Dispatches from District 48
Hey, Obama Administration! The evil speculators are moving oil prices again. Time to get after them. Hello? Anyone there? Where did everyone go?
This is only tangentially related, but I wonder if anyone here can explain this.
I noticed a while back that last year, and this year, gas prices peaked around late April, whereas before that it tended to raise through the summer months before falling off at the end of summer.
I was playing with this chart when I noticed this: http://gasbuddy.com/gb_retail_price_chart.aspx
Does anyone have an explanation for the change in behavior?
When gas prices are going up, there's something about it every night on the tv news. When prices are going down? You'd never know it from listening to that same news report.
That is a unidirectional phenomenon.
I am skeptical of global oil markets. Yo have large players---Russia, for example---who have dire stakes in higher oil prices, and lots of money to bring to bear. (Russia exports nothing of value, aside from oil, and produces nothing of value internally). They can also leverage.
Putin would find his head on a spike if oil sustained a long dump.
Putin, a monkey-thug leader of a Mafia-state, would be remiss, and unpatriotic, if he did not try to game oil prices. We should assume he is trying, anyway.
Okay, it is probably a given that Putin, Iran, Venezuela (Chavez), perhaps our "friends" Saudi Arabia are trying to game prices higher. Certainly we should expect that they try.
Tracking to true money behind commodities trading is impossible. The CFTC enforcement powers are limited in this regard, and are not international.
The path of oil to $147 a barrel in 2008 was peculiar. It was rising, even as full oil tankers were parked at Malta with nowhere to offload. Even as Cushing was glutted, no more tanks left to fill.
Perhaps such gaming can only keep oil prices in a band 20 percent higher than the "normal" price. Instead of trading around $80, oil trades around $100.
That is still hundreds of billions of dollars drained out of Western economies every year and into thug-nations and terrorism-financiers.
What, me worry?
If we don't stop them now, they will bid the price of oil too low, and then it will go up again!
Benjamin, how is Putin supposed to be able to profitably "game" oil prices? He could drive them higher if he can restrict Russia's oil sales, but then the money from those sales doesn't come in.
Sure they are moving the price down, so they can have lower gas prices peaking right about Election Day. Notice how the media has been touting the unemployment numbers to make look like we have the lowest rate in years, while the job creation numbers keep falling. Once the election is over, if Obama wins the price of gas is going to go right back up. Didn't Obama say something about wanting $7 for a gallon of gas to bring our prices in line with Europe's?
Why not collude to shrink supplies, and also play NYMEX and Brent? Keep taking both sides of a bid at higher and higher prices.
If you "lose" and buy oil at too-high a price on the NYMEX, but you also produce oil, are you really a loser?
All investment is speculation. The buyer believes it is a good deal and that the price will go up. The seller believes the opposite. How can you outlaw "speculation" without stopping all stock, bond, commoditiees, etc. trading?
Futures contracts were originally for the purpose of ensuring a market at a known price for the seller, and a supply at a known price for the buyer. Both parties benefited thereby. Now, traders buy and sell futures with no intention of either buying or selling the commodity. It has been proposed in times past that to participate in the futures market one must have a legitimate supply or a legitimate demand. Perhaps this would be a good idea. In the meantime, prices rise and fall with trders perception of where prices are headed. This is the FREE MARKET. Whatever else Obama does, let's hope he doesn't screw this free market up.