Skip to comments.Dem Sen. Casey calls on CFTC to act against oil speculators
Posted on 03/04/2012 4:33:50 PM PST by Libloather
Dem Sen. Casey calls on CFTC to act against oil speculators
By Vicki Needham - 03/04/12 06:25 PM ET
Democratic Sen. Bob Casey (Pa.) is pressing the Commodity Futures Trading Commission (CFTC) to help ease rising gasoline prices.
In a letter sent to CFTC Chairman Gary Gensler on Sunday, Casey called on the agency to complete a rule that would limit speculation in the oil market and is two years in the making.
Consumers shouldnt be forced to pay higher prices at the pump because of speculative bets on Wall Street, Casey said.
Nearly two years ago Congress gave the CFTC the tools to crackdown on speculation in the oil market, and with sky high prices at the pump its time they used it.
The Dodd-Frank law gives the CFTC the authority to limit the ability of speculators on Wall Street to inflate the price of oil by putting in place position limits. The position limits set the maximum amount of the oil market that a single speculator could control.
Implementing the CFTCs position limits rule is an important first step in curbing the role that oil speculation has played in driving up prices," he wrote. "Increased oil prices pose a serious threat to the ongoing recovery of our economy."
Experts argue that federal policymakers have few options to lower gas prices in the short term.
Gas prices are linked closely to oil prices, which are set on global markets. Even a dramatic expansion of domestic oil-and-gas leasing would have little short-term effect on gas prices, they say.
Republicans though have continued to hammer the Obama administration over the rising prices at the pump, calling for increased domestic drilling and for the administration to approve the Keystone XL pipeline project.
The White House though has said there are no quick fixes to rising costs and that the president is doing all he can to reduce the nation's reliance on foreign oil by expanding domestic production and investing in renewable energy sources.
Obama has accused Republicans of exploiting rising gas prices for political gain. Only in politics do people root for bad news, do they greet bad news so enthusiastically, he said.
But the administration has also felt pressure from Democrats worried about the political cost of rising gas prices in an election year. Some Senior Democratic lawmakers have called on the president to consider releasing oil from the Strategic Petroleum Reserve, to ease prices.
Their meddling will only drive the price up more.
Stop printing trillions of dollars and talking about war every ten minutes. Congressmen are so funny sometimes. Speculators.... Hahahahaha.
... and restrict supply - these people don’t remember the gas lines in the late 70s ...
Sorry, Sen Bob.
It’s a world market these.
If they can’t hedge in our market, they’ll go somewhere else.
Good. The futures market exists for producers and industrial consumers to buy and sell. Speculators having no interest in producing or consuming it have no place there.
Casey, how about learning first about the value of the dollar? And when you come to realize the value of oil has't increased, but that the value of the dollar has deceased, then maybe you will come to realize why your vaunted party leadership has been sending your Pennsylvania soldiers into harms way. But you could give a flying........!!
And 'robosigning' loan documents caused the mortgage crisis.
(Extreme Sarcasm Alert)
>The futures market exists for producers and industrial consumers to buy and sell.
The futures markets exist to make it possible to sell product not yet delivered, or in some cases, not even made - speculators are an important part of that.
For every one that makes money there is one who loses and that is part of the process that keeps a commodity market liquid.
Take parts away and prices will rise over a long term.
The speculators are into foreign oil US oil is cheaper.
Casey sounds like BOR. It's all the Oil Companies fault.
Apple uses cheap Chinese labor to make all their products and has a 40% Profit Margin. U.S. Oil Companies use Union Labor and have an 8% Profit Margin.
Remember, high gas prices are only the President's fault when the President is a Republican.
None of your assertions are axiomatic. Why is it necessary for a (”long”, let’s say) speculator to lay claim to some number of tankers of crude oil instead of an airline? Who benefits from that point if the price rises? Who benefits from that point if the price falls?
Who the heck woke Bobby Casey up?
Absolutely agreed. I’ll go one step further. Remove it from the commodities market.
Silent except for his votes, Casey now finding a voice 7 months before election? Gimme a break. Send hm acking.
lol I've wrote to him many time...finally told him to keep his ‘form letter’ Democrat talking point in his desk and not send to me..I'm not interested...he has been hiding under a rock or in church under a pew...
He is a do nothing Senator who ran on his dad's shirt tail..
He needs to be replaced but looks like Pennsylvania GOP just doesn't care...so totally disgusting..
Time for a NEW Political Party..and if Hussein is re elected (laughing) I hope a NEW party gets formed..
I’ve never been a Democrat and as for GOP...it is worthless..tired of being the ‘nice guy’
Nothing is necessary in the futures market, other than buyers and sellers agreeing on a price for an amount of a known and agreed upon commodity, delivered at a time and date certain.
Speculators serve a vital role in these markets, long and short, by providing liquidity. An airline who wishes to control their future price for kerosene, (fuel) for example, might purchase long futes contracts. A (long) speculator just thinks the price will be higher at a later time and wishes to profit therefrom, never taking delivery of the commodity. But the speculator is far more likely to bail on his long position in the event of a momentary price drop and if enough speculators do that, then the price could be whacked for a greater amount of time. That could benefit the user by letting him buy more oil at a depressed price. If there were no specs, then the argument could be made that price rises would get more and more entrenched since actual users would value their positions more and more, meaning, hold them tighter. A long speculator also provides liquidity when he has held the position as long as he can handle it and sells out early, before the peakiest peak.
I honestly don’t see how this is even an issue, because I don’t see how any particular argument can be sustained. If too many people lean one way on the boat, the boat has a way of smacking them straight. Last time oil got up to $147, lots of people who shorted it at $120 got destroyed, people who went long at $145 got destroyed, and people who sold calls made giant money. Oil got smacked all the way down to $30 from $147. This “actual user vs evil speculator” argument has been made many, many times, and there has never been, to my knowledge, a conclusion that says one opinion and one positioning in the market is “right” or “good” or best”. Prices don’t move in a straight line forever..and if they DID, it would almost certainly be speculators who cure the problem, not users. I don’t like the argument/discussion because no one viewpoint can possibly encompass all the opinions that make up the market. I don’t share the opinion that a speculator’s money is any less money than United Airlines money. More often than not, speculators are ground up and spat out in the market.
The value of speculation is that they anticipate future supply disruptions. By raising prices they reduce current consumption, induce more supply, and create reserves.
The last thirty dollars, at least, during that 2008 run-up was purely long speculators ganging up on SemGroup. They knew SemGroup was short and they literally killed the company. Within hours of SemGroup declaring bankruptcy and surrendering its positions to Barclays, oil began the even more insane drop to the sub-$30 level that is currently dishonestly being used as a benchmark for crude and gas prices. It can't be argued that that wasn't "excessive speculation"; it needed only the kind of enforcement of the relevant portions of the 75-year-old Act that is being talked about in the original post.
I don't accept that commodity markets, particularly crude oil, natural gas, and unleaded gasoline, these days, are lliquid without the likes of, for example, the California Public Employees Retirement System applying their "expertise" of the economics of the world market for crude oil. It's easy to conceive of a no-bid situation in the stock market; a company can become worthless overnight. But even an agricultural commodity, possibly because it's the only thing traded in any U.S. market that actually has intrinsic value, can't become worthless under the current system. That's why the exchange was created -- to make sure that wheat wouldn't rot in the fields.
If, as you say, there were no specs, as price rises, why would an "actual user" sell their position? Did that airline buy that fuel for its own use or didn't it?
Finally, if most speculators are ground up and spat out, and speculation is a zero-sum game, it follows that a few speculators clean up. That outcome is not, never was, and cannot be the purpose of a commodity market.
Dems are for anything and everything, except the one thing which would actually help:
An immediate and across the board push to drill every place available.
We’re going to need all the oil we can get, when the middle east eventually goes down the tubes.
It’s going to happen. One way or another, the Strait of Hormuz will at some point be unavailable.
Now is the time to act. Now is the time to drill more.
Not after the next crisis happens.
I wouldn’t go that far. The markets and the exchange work except for when the well-documented kind of rampant speculation in 2008 wreck them.
Where are the candidates on this attack on the oil industry which provides 9.5 million U.S. jobs? The candidates should ask Casey why his overlord is killing the coal industry in his state. Come on guys. Lets get those sound bytes out there. Don’t let them get away with taking over the oil industry. Fight. Fight. Fight!!!!
"...Goldman Sachs significantly readjusted in August of that year  the GSCI's gasoline weighting. Index products tracking the GSCI, and representing an estimated $60 billion in institutional investor funds, were forced to rebalance their portfolios resulting in an unwinding of positions. Originally, unleaded gasoline made up 8.75 percent of the GSCI as of 6/30/2006, but this was changed to just 2.3 percent, representing a sell-off of more than $6 billion in futures contracts.
"As a result, gasoline fell 82 cent in the wholesale market over a four-week period, an unprecedented move; and crude oil, which in July 2006 traded over $79 per barrel for August deliveryat the time an all-time recordsubsequently fell to around $56 by January 2007."
I leave the matter of the clear culpability of speculators for the worldwide food riots of 2008 for another post.
This is not an attack on the oil industry.