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Those Pesky Speculators Again

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Mike

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Energy Policy: A group of liberal senators once again want to pass a law that would force the Commodity Futures Trading Commission to clamp down on oil speculators. Their ignorance of how markets work is breathtaking.

These senators, led by Vermont socialist Bernie Sanders, claim speculative evildoers control 80% of the oil market, and are to blame for rising gas prices. When lawmakers blame speculators, you can be sure they're covering for their own ineptitude.

Basically, the senators say that since supply is rising, and demand is at its lowest since 1997, the price of oil should be falling — not rising. That means speculators must be stealing billions from consumers.

But this is false — and more than a little bit silly.

Recent price hikes have a geopolitical cause. A good chunk of Iran's hefty supply has been taken off the market, tightening a delicate supply-demand balance. Refiners worry about a wider conflagration in the Mideast.

It's their job to secure oil and "crack" it into usable products, such as gasoline, heating oil and jet fuel. If you were them, wouldn't you buy extra oil, just in case?

Well, that's speculation. And if the price of oil goes up today, and you rush to the gas station to beat the higher price tomorrow — guess what? You too are a speculator.

Today, the economy is improving, boosting fuel demand. But while oil supplies are ample in the U.S., the same isn't true in Europe and China. And the market for oil is a global market, not a local one.

For politicians, it's far easier to blame futures traders — speculators — than to admit their own failure.

Take Sen. Maria Cantwell, D-Wash., who on March 29 blamed speculators for pushing up the price of gas.

As we've written before, speculators do not control markets — a view bolstered by a report last September from the Institute of International Finance. Looking at numerous studies, the IIF found little evidence of a link between speculation and higher prices. Rather, the IIF found commodity prices are driven by market fundamentals — supply and demand.

As economist Robert Murphy of the Institute for Energy Research wrote: "Blaming speculators for rising oil prices is like blaming thermometers for a heat wave."
 

MoGal

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"Gasoline: 70 percent off", by Newt Gingrich, Human Events, 3/7/2012
http://www.humanevents.com/article.php?print=yes&id=50008

"... the price of natural gas has collapsed, largely due to an enormous increase in American supplies made possible by new discoveries and technologies ... The reversal comes thanks to the shale gas revolution, improvements in technology that have made it possible to retrieve the natural gas trapped in shale. In the period of just a few years, our estimated supply in North America has gone from less than a decade’s worth of gas left to more than a century’s worth."

He is right that natural gas prices have plummeted 70%. Just in January, 2006, natural gas was selling for $8.01 per 1,000 cubic feet.

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NEWS BRIEF: "Natural gas prices drop sharply on bulging supply", Yahoo Financial News, March 8, 2012
http://news.yahoo.com/natural-gas-prices-drop-sharply-bulging-supply-162152920.html

"Natural gas is falling sharply after U.S. supplies declined less than expected last week. Natural gas dropped 4.9 cents Thursday to $2.253 per 1,000 cubic feet, its lowest level in a decade. A mild winter has caused weak demand for natural gas, which is used to produce electricity and heat homes. There also is a huge increase in supply because producers are accessing more underground reserves."


NEWS BRIEF: "Shale boom turns North Dakota into No. 3 oil producer", Reuter's News, March 8, 2012
http://www.reuters.com/article/2012/03/08/us-oil-output-bakken-idUSBRE82714V20120308

"North Dakota has overtaken California as the third-largest U.S. oil-producing state, as the controversial fracking technology boosted shale oil output and cut the Midwestern state's unemployment rate to the lowest in the country ... The state's January oil output rose to 546,050 barrels per day (bpd), up 59.2 percent from a year earlier, after output in the Midwest state's Bakken and Three Forks shale prospects rose some 11,000 bpd to a record 480,700 bpd ... North Dakota, located along the Canadian border, has upended the U.S. oil market since 2007 and its output has eclipsed that of OPEC member Ecuador thanks to advances in horizontal drilling and hydraulic fracturing. Production has doubled in the three years since 2009."
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Speculators -- most speculators have jumped on anything and everything to keep prices spiking upward. I wonder how many of these "speculators" are central banks/bankers??? Could any of them be our beloved Congress???

Whenever prices begin to slide lower, we hear that a pipeline has exploded, or that rebels have kidnapped oil workers or that American inventories are "unexpectedly" lower.

The manufactured crisis with Iran -- Since 2003, American and NATO leaders have been threatening to attack Iran's nuclear facilities. Every time oil prices begin sliding, some threat against Iran is bombarded on mainstream media.

Don't you think its time to stop manipulating the American people, and using fear on the mainstream news media?
 

burnt

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Yet for some strange reason nitrogen fertilizers, which are manufactured from natural gas, are selling at all-time highs. Their raw product is essentially free, yet farmers are being charged record prices.
 

Hayguy

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the same with electricty, record low's for natural gas and coal, their main input's, and yet record high power prices. :? :???: :?
 

Sandhusker

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Sanders and the other liberal economic illiterates are recognizing the fact that extra buying of any market pushes prices up. However, they are forgetting the second part - that in order to actually put money in their pockets, speculators have to SELL their contracts and selling pushes prices down.
 

Steve

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hayguy said:
the same with electricty, record low's for natural gas and coal, their main input's, and yet record high power prices. :? :???: :?

Someone has to pay for the windmills, bankrupt solar farms and sour foreign investments,.. as the tax-payer can't foot the whole bill... :? :???:
 

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