[sprocket3]

Check this out. It came from an aircompany.


Stop Oil Speculation Now | S.O.S. NOW


Dear xxxx,

Last week, crude oil hit an all-time high of $146, and the skyrocketing cost of fuel is impacting our customers, our employees, the communities we serve, and the economy as a whole. United, and the majority of other major U.S. airlines, are asking our most loyal customers to join us in pushing for legislation to add more transparency and disclosure in the oil markets. Please see the attached open letter from the leaders of the U.S. airline industry.

An Open letter to All Airline Customers:

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting.

[ajfriz]

I got the same email from delta not too long ago.

[tcb]

One of our PM's sent this out yesterday... pretty wild.

[IDave]

McCain's financial adviser, Phil Gramm....

Pensito Review Closing Enron Loophole Would Drop Oil Prices 25% - 50% Overnight

[Sporin]

Yup, close the Enron loophole, not much chance of McCain doing that since it's Phil Gramm who is giving him his "economic policy" notes.

[sprocket3]

Originally Posted by IDave

McCain's financial adviser, Phil Graham....

Pensito Review Closing Enron Loophole Would Drop Oil Prices 25% - 50% Overnight

That's just great.

[calstyl2]

McCain is sure gonna find himself without much support if that makes the big news.........

[semlin]

does anyone understand how or why this "loophole" would drive prices down and for how long? i have not seen an explanation of how the oil market is being driven artificially high. i don't generally have a problem with people able to trade freely in stuff unless they are monopolizing or manipulating the market.

[re_guderian]

I notice the article didn't really go into specifics on what this "Enron Loophole" really is (though Enron is enough of a negative buzzword that it just has to be bad, right?). Isn't this the same de-regulation that allows you and I to trade in single commodities? Now it may be wise to repeal that, but it's funny to see the same people the boo-hoo FISA be in favor of repealing the "Enron" loophole. I just detest the smoke and mirror reporting jobs of using hot-button buzzwords while masking the real details, but hey, that's the news these days, right?

[IDave]

Originally Posted by re_guderian

I notice the article didn't really go into specifics on what this "Enron Loophole" really is (though Enron is enough of a negative buzzword that it just has to be bad, right?). Isn't this the same de-regulation that allows you and I to trade in single commodities? Now it may be wise to repeal that, but it's funny to see the same people the boo-hoo FISA be in favor of repealing the "Enron" loophole. I just detest the smoke and mirror reporting jobs of using hot-button buzzwords while masking the real details, but hey, that's the news these days, right?

My understanding is that it's a specific loophole that affects oil speculators who are allowed to make a percentage of their trades on out of country (non US) exchanges tax free. This encourages speculative spirals, supposedly.

Can you and I do that for any commodity? I honestly don't know, but I don't think so.

[Sporin]

More info. Stop Oil Speculators. Send Congress An S.O.S. it basically allows traders to work outside of federal regulations.

As I understand it.... It's "bad" because this loophole allows crazy swings like we've seen in the oil market this year ONLY on items that are exempt specially exempted from the regular trade laws (thanks to http://en.wikipedia.org/wiki/Enron_loophole). So while frozen concentrated orange juice, a product that effects almost no one unless they are orange growers is HIGHLY regulated to curb huge swings. OIL, a product that hugely effects every person on the planet and is currently driving down the global economy, is free from the same regulation and oversight.

[semlin]

how do i become a trader?

[tcb]

Originally Posted by semlin

how do i become a trader?

Start out as a runner and work your way up..

[IDave]

Originally Posted by semlin

how do i become a trader?

Seeing as you are from Canuckistan, you probably have different trade laws applying to you.

However, if you're willing to send me the seed money, perhaps I can set up a partnership to include you.....

[wob]

Read this...

The onion conundrum: no futures market, high volatility - Jun. 27, 2008


In defense of oil 'speculators' - Jun. 27, 2008


Why the oil boom will eventually bust - Jun. 6, 2008

[IDave]

Originally Posted by wob

Read this...

The onion conundrum: no futures market, high volatility - Jun. 27, 2008


In defense of oil 'speculators' - Jun. 27, 2008


Why the oil boom will eventually bust - Jun. 6, 2008

Well, I like their argument that buying pressure doesn't raise prices because "for every buyer there is a seller", so no net change . But they seem to agree that prices will eventually fall precipitously.

[semlin]

Originally Posted by wob

Read this...

The onion conundrum: no futures market, high volatility - Jun. 27, 2008


In defense of oil 'speculators' - Jun. 27, 2008


Why the oil boom will eventually bust - Jun. 6, 2008

thanks for adding some sanity to this thread perhaps i won't be an oil trader after all.

[IDave]

Originally Posted by semlin

thanks for adding some sanity to this thread perhaps i won't be an oil trader after all.

Damn you, Wob. I had a PLAN.

[GeoRoss]

Originally Posted by semlin

does anyone understand how or why this "loophole" would drive prices down and for how long? i have not seen an explanation of how the oil market is being driven artificially high. i don't generally have a problem with people able to trade freely in stuff unless they are monopolizing or manipulating the market.

It is through activity. I have had a hell of a time finding any data other than anecdotal on oil futures trading, but all the anecdotal is that it is skyrocketing.

If you start increasing the number of people who 'want' to buy oil futures, Dow for plastic, Vallero for refining, speculators to make money, it becomes a supply-demand thing on that scale. More and more money is getting 'invested' in these markets to hedge against inflation and a falling dollar.

15 years ago, pension and hedge funds held nearly no oil futures. It is now well over 250 billion. You can't pump that much money in what is a volatile market anyway and not see upward pricing pressures.

The falling dollar contributes ~$50/bbl to the price over the last 7 years too.

This was the Cliff Notes version given to me from a friend.

[semlin]

Originally Posted by GeoRoss

It is through activity. I have had a hell of a time finding any data other than anecdotal on oil futures trading, but all the anecdotal is that it is skyrocketing.

If you start increasing the number of people who 'want' to buy oil futures, Dow for plastic, Vallero for refining, speculators to make money, it becomes a supply-demand thing on that scale. More and more money is getting 'invested' in these markets to hedge against inflation and a falling dollar.

15 years ago, pension and hedge funds held nearly no oil futures. It is now well over 250 billion. You can't pump that much money in what is a volatile market anyway and not see upward pricing pressures.

The falling dollar contributes ~$50/bbl to the price over the last 7 years too.

This was the Cliff Notes version given to me from a friend.

that is not a reason to abolish a market.

pension plans and investors distort all markets by pumping dollars into them in good times and bad. in a down market those guys will chase anything that is moving up and often overdo it, allowing more prudent investors to reap profits shorting them back down. you can't regulate the herd mentality.

[scottm]

Oil speculators are trading in oil futures contracts, not oil. Those futures are contracts to buy at a given price, and the agreed prices of those futures change with every transaction, usually up. And there's currently no limit on how many times futures contracts can be traded, and little requirement to report those trades.

Prices spike when Iran fires off missiles, when Nigerian oil workers threaten to strike, or when Israel conducts military exercises. That's not an actual change in the supply/demand curve, it's purely based on fear and speculation. If someone could control those fears, and they owned a lot of oil or oil futures, they could make a ton of money, your money.

If you Google oil prices, you'll see many articles stating that the latest jump to new record prices was due in part to a comment on oil prices by a Morgan Stanley analyst. Why is that significant? It's because Morgan Stanley is the worlds largest trader of oil futures and oil derivatives. They actually buy oil, as well as futures. They own some of the largest tankers in the world, holding 1 million barrels apiece. They don't produce, process, or store oil, it's all speculation. Well, they do store oil when they park their tankers waiting for the next well-timed spike. So if they can take another billion dollars out of the world's wallets by making a pessimistic comment about oil prices, why not? If oil prices fall, they could lose millions. Morgan Stanley shares were downgraded recently when this talk of regulating oil speculators started. Why? Because oil prices have to keep rising for companies like Morgan Stanley to keep profitting. If regulation happens, they may not be able to manipulate the market any more. This indicates that investment houses expect regulation to cause oil prices to fall, hurting Morgan Stanley.

I have very little experience or knowledge in this stuff, but I've been digging a little, out of curiosity.

Morgan Stanley May Run Larger Tankers for Oil Trades

[GeoRoss]

Originally Posted by wob

Read this...

The onion conundrum: no futures market, high volatility - Jun. 27, 2008


In defense of oil 'speculators' - Jun. 27, 2008


Why the oil boom will eventually bust - Jun. 6, 2008

What is missing from the articles though is the "fear" part.

For instance the onion piece, imagine if the price of onions were completely driven by rumor and speculation about the market rather than supply and demand. If a big storm knocks out half the crop, there goes half the supply.

With oil it is different. Some thugs in Nigeria hold up a tiny fraction of the world's production and the price rises a couple of percent whereas when the pipeline of BP's in Alaska went caput with a similar volume of production effected you didn't see a price jump. Supply effected similarly but with different effects on price.

It is hundreds of little stories like this which make me think that there is more than supply-demand and a lousy dollar at work here.

I just can't see how pumping so much additional money into a market doesn't cause the price to go up, much like the housing bubble.

[GeoRoss]

Originally Posted by semlin

that is not a reason to abolish a market.

pension plans and investors distort all markets by pumping dollars into them in good times and bad. in a down market those guys will chase anything that is moving up and often overdo it, allowing more prudent investors to reap profits shorting them back down. you can't regulate the herd mentality.

Never my intent to abolish the market. One thing that could be done is to end leveraged futures trading. You want to buy a futures, back it up with cash. 100%, 75%, 50%? No clue here as I am told it has it drawbacks.

The other problem is if we put too many regulations on, it will just drive the trading overseas.

At some point this will crash. Will it be an 80's style crash where oil dropped almost 75%? I don't think so, but it will be significant.

[scottm]

Originally Posted by GeoRoss

At some point this will crash. Will it be an 80's style crash where oil dropped almost 75%? I don't think so, but it will be significant.

From what I've read, it would be catastrophic to the worlds markets at this point. I don't think governments dare to regulate it, which gives speculators more power than the governments.

[re_guderian]

Originally Posted by GeoRoss

...The falling dollar contributes ~$50/bbl to the price over the last 7 years too....

maybe if you selectively take today's dollar and today's oil price, but that doesn't wash with the price of oil 6 months or a year ago. I'll try and put together the correlation...

[scottm]

More:
Joemama's Free Press: Morgan Stanley Oil Prediction: Tail Wags Dog


Some talk about the shadowy oil swap market:
http://www.montereyherald.com/ci_9848974?source=rss

[informationjunky]

Got it from airtran and delta

[mustardfj40]

It's the speculation and the diving of the US dollars...otherwise explain to me that how oil demand has increased over 100% over last year to justify the double increase in oil price. The US oil usage has actually decrease more than 1%...Don't tell me that the Chinese and Indian have double their oil comsumption in a short year while the US ecomony is going into a recession.

These kinds of specualtions is pretty common in third world countries where the prices of commodies are unregulated and are subjected to speculations...We the US are becoming more alike of a the 3rd world country but we still are superpower in term defendse capability

[roscoFJ73]

Originally Posted by mustardfj40

These kinds of specualtions is pretty common in third world countries where the prices of commodies are unregulated and are subjected to speculations...
:

Well actually the chinese and many other countires regulate and subsidise their oil .
And the problem they have is they can longer afford to.

[re_guderian]

Originally Posted by mustardfj40

It's the speculation and the diving of the US dollars

Can anyone who says this please post up some data that verifies it? Oil is up 50% this year alone, from Jan to now. How much has the dollar declined in the same period?