Posted on 06/06/2008 8:49:50 AM PDT by Entrepreneur
Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, according to a growing number of lawmakers and prominent investors, who blame the practice for helping to push oil prices to record highs.
The federal agency that oversees oil trading, the Commodity Futures Trading Commission, has exempted these firms from rules that limit speculative buying, a prerogative traditionally reserved for airlines and trucking companies that need to lock in future fuel costs.
The CFTC has also waived regulations over the past decade on U.S. investors who trade commodities on some overseas markets, freeing those investors to accumulate large quantities of the future oil supply by making purchases on lightly regulated foreign exchanges.
(Excerpt) Read more at washingtonpost.com ...
bump
Thanks, I should like to read your book as three different people have at least seven different opinions on the subject.
INTREP
Trading Options to Win, John Wiley & Sons, 2003. Do yourself a favour and buy it at half.com. The publisher put an idiotic 'list' price on it (mutter, grumble...). Even Amazon's best price is $36.xx or something similar -- too high.
Please note that under no circumstances will I make a penny on your purchase. Let's just say that my naivete in signing contracts with publishers equals or exceeds my experience and/or expertise in options and futures mkts (cough...). Ordinarily, I'd say to borrow it fr/the public library. Sadly, the number of copies sold to libraries seems to be about 76-77, so you'd have to be rather lucky to find it at your local.
All the federal agency that oversees oil trading, the Commodity Futures Trading Commission has to do is require that the buyer have the ability to take delivery of said oil. In other words, if you buy say 25000 or 50000 barrels of crude you must show the CFTC that you in fact have the storage tank capacity to take delivery. If not no sale. That will get the speculators out of this market and maybe some hedge funds also.
Great! Remove all liquidity from these markets. That'll fix things. Not.
I’ll try to find it. I have no problem with an author making a buck from his work but I also know you’re not trying to turn FR into E-bay. With future traders being called speculators and speculators being called crooks everyone should understand the basics of the workings of the market.
Again thanks!
Yesterday morning RBOB gasoline was 3.22, which is 20 cents below the recent high and would be showing up at the pump, and indeed fuel oil had backed down a couple cents. But now it is up 10 cents and 20 cents and is now 10 cents above the previous high. So forget the price at the pump reduction. It is going up another 10 cents.
NYMEX crude oil is now 138 up $10 today alone or $15 in two days
These speculators “be they hedge funds or individuals” are the “bump and dump” clowns who are driving the oil prices up. I’m all for buy low and selling high or in this case buy high and sell higher. but something as simple as requiring the buyer however big or small to show that they can take possession of the crude for delivery to their storage tanks. It is a plan to help lower the oil prices and if Congress would get off their dead asses and quit listening to the leftist environmentalist and drill for new oil and build 10 new refineries this problem of high gas prices would go away. That is my plan, what’s yours?
Well, that'll knock out all the locals. What about Southwest Airlines? They don't take delivery on their futures contracts. You want to prevent them from trading too?
It is a plan to help lower the oil prices
And boost volatility.
Congress would get off their dead asses and quit listening to the leftist environmentalist and drill for new oil and build 10 new refineries this problem of high gas prices would go away.
50 new nuclear power plants would be a good idea too.
HERESY! You BARBARIAN! How DARE you question the pure and innocent intentions of the speculator market! Speculators are GOOD for the economy! Why if we didn’t have speculators driving up the price of oil, corn, wheat, soybeans and other necessary commodities we might all still be driving around and paying $2/gal for gas. And we can’t be having THAT, now can we?
You can bet your sweet patooty that Southwest Airlines is going to take delivery on their futures contracts. They are very capable of taking delivery of the oil they bought at a much lower price, they have a need for the oil and the storage capacity too. It’s the quick buck guys, I have a problem with, who are making a lot of dough at our expense.
The 50 new nuclear power plants is an excellent idea also and should have been started on 10 years ago. Thanks !
How much you want to bet?
They are very capable of taking delivery of the oil they bought at a much lower price, they have a need for the oil and the storage capacity too.
They don't use oil to fly their planes.
Southwest Airlines has never had the capability to take delivery on crude oil. They buy jet fuel. No Jet Fuel tank at any airport is going to be filled with crude oil.
Jeffrey Harris, the chief economist at the Commodity Futures Trading Commission, who was speaking before another Senate committee last month, said he saw no evidence of a speculative bubble in the commodity market. Instead, Mr. Harris pointed out to a confluence of trends that have contributed to the oil price rally, including a weak dollar, strong energy demand from emerging-market economies, and political tensions in oil-producing countries.from Oil Prices Skyrocket, Taking Biggest Jump Ever“Simply put, the economic data shows that overall commodity price levels, including agricultural commodity and energy futures prices, are being driven by powerful fundamental economic forces and the laws of supply and demand,” Mr. Harris said. “Together these fundamental economic factors have formed a ‘perfect storm’ that is causing significant upward pressures on futures prices across the board.”
Sorry I was painting this mess with such a broad brush. Agreed they don’t buy crude oil. But they sure do buy futures on jet fuel, and that is why they are in a much better shape financially because they locked in at a much lower price. When we say crude oil I was thinking of the many finished products.
Excellent!
But they sure do buy futures on jet fuel,
No such contract.
Jet fuel futures are not sold. They buy oil futures and the sell their oil futures to others without taking delivery. It is still a hedge against price increase because most of the price increase is based upon the price of crude oil. If it drops, they lose on the hedges but their fuel is cheaper with offset cost/loss.
Thank you for todays education.
I’m still going to hate filling up my truck next week, it should be under $150.00 maybe? My last fillup was May 03 2008.
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