Posted on 05/25/2008 7:16:24 PM PDT by Fred
German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.
It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.
Car lights are seen streaking past an oil rig extracting petroleum Speculators are split, with some betting that oil will fall
Uwe Beckmeyer, transport chief for Germany's Social Democrats, said his party would call for joint measures by the G8 powers to prohibit leveraged trading on energy contracts. "It's an extreme step but it has to be done," he told the Berlin media.
Mr Beckmeyer said the last 25pc rise in the price of oil to $135 a barrel had nothing to do with underlying supply and demand. “It’s pure speculation,” he said.
Oil has doubled in price over the past year and the concerns are echoed on Washington’s Capitol Hill where irate Democrats want rules compelling traders to take delivery of crude oil, a move which would paralyse the market.
There is now broad support in Germany for a clampdown on “locust” funds. President Horst Köhler said modern capitalism had turned into a “monster”, bringing the entire financial system to the brink of collapse this spring.
The Social Democrats form part of Chancellor Angela Merkel’s ruling coalition. Her own Christian Democrat Party shares concerns that funds are causing a fresh bubble in commodities, risking further havoc for the real economy and society.
In the long run, any scheme to ban futures trading would be extremely hard to enforce as the markets would tend to move offshore. Hedge funds are probably not the culprit in any case.
Speculators are split, with some betting that oil will fall. The mass of money coming into the commodity indexes is mostly from pension funds and long-term investors.
Oil markets are likely to shrug off the moves as political posturing, instead focusing on Norway’s suspension of crude output at three platforms, cutting supply by 138,000 barrels a day.
The news comes as Lloyd’s Marine Intelligence reported Opec oil shipments fell by 1m barrels per day in the four weeks to May 4, confirming suspicions that the market has been chronically short of supply.
The sheer idiocy is mind boggling.
Watch oil prices spike after speculation is outlawed. Make anything illegal and it becomes much more lucrative.
Just pass a bill allowing more offshore drilling plus in ANWR and the speculators will go bankrupt overnight.
Also resulting in the immediate drop in the price of gasoline.
America is like the idiot husband who finds his wife in bed with another man then puts a gun to his own head.
His last words? “Don’t laugh,you’re next!”
This thing is being fueled by vultures like Pickens who claim that oil production has peaked. More likely in 2040 than today. But capital runs scared.It seems we have a bubble, and the money supply has outrun the ability of government to control it.
Since speculators neither use nor store oil..they must sell it upon delivery. So enduser demand or lack of demand drives the price. If the speculator guesses wrong..they loose. It is crazy to try and cut that off. Every other commodity survives speculation...so can oil.
Is it any wonder they were on the losing side in both World Wars? They were not, and are not, ready for prime time.
Stay tune for the Senate’s lame plan along the same lines.
speculators are what makes the market work...without them, no market at all....who are the hedgers going to sell to? Not to mention the speculators add the needed liquidity and efficiency to markets. The world is governed primarily by idiots......we would all be better off if they passed a law banning themselves.
Yeah, it's from the folks who think speculation has had no effect on the price of oil. You among them?
I think its probably had an effect.
The problem is that there is a lot of sheer idiocy that thinks there is just a bunch of people gambling on oil, and that they serve no purpose. They serve a huge purpose. They take on price risk. Speculators bear the risk of rising or lowering prices. Where does that risk come from? They assume it from people who don't want it. For example, oil producers want to know what price they will get for a large portion of their oil so they can plan their capital expenditures. So what do they do? They pass the price risk on to speculators who are willing to take it on because they think they know the direction prices will go.
If you ban speculators, you will force price risk back on to people who don't want it. What will the result be? Less capital flowing into new wells, which in turn will mean less oil produced, and long term, higher prices.
What purpose would that serve? One of the results would be to reduce speculation. Speculators take on price risk for people who don't want it (producers). You reduce speculation, you reduce the ability of people who don't want price risk to pass it to someone else. If producers can't hedge (pass on price risk) they will invest less capital in new wells.
That right, and no oil and no cars. Yes sure!!
Rational speculators also provide two important services: liquidity, and they also keep prices from moving too far away from fundamentals.
Separate the wheat from the shaft! Some of you people think that a silly market created to gamble, really has anything to do with supply and demand. Just what was happening before these silly speculator markets were created. Are maybe it says that on the ninth day god created speculators. That has to be it. They sure aren't mentioned anywhere else and anything I have signed on to.
What the government has created the government, ie, the people, can change.
One of the most concise defenses of speculators I’ve ever seen.
Too bad even many people on this site, of all places, are calling to ban them.
Why do you insist on giving your opinion on a topic you don’t understand? And even worse, dismissing the reply of a poster who actually does understand it?
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