaze. Prices are high enough now just from the natural difference between supply and demand and there is little to justify futures buyers for their profiting from the pain of the rest of us.

Gos
Gos

How about fighting to give the SEC back its balls by kicking out all of its Wall Street insiders?  Gas prices are better high, it forces us to make more efficient choices.

nat x
nat x

Speculation, by itself, does not have an effect on oil price.  If oil is being withheld from the market, yes, the price will go up. If oil is flooding the market, yes, the price will go down. What does the OECD inventory data say is happening with oil? I'm sure most people are bored at this point and do not want to look up the data. It's easier to cling to slogans. Sigh.

Just an average guy
Just an average guy

Not exactly the point of the article.  The article is about how much a barrel of oil's cost is due to speculator influence through futures contracts, not the actual price increase of oil. The theory goes that limiting futures activity will reduce the cost involved in trading oil.  

http://www.forbes.com/sites/ro...

Kirk the Conservative Jerk
Kirk the Conservative Jerk

Prices always spike when the refineries have to reformulate the mix to summer blends.Damn you EPA!!!Of course it doesn't help when President Obama actively lobbies and personally makes phone calls to Democrat Senators who he thought might vote for the Keystone XL Pipeline encouraging them to vote no.

Oh wait, now he is allowing the pipeline.  Schizophrenic freak show...

John the lawyer Edwards
John the lawyer Edwards

By the way, it appears that Amy is knocked up. I know it's not mine. Are you preggo Amy?

John the lawyer Edwards
John the lawyer Edwards

"our senators are fighting the good fight" and "they know what rules to impose but not how" and obama set up a high level commission that hasn't meet.

It must be that dam bush guy again. Lets ask him to ask the Saudi's to drill more for us. Oh wait, Shumar from NY has already done that.

Talk about the 3 stooges. Al, Amy and Mo 

Literate hillbilly
Literate hillbilly

I'm hoping you mean "damn" instead of dam.  Technically, the commission has met, but not for months.  I believe you're referring to Charles Schumer, not Charles Shumar.  

Johnny
Johnny

The best way to kill the speculators is to enhance supply to the point the specs can't operate.  of course that would require the government getting out of the way......

Just an average guy
Just an average guy

I would like to see some sort of economic theory that supports this.  Wikipedia would be fine.

jim
jim

if you "enhanced supply" wouldn't speculators just bet that the price would decrease? Do you understand what speculators do?

webcelt
webcelt

It did get out of the way, remember? That's the problem.

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