U.S. Considers Curbs on Speculative Trading of Oil

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Originally Posted By: Tempest
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whatever is agreed upon.

So the people that are buying oil are not currently agreeing upon the price they are paying?


Speculators are not buying oil. They are buying contracts on oil they will never actually use abd don't have to put up much money to do it. I am talking about PRODUCERS and BUYERS agreeing. Take out the middle men. They are also agreeing on price not by true demand and supply issues but on rumor and guessing.
 
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Originally Posted By: Gary Allan
1993_VG30E_GXE

Hmmm...well, can you tell me where all the money comes from that speculators "use". I can't see it coming from individuals ..I don't think that they would have the wealth to effect so much for so many. This leads me to think that much of this is done with OPM ..which after the losses and whatnot are shaken out ..there are more losers than there are winners ..but the financier, like the neighborhood bookie ..always gets his juice.


The money comes from:

Personal Money, Borrowed Money, Fund Flows...it depends who the speculator works for. If he's in the Managed Futures business he uses the funds money (high net worth individual's money or institutional money - pension fund money etc...), and he'll likely trade his own account along side. Same with Hedge Fund. Any Fund. The Speculator doing the trading will charge a fee for his 'management' (trading), and if a Hedge Fund for example he'll charge a performance fee of say 20% of the Net Asset Value Increase.

There's no such thing as a free lunch on wall street. When a speculator starts trading other peoples money (fund money), he naturally has to be paid for his service so the pensioners can grow their 401K's. We don't get to just use money for free and that's it.

I don't know why alot of you think that all speculators just make free money. The biggest speculators in the market lost MASSIVELY last year and some of them imploded on themselves. Many funds lost up to 70% of Assets. Some funds closed down completely.

The oil futures market is a zero sum game, there are equal losers to winners. I think alot of the public may try and support this cause simply because it sounds simple...but have any of you actually tracked the Hedge Fund returns over the past year? Most funds are trading like crazy trying to make back what they can.
 
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Originally Posted By: ZZman
1993_VG30E_GXE

I fail to see how speculators buying oil for the future will stop chaos if there is a true shortage not a soon to be rumored shortage.

The producers want to sell their product and they don't like the price going low just as much as we don't like it going high. Setting a fair middle price that makes both happy would be benificial for both as we would get our oil and they would get steady income.


It will stop DAILY chaos for most of the time. If there weren't speculators the price would be erratic every day. Pricing would not be possible. Speculators in the market let the price move in any direction in a smooth manner and ensure to the commerical hedgers and other market participants, there is always someone on the other side of the trade. It's like guaranteed market making.

The biggest oil companies are also speculators, so they will not allow any of this fixed pricing. Their industry would not function without the financial market going hand in hand with the physical market. If the US allowed this to happen (and it never will), the National Oil Companies will suck them dry so fast they won't know what hit them.

Honestly these articles are just a distraction. Nothing is going to happen. Even if something were going to happen, there's going to be a work around. So you have this department of the government wasting more tax payer money on a lost cause. Plus they don't even know what they are fighting against. NONE of them can come up with concrete evidence to prove their case. Seems to me like a 'make work task' more than anything...another way to create decent paying jobs in the agency, where a job doesn't exist.

Let's see the proof. It's easy to say, look, price has been moving drastically. It's partly because of speculation, not because of potential world markets crash. What it really is, are alot of people trying to justify to someone why they have lost money and why they can't seem to make money like they did a year ago.

Now, I DO AGREE that greater transparancy and position limits and other measures could be a good idea, if researched properly, to avoid possible cornering, but the way the articles are written, they make it sound like the Speculators will be driven out of the market.

And that is just not reality.
 
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Gary, you just don't understand. The market EXISTS because of Speculators. Speculators also built much of US Industry. They built it on Wall Street. We also destroy what needs to be destroyed. If something isn't working and needs to be eliminated (scandal or just poor business operations), we short it to death. It must be this way. You wouldn't want your tax dollars being poured into a bottomless pit would you?

Gary you need to study wall street more. If your interested I can recommend you some good books to get started. It's a very fulfilling topic, and as a young boy I always dreamed of Wall Street, and trading Pork Bellies. For the longest time I couldn't understand it. I just think your mis-informed. The great thing about America and it's something I'll always love about the US, is that wall street is open for business to anyone. And all people have a chance, regardless of background or race. Free market capitalism is the best path to prosperity!
 
Originally Posted By: 1993_VG30E_GXE
Free market capitalism is the best path to prosperity!


Properly applied and not driven by greed that causes inappropriate conduct. Your Wall Street friends used and abused the system and people in the process.
 
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There's no such thing as a free lunch on wall street. When a speculator starts trading other peoples money (fund money), he naturally has to be paid for his service so the pensioners can grow their 401K's. We don't get to just use money for free and that's it.

I don't know why alot of you think that all speculators just make free money. The biggest speculators in the market lost MASSIVELY last year and some of them imploded on themselves. Many funds lost up to 70% of Assets. Some funds closed down completely.


I don't think speculators make "free money" ..they get OPM. Those 70% asset losses were OPM. What occurred destroyed people's 401k in their shenanigans ..all under the "well if I didn't do it, I wouldn't get my potential cut". It was the same with the secured debt swapping (or whatever the term is). 10's of thousands of people doing no more than their appointed task driving toward a known cliff with OPM as their treasure and their peril.

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The oil futures market is a zero sum game, there are equal losers to winners.


The entire market is effectively a way for Wall St. and Co. (speculators/brokers et al) to have a purpose and make money. It is 100% derived from the collective resource pool of assets. No one's pension can "grow" on average since there are winners and losers in a zero sum game. It's as much of a modified ponzy scheme as any other.

I'm sure there are immutable laws involved, but when I see expansion of debt to expand the economy, it appears that it really is a stupid thing to do ..and that the financiers and the brokers (speculators = et al) are the primary beneficiaries from the collective resource pool.

That is, to the society, as a whole, just what productivity of merit do you bring to the table? What is your "value added" to the society?

I'll apologize in advance here. I tend to have a real harsh and abrasive style here ..and I'm dismayed at how so many find it so easy ..and apparently essential ..to extract their cut from the productivity of the collective resource pool ..without truly adding anything to it ..they just broker it.
 
Originally Posted By: 1993_VG30E_GXE


Gary, you just don't understand. The market EXISTS because of Speculators. Speculators also built much of US Industry. They built it on Wall Street. We also destroy what needs to be destroyed. If something isn't working and needs to be eliminated (scandal or just poor business operations), we short it to death. It must be this way. You wouldn't want your tax dollars being poured into a bottomless pit would you?



Too funny.

"Speculators", in the limited context of people who put their money at risk in the process of creating something of greater value and utility to society as a whole, did indeed build much of U.S. Industry.

You and your ilk have nothing in common with such people.

Well, folks, you've heard it straight from whichever end of the horse you think is applicable. I'm certainly glad I never put my family's financial future in with this lot. I have great empathy for anyone that did.
 
Originally Posted By: 1993_VG30E_GXE
I can tell you that the presence of speculators is the very thing that brings stability to the oil market. Wall street speculation is a very complicated near impossible thing to grasp for most people. First off, people don't understand what the role of the speculator is, what he does, and how they affect the market....
It can't be understood unless one is a market participant. All that's going to happen is trading limits could be altered. This will do NOTHING to the market because they know the market would not function without adequate speculators. ...

Plus, even if the NYMEX made it very difficult, all those traders would just move to ICE to trade Brent North Sea Crude or move to the Dubai Exchange. So, in many ways they can't do anything drastic, or else the volume will just move to another country


You are right, or at least mostly so, so naturally you've been slammed pretty hard by folks who do not understand markets at all.

The problem with oil trading is one that the CFTC is not well suited to address. Hedge funds and other legitimate speculators are not the big problem -- if they were, then raising the margins would reduce extreme volatility. No, the greater problem is with pension funds that do not use leverage -- they just take long positions and roll them over monthly. They can VERY EASILY take their business to other exchanges, and increasing the margins has no effect on them The only thing that will discourage them is flat or declining prices.
 
Originally Posted By: ZZman
My problem is as you mentioned. Profit. They Buy/Sell to make profit. It is not really based on need, or supply and demand. It is based on a need to make profit and whatever "news" or rumor is heard that causes this frenzy of activity to occur.

Profits are good. Profits are the reward for those who take risks. Our nation was founded by risk-takers and became the richest in the history of the world because of risk-takers. If you think the country is rich enough now that we no longer need risk-takers, you are greatly mistaken.

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How could the price change much if true producers and users set a "fair" price and stuck with it? It wouldn't matter what the consumption is or the supply is. If you need oil you pay the agreed upon price. This could be done every 6 months or a year. It is the change in prices for any ridiculous reason under the sun that is irritating.


Who would set this "fair" price? And who would adjust it, and how often would it be adjusted, if supply and demand did not balance out?

If you were in charge of setting the price of oil, and you set a price $2/barrel cheaper than the market price in the rest of the world, every supertanker headed to the US would turn around and go elsewhere. And after dropping off its cargo in Europe or Asia, it would travel empty to the US so it could load up with "cheap" American oil and take it wherever it could be sold for more.

I leave it for you to figure out what would happen to supplies at the fuel stations.

If you fix the crude oil price higher than the rest of the world, then we would have big surpluses. The Arabs and Venezuelans would be happy, but American consumers would not be.

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And yes there are speculators and gamblers in the market and that is what makes it run. But you understand the risks in the market and understand that it is gambling. Energy is too important to be toyed or gambled with.


Energy is too important to allow politicians or bureaucrats to get anywhere near the pricing mechanisms. The only people who want to take over from the free market are those who don't understand the free market.
 
Who is getting the profit? Who takes the terrible loses when they are wrong. Reasonable profit is good. At the expense of the vast majority of society.....No.

As I said the Producers and Buyers set the fair agreed upon price. This could be for all nations as a whole. If it is agreed at $ 75.00 a barrel by Buyers and Producers then every one pays that. It could be done every year. They could start at a price and raise it 3-5% a year for inflation.

Are you saying you enjoy the up and down? Are you benefiting from it? Wouldn't you rather have oil and gas prices stay at a stable range and flucuate very little? How would you like your food, electricity, natural gas jump all over the place?

I would.

I am not unhappy with oil in the $ 70-90.00 range. The gas prices should then be between $ 2.50-3.00 a gallon. I can handle that. What I can't handle are the large jumps up and $ 4.00 gas for no logical reason but speculators going into a panic over any "possible" problems.
 
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Originally Posted By: ZZman
Who is getting the profit? Who takes the terrible loses when they are wrong. Reasonable profit is good. At the expense of the vast majority of society.....No.

As I said the Producers and Buyers set the fair agreed upon price. This could be for all nations as a whole. If it is agreed at $ 75.00 a barrel by Buyers and Producers then every one pays that. It could be done every year. They could start at a price and raise it 3-5% a year for inflation.

Are you saying you enjoy the up and down? Are you benefiting from it? Wouldn't you rather have oil and gas prices stay at a stable range and flucuate very little? How would you like your food, electricity, natural gas jump all over the place?

I would.


Let's see... The Saudis and Kuwaitis are happy with crude at $60-70, because they have dollar-denominated investments. The Venezuelans and Iranians want $200 a barrel, so they can bankrupt us. Russia wants $100-150. On the consumer side, I imagine we all want to pay $25-50 a barrel or maybe less. So you see, there can be no agreement. Plus a single price that can only be changed once a year leaves no room for supply disruptions -- if that happens, either the price has to float upward or else there will be the world's biggest black market.

So... the only thing wrong with your plan is that IT WILL NEVER WORK.
 
Well, you can't fix the price unless you want shortages in some areas. You would then be rationing petroleum.

No, free market should set the price. Goes automatically to wear the demand is.

Now if the USA wants to assure supplies for its people at a fixed price ..and let the rest of the globe pay whatever it needs to, well, then we have to (cough-cough) acquire the resources and have our upper tier elite whine that we're "holding them back" since we won't let them sell the the screaming masses that are willing to sell their future generations into slavery for a few barrels of oil today

..wait a minute!
 
Originally Posted By: Tornado Red
Originally Posted By: ZZman
Who is getting the profit? Who takes the terrible loses when they are wrong. Reasonable profit is good. At the expense of the vast majority of society.....No.

As I said the Producers and Buyers set the fair agreed upon price. This could be for all nations as a whole. If it is agreed at $ 75.00 a barrel by Buyers and Producers then every one pays that. It could be done every year. They could start at a price and raise it 3-5% a year for inflation.

Are you saying you enjoy the up and down? Are you benefiting from it? Wouldn't you rather have oil and gas prices stay at a stable range and flucuate very little? How would you like your food, electricity, natural gas jump all over the place?

I would.


Let's see... The Saudis and Kuwaitis are happy with crude at $60-70, because they have dollar-denominated investments. The Venezuelans and Iranians want $200 a barrel, so they can bankrupt us. Russia wants $100-150. On the consumer side, I imagine we all want to pay $25-50 a barrel or maybe less. So you see, there can be no agreement. Plus a single price that can only be changed once a year leaves no room for supply disruptions -- if that happens, either the price has to float upward or else there will be the world's biggest black market.

So... the only thing wrong with your plan is that IT WILL NEVER WORK.


Yep, OPEC tried it in the '70's, the US tried it in the 1930's at the height of the East Texas Oil boom, it was estimated that a million barrels a day flowed through the black market out of E. Texas in the 1935 or thereabouts.
 
Originally Posted By: Tornado

Let's see... The Saudis and Kuwaitis are happy with crude at $60-70, because they have dollar-denominated investments. The Venezuelans and Iranians want $200 a barrel, so they can bankrupt us. Russia wants $100-150. On the consumer side, I imagine we all want to pay $25-50 a barrel or maybe less. So you see, there can be no agreement. Plus a single price that can only be changed once a year leaves no room for supply disruptions -- if that happens, either the price has to float upward or else there will be the world's biggest black market.

So... the only thing wrong with your plan is that IT WILL NEVER WORK.


So what you are saying is that GREED the greatest evil on earth means this could never happen? 1: because no one would agree and 2: because if there was a supply disruption no one would abide by their contracts? We live in a wonderful and complex world that loves to screw the other guy.

I have a simple solution for the black marketers. Take their assets and give them a bullet.
 
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Originally Posted By: ZZman
I have a simple solution for the black marketers. Take their assets and give them a bullet.


The argument since the publication of Adam Smith's "The Wealth of Nations" in 1776 is that free trade obviates the need for war -- that countries can obtain the resources they need peacefully and do not have to fight each other.

But not only do you think Adam Smith was wrong, but you actually think war is better than trade. It's not an original idea, but I think it's wrong -- I would rather buy a tank of fuel from you than fight you to the death for one.
 
Originally Posted By: ZZman
Great it is about time. Lets get some stability in the market and have actually supply/demand issues determine the price.

This is what we need to stop:

Federal officials said “speculative” traders were primarily those that the agency defined as “non-commercial,” which are essentially financial investors who are not users or producers of the commodities and are primarily interested in betting on the direction of prices. “Commercial users,” by contrast, include farmers, airlines and oil companies that want to hedge against the risk of rapid price changes. (Qoute from article)

Energy is too important of a product to be played with.


My feelings exactly, let the day traders play elsewhere. It's about time supply and demand drives the oil market.
 
TornadoRed: I have no problem with free trade if it is reasonable. But as our countries and people become more morally corrupt and care about themselves more than society as a whole I have issues with that.

Morals and Ideals have changed a great deal since 1776.

It may be free trade to sell water to a thirsty traveller in the desert for $ 10.00 a bottle but is it morally right?

**And I don't think Adam Smith was wrong. Didn't I repeat over and over again that producers and buyers agree to a price? I was talking about greedy black marketers who want to break that agreement.
 
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Originally Posted By: ZZman
TornadoRed: I have no problem with free trade if it is reasonable. But as our countries and people become more morally corrupt and care about themselves more than society as a whole I have issues with that.

Morals and Ideals have changed a great deal since 1776.

It may be free trade to sell water to a thirsty traveller in the desert for $ 10.00 a bottle but is it morally right?

**And I don't think Adam Smith was wrong. Didn't I repeat over and over again that producers and buyers agree to a price? I was talking about greedy black marketers who want to break that agreement.


Human nature has not changed in at least the last 2000 years, and certainly not in the last 200.

If there is not enough water to go around if the price is free, how high must the price increase before supply and demand are in balance? It sounds like you think the morally preferred method is to let those with the most guns decide who gets water and who doesn't.
 
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