Wall Street effect on price of fuel we pay

[magnumpi]

Interesting perspective...

Gas prices: How Wall Street helps pump prices defy supply and demand - Olive - thestar.com

[lane912]

Daily Kos: DeFazio is trying to make the Gas Speculators pay

"by Charles Pope, The Oregonian -- March 07, 2012


[...]
In a letter to Obama delivered Wednesday, DeFazio argued that "for the last decade, rising speculation in the oil markets has added considerable volatility to the price of oil. The bottom line is that oil speculation is artificially jacking up gas pump prices."
DeFazio then asks Obama to formally endorse a bill he introduced last year that would levy a "0.01 percent excise tax on transactions in oil futures, options, and swaps" that DeFazio says would curtail speculation and price swings at the pump.

"By charging a minuscule 0.01 percent tax (1 basis point) on derivatives of crude oil, speculators would be dissuaded from excessive speculation. Oil prices will then return to accurate price discovery following the supply and demand price curve. American drivers will see fair gas prices and our economy will not be further constrained by excessive oil speculation," DeFazio said in the letter."

[kach22i]

Would a one cent tax really do all that much?

[lane912]

i realy don't know? but this seems to be the idea that several folks are throwing out there-
what is the volume of speculation?

[Craig]

I believe the article said that about 64% of the volume is specualtive trading nowadays.
I am all for this passing. I would like to see it refined (no pun intended) somewhat so only the Wall Street speculators have to pay the surtax, and refiners and other oil related business don't.
If it could be worked out this way, I would be for the tax being hiked to 15 % or so. Speculators have no business buying crude, they are screwing eveybody world-wide with their greed. I am usually a free-market capitalist type guy, but I am all for crude being taken off the public trading block.
Craig

[sammyg2]

The price of crude is artificially inflated by speculators, of that there is no doubt.

Investors buy a future delivery, sit on it, and then sell it when the price increases. It artificially decreases supply temporarily which drives the price up.
I'd like to see a law that says if you buy a crude delivery you have to physically receive it before you can sell it, or you go to jail.

If we could do that internationally it would instantly drive the drive down to around $60/bbl.
If we could just do it in the US it would drive the price down to $80.

[J P Stein]

I have read that there are tankers full of oil sitting in anchorages all over the world and this is not new news. The "take delivery" bit won't work.

All commodity markets are run to be advantageous to the speculator cause that's where the money is. Much of the trading in commodities markets are on commodities that don't even physically exist.
Longs, shorts, hedges(?) & God knows what else. Your government allows this so bend over & quitcher' whinin'.

[wdfifteen]

Originally Posted by sammyg2

The price of crude is artificially inflated by speculators, of that there is no doubt.

Investors buy a future delivery, sit on it, and then sell it when the price increases. It artificially decreases supply temporarily which drives the price up.
I'd like to see a law that says if you buy a crude delivery you have to physically receive it before you can sell it, or you go to jail.

If we could do that internationally it would instantly drive the drive down to around $60/bbl.
If we could just do it in the US it would drive the price down to $80.

This is scary. Sammy and I agree on something. I hope the earth doesn't stop rotating. Hug your children.

[Rich76_911s]

You want oil to be cheaper stop printing dollars like they are toilet paper. Every commodity has increased a significant margin. From gold to oil to you name it. Sure speculation may impact the prices in the short term, but the long teem fundamental change has little to do with speculation. If anyone including the author had the scoop on the actual intrinsic value of oil I I'm confident you will find some to finance your short positions. My guess its though that those 60 hunches are as accurate as tossing a dart at a board.

[widebody911]

Originally Posted by wdfifteen

This is scary. Sammy and I agree on something. I hope the earth doesn't stop rotating. Hug your children.

This.

I guess the Mayans were right after all...

[J P Stein]

Originally Posted by Rich76_911s

You want oil to be cheaper stop printing dollars like they are toilet paper. Every commodity has increased a significant margin. From gold to oil to you name it. Sure speculation may impact the prices in the short term, but the long teem fundamental change has little to do with speculation. If anyone including the author had the scoop on the actual intrinsic value of oil I I'm confident you will find some to finance your short positions. My guess its though that those 60 hunches are as accurate as tossing a dart at a board.

You're right, of course. The devalued buck is the root of the problem and the vast majority of price escalation is just good old fashion inflation........which is a non-event according to our government.

[island911]

So are speculators also responsible for sending gas prices to extreme lows? - think they are.

The thing is, cheap energy is the grease of the economy. ...it makes everything we do easier.

The fundamental here in the US is that the current admin has been focused on steering us away from cheap energy, in great Hope of making the expensive (alternative) energy cheap. Part of that strategy has been restricting domestic oil on govt land such that the alternative looks better by comparison.

Of course, those pet (alt) energy projects have failed miserably. Oil prices shot up, causing all sorts of old oil wells (expensive to run) to start back up. IOW, even the expensive oil still is cheaper to get than subsidized alternative energy.

Energy prices will go back down when political obstacles are pushed aside for the sake of a prosperous nation.

[ronster]

Originally Posted by kach22i

Would a one cent tax really do all that much?

No because speculators would find a way to pass it on to consumers. Regulation and enforcement of existing regulations are the key but that smacks of big government and that is a Romper Room no-no around PARF. One way or another the existing majority on PARF will find a way to blame Obama.

[island911]

Ronster -There are two things going on here; price volatility and supply/demand changes.

For price volatility, blame the speculators (who watch daily world politics for planned supply cuts and inflation)

For the supply side. . . consider that Energy sec Chu just recently backed away from comment about how he would like to see US gas prices equally high to European gas prices. ($9 gas, for the good of the country) So don't go implying that teamO has nothing to do with increased energy prices. ...Trillions of new dollars infused drives inflation. Restricting new oil drilling permits cuts supply. (guess who is doing that)

[kach22i]

Originally Posted by sammyg2

I'd like to see a law that says if you buy a crude delivery you have to physically receive it before you can sell it, or you go to jail.

All those Greek shipping tycoons are cheering for that to happen. They own all the ships!

Actually, we don't know who really owns half these ships. It's one shell tax evading corporation owning another.

[sammyg2]

Re: printing dollars..................

When a gubmint goes crazy and spends trillions it doesn't have and then borrows to cover it, it has only two options.
1) try to pay back the money it borrowed (which it can't) so it defaults....... or
2) prints enough money to devalue the money already borrowed to make it easy to pay back the debt.
In other words if I borrow a million from you and the next day a million isn't worth anything, then I basically owe you nothing. I jones'd out of the debt.

BUT that only works if I stop borrowing money.
If I keep borrowing money eventually I'll still go into default because I can only devalue my own currency so far and so many times before getting into real trouble, like having the Chinese take over.

The other downside is that whenever the money becomes worth less, it takes more to buy stuff. (see jiminy carter). Inflation goes nuts, people's paychecks don't buy as much, people get poorer and the economy goes into recession, or stays there as in our case.

But hey, as long as the sheeples are dumb you can just blame it on the other guy and they won't know the difference. What could go wrong?

[Shaun @ Tru6]

Originally Posted by Rich76_911s

You want oil to be cheaper stop printing dollars like they are toilet paper. Every commodity has increased a significant margin. From gold to oil to you name it. Sure speculation may impact the prices in the short term, but the long teem fundamental change has little to do with speculation. If anyone including the author had the scoop on the actual intrinsic value of oil I I'm confident you will find some to finance your short positions. My guess its though that those 60 hunches are as accurate as tossing a dart at a board.

Does this also apply to Great Britain who went an austerity plan vs. a money printing/stimulus plan, but their fuel prices have also risen dramatically? Or is it just that the world currency is based on U.S. Dollars and therefore effects the price of oil on the exchanges?

My understanding is that all the new money printed by the Fed is in banks (Financial economy), not in general circulation (Main Street economy), so it hasn't effected inflation on the scale it could, yet.

on a tangent, I would expect the developing Middle Classes in India and China to have a greater impact on inflation in the U.S. economy than printing money. Everything is getting more expensive due to higher labor rates overseas.

[Rich76_911s]

Originally Posted by Shaun 84 Targa

Does this also apply to Great Britain who went an austerity plan vs. a money printing/stimulus plan, but their fuel prices have also risen dramatically? Or is it just that the world currency is based on U.S. Dollars and therefore effects the price of oil on the exchanges?

My understanding is that all the new money printed by the Fed is in banks (Financial economy), not in general circulation (Main Street economy), so it hasn't effected inflation on the scale it could, yet.

on a tangent, I would expect the developing Middle Classes in India and China to have a greater impact on inflation in the U.S. economy than printing money. Everything is getting more expensive due to higher labor rates overseas.

I can't say I have paid much attention to the exchange rates between the USD:GBP, but a quick look shows that it has been rangebound between 1.65 and 1.55 GBP/$ for the year. (avg around 1.60). Since oil is priced in dollars (everywhere) and their currency has remained relatively flat against the USD it would be expected that their increases in gasoline would mirror ours.

Evil speculators aren't waiting for the Fed to tell them that inflation is actually running closer to 5%, they are taking action today. I've heard one hot commodity for hedge funds lately has actually been farmland (on the assumption it is a good inflation hedge). SO whether the money is hitting main street today or tomorrow doesn't matter, speculators are preparing for it today. Which is why I will still stick to my toilet paper argument, a stonger dollar will curtail investments in commodities.

I have no idea which force will have a larger impact on inflation in $ terms, foreign wage inflation or domestic dollar production. I just know we are in hot and heavy dollar production mode and the fed continues to hint at turning the heat up.

If you price oil in terms of gold it doesn't look too terribly expensive on a historical basis:

[red-beard]

Originally Posted by Rich76_911s

You want oil to be cheaper stop printing dollars like they are toilet paper. Every commodity has increased a significant margin. From gold to oil to you name it. Sure speculation may impact the prices in the short term, but the long teem fundamental change has little to do with speculation. If anyone including the author had the scoop on the actual intrinsic value of oil I I'm confident you will find some to finance your short positions. My guess its though that those 60 hunches are as accurate as tossing a dart at a board.

About 50% of the increase in the past 10 years is this. The most stable currency, which is about 40% gold backed, is the Swiss Franc. When I went to Switzerland in 99/2000, it was around 1.4 to the USD. Now it is 0.7-0.9 to the USD.

I expect the rest is speculation, supply disruption and general increase in the demand for oil by place like India and China.

[vbaron]

After reading this last week , it's now understandable that prices are that high, despite that fact that we are actually exporting more oil than importing. Consumption actually sank in the US, which should drive the prices down or at least stabilize them!

U.S. Was Net Oil-Product Exporter for First Time Since 1949 - Bloomberg