U.S. Considers Curbs on Speculative Trading of Oil
Jack Linthicum
Considering only the swings in automobile gasoline and diesel in the
past year, from $145 a barrel and $4.00++ a gallon in late summer
2008 to $33 a barrel and $1.49 a gallon by December 2008, the idea of
controlling those wild swings and the planning for the automobile
industry.
For those who think this article does not have naval content try
filling up a DDG with $147 fuel.
July 8, 2009
U.S. Considers Curbs on Speculative Trading of Oil
By EDMUND L. ANDREWS
WASHINGTON — Reacting to swings in oil prices in recent months,
federal regulators announced on Tuesday that they were considering
trading restrictions on hedge funds and other “speculative” traders in
markets for oil, natural gas and other energy products.
In a big departure from the hands-off approach to market regulation of
the last two decades, the chairman of the Commodity Futures Trading
Commission, Gary Gensler, said his agency would consider new limits on
the volume of energy futures contracts that purely financial investors
would be allowed to hold.
The agency also announced that it would pull back part of the veil on
the oil and gas markets, publishing more detailed information about
the aggregate activity of hedge funds and traders who arbitrage
between domestic and foreign energy prices.
“My firm belief is that we must aggressively use all existing
authorities to ensure market integrity,” Mr. Gensler said in a written
statement.
Mr. Gensler announced that his agency will hold several hearings in
July and August, the first of which will examine whether to impose
federal “speculative limits” on futures contracts for energy products.
Oil prices have swung wildly in the last year, hitting about $145 a
barrel last summer, then plunging to $33 in December before rising to
about $70.
Much of that gyration stemmed from chaos in the global financial
system, as banks and much of Wall Street came perilously close to
collapse last September and the global economy fell into the most
severe recession in decades.
But a growing number of critics have blamed some of the extreme
volatility on the role of purely financial investors — those who are
simply betting on the direction of energy prices, as opposed to those
who actually use such products, like airlines.
The Commodity Futures Trading Commission, an independent regulatory
agency that regulates the trading of futures contracts for commodities
ranging from wheat and corn to oil, precious metals and currencies,
has for years followed a deregulatory path that rarely interfered with
the burgeoning markets they regulated.
Federal officials said “speculative” traders were primarily those that
the agency defines 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.
Non-commercial traders accounted for almost a fifth of the activity in
several major oil and gas products for the week that ended June 30,
according to data compiled by the commodities agency.
Mr. Gensler, who was nominated by President Obama and took over the
agency earlier this year, made it clear that he is pushing toward
tighter regulation on several fronts. His efforts mirror actions taken
by the Justice Department to strengthen antitrust enforcement and by
financial regulators to police banks and investment firms much more
closely.
Mr. Gensler noted that his agency already imposes volume limits on
speculative trading in agricultural products like wheat and corn. But
in the case of energy products, the agency allows the futures
exchanges — primarily the New York Mercantile Exchange — to set
limits.
A future is a contract to buy or to sell a particular volume of a
commodity by a particular date. Futures contracts were originally
created to help farmers shield themselves from price volatility
between the time they planted their crops and the time of harvest. But
futures are now used to hedge price swings in everything from oil and
gas to electricity, Treasury bonds and foreign currencies.
In the case of energy products, Mr. Gensler said, the exchanges were
not required to set or enforce position limits aimed at preventing
“excessive speculation.” The contrast between approaches taken for
agricultural and energy commodities, he said, “deserves thoughtful
review.”
Mr. Gensler added that the agency would be reviewing the manner in
which traders receive exemptions from trading limits by claiming the
need to carry out “bona fide hedging transactions.”
http://www.nytimes.com/2009/07/08/business/08cftc.html?_r=1&hp=&pagewanted=print
Keith Willshaw
"Jack Linthicum" <jackli...@earthlink.net> wrote in message
news:318e1938-9e67-4fce...@c1g2000yqi.googlegroups.com...
> Considering only the swings in automobile gasoline and diesel in the
> past year, from $145 a barrel and $4.00++ a gallon in late summer
> 2008 to $33 a barrel and $1.49 a gallon by December 2008, the idea of
> controlling those wild swings and the planning for the automobile
> industry.
Reality check, oil is a commodity traded world wide , whatever Washington
does traders will still buy and sell it in Hamburg, London, Tokyo, Paris
etc. Preventing US oil traders buying futures will make them MORE
reliant on spot prices which are the headline fluctuations and allow foreign
traders to control the market. Some might consider this a bad idea.
If the US Government wants to do something real they have to take
measures to reduce the nations dependence on imported oil.
Keith
Jack Linthicum
<ke...@nospam.kwillshaw.demon.co.uk> wrote:
> "Jack Linthicum" <jacklinthi...@earthlink.net> wrote in message
20% is a big enough chunk of the market to make other speculators more
cautious.
It is the New York Mercantile Exchange and the idea of a U.S. control
will make the global financial system more aware of the restriction
that aren't yet there yet.
William Black
The US price is based on the international exchange in Rotterdam.
--
William Black
Jack Linthicum
Keith Willshaw
>Not always
> http://www.reuters.com/article/fundsFundsNews/idUSN0732823620090707
The irony of course is that these US futures markets are exactly those the
Fed
wants to close down
Keith
Jack Linthicum
Like those un-banks that became traders and the un-stocks that became
securities
Richard
Yeah. Price controls (which is what this is attempting) worked so
well for us in the '70's.
Don't the dimbulbs ever learn? It's called a 'Free' Market for a
reason, tovarisch, and if you don't like it: EMMIGRATE ELSEWHERE.
William Black
> Don't the dimbulbs ever learn? It's called a 'Free' Market for a
> reason, tovarisch, and if you don't like it: EMMIGRATE ELSEWHERE.
Except it isn't.
It's a highly regulated market that is affected by any number of outside
factors from OPEC to the US Government Strategic Stockpile.
--
William Black
So I looked at the script
It was six weeks filming in the desert.
No girls, no dialogue, just guys with guns.
They said "Do you want wages or a percentage?"
It looked like a certain turkey.
When they came the second time I was ready.
I haven't had to work since...
Eli Wallach on his roles in
"The Magnificent Seven"
and "The Good the Bad and The Ugly
Keith Willshaw
"William Black" <willia...@hotmail.co.uk> wrote in message
news:h32657$guc$2...@news.eternal-september.org...
> Richard wrote:
>
>> Don't the dimbulbs ever learn? It's called a 'Free' Market for a
>> reason, tovarisch, and if you don't like it: EMMIGRATE ELSEWHERE.
>
> Except it isn't.
>
> It's a highly regulated market that is affected by any number of outside
> factors from OPEC to the US Government Strategic Stockpile.
>
I'd hardly call it highly regulated. Opec now controls only 1/3 of global
oil production and the US Strategic reserve amounts to around
one months worth of consumption.
Keith
William Black
OK then, reasonably well regulated...
What it ain't is a 'free market'...
Jack Linthicum
<ke...@nospam.kwillshaw.demon.co.uk> wrote:
> "William Black" <william.bl...@hotmail.co.uk> wrote in message
It is the storage that is the controlling factor in determining price,
unless someone is manipulating the price without regard to actual
acceptance. Old urban legend about the guy who wakes up on the first
of the month to the sound of plywood being dumped on his front lawn,
never covered.
20% is a large share of the oil available
http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html
Keith Willshaw
On Jul 8, 1:19 pm, "Keith Willshaw"
<ke...@nospam.kwillshaw.demon.co.uk> wrote:
> "William Black" <william.bl...@hotmail.co.uk> wrote in message
>
>> > It's a highly regulated market that is affected by any number of
>> > outside
>> > factors from OPEC to the US Government Strategic Stockpile.
>
>> I'd hardly call it highly regulated. Opec now controls only 1/3 of global
>> oil production and the US Strategic reserve amounts to around
>> one months worth of consumption.
>>
>> Keith
> It is the storage that is the controlling factor in determining price,
> unless someone is manipulating the price without regard to actual
> acceptance.
That's not true I'm afraid. Large oil users purchase futures to hedge
their bets and limit exposure to market fluctuations. The amount
in the US Strategic store makes little difference to market prices
which are essentially a matter of supply and demand.
> Old urban legend about the guy who wakes up on the first
> of the month to the sound of plywood being dumped on his front lawn,
> never covered.
> 20% is a large share of the oil available
You misunderstand I'm afraid , the US strategic reserve is MUCH less
than 20% of the total available
Proven oil reserves Saudi Arabia - 260 billion barrels
global oil consumption - 32 billion barrels
US Strategic reserve - 700 million barrels
> http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html
> http://money.cnn.com/2008/07/24/markets/cftc/
Semgroup paid the price for the hubris they showed
Keith
Jack Linthicum
<ke...@nospam.kwillshaw.demon.co.uk> wrote:
> "Jack Linthicum" <jacklinthi...@earthlink.net> wrote in message
> >http://money.cnn.com/2008/07/24/markets/cftc/
>
> Semgroup paid the price for the hubris they showed
>
> Keith
You are talking about reserves on one hand and available oil on the
other. Read today's reports.
http://www.journalgazette.net/article/20090708/APF/907080745
William Black
> William Black <willia...@hotmail.co.uk> wrote:
>
> :Keith Willshaw wrote:
> :> "William Black" <willia...@hotmail.co.uk> wrote in message
> :> news:h32657$guc$2...@news.eternal-september.org...
> :>> Richard wrote:
> :>>
> :>>> Don't the dimbulbs ever learn? It's called a 'Free' Market for a
> :>>> reason, tovarisch, and if you don't like it: EMMIGRATE ELSEWHERE.
> :>> Except it isn't.
> :>>
> :>> It's a highly regulated market that is affected by any number of outside
> :>> factors from OPEC to the US Government Strategic Stockpile.
> :>>
> :>
> :> I'd hardly call it highly regulated. Opec now controls only 1/3 of global
> :> oil production and the US Strategic reserve amounts to around
> :> one months worth of consumption.
> :
> :OK then, reasonably well regulated...
> :
> :What it ain't is a 'free market'...
>
> What's 'unfree' about it, Willie? I really think you don't understand
> the actuality of how the thing works.
OPEC.
Keith Willshaw
>
>> You misunderstand I'm afraid , the US strategic reserve is MUCH less
>> than 20% of the total available
>
>> Proven oil reserves Saudi Arabia - 260 billion barrels
>> global oil consumption - 32 billion barrels
>> US Strategic reserve - 700 million barrels
>
>> >http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goo...
>> >http://money.cnn.com/2008/07/24/markets/cftc/
>
>> Semgroup paid the price for the hubris they showed
>>
>> Keith
>You are talking about reserves on one hand and available oil on the
>other. Read today's reports.
> http://www.journalgazette.net/article/20090708/APF/907080745
I read them every day Jack, do you ? Oil prices are falling again because
of weak demand due to the recession, as the articles you posted the links
to make plain. This is the market in action.
Prices are set by supply and demand, Releasing the US strategic reserve
to the market would have nothing more than a limited temporary effect on
prices
while making the US nuch more vulnerable to interuptions of supply. Hardly
a
viable option is it ? Especially when the US lacks the capacity to refine
the
oil it does use. What do you plan to do, ship it to Europe for refining ?
Keith
Jack Linthicum
<ke...@nospam.kwillshaw.demon.co.uk>
>
Especially when the US lacks the capacity to refine
> the
> oil it does use. What do you plan to do, ship it to Europe for refining ?
>
> Keith
Probably not
There is a chart at the citation
The U.S. ranks 1st in oil refinery capacity
Posted 11 May 2009
Filed under: Ranking of 1, energy | Tags: energy, oil, oil refinery,
petroleum |
According to British Petroleum, the United States has an oil refinery
capacity of 17,455 barrels per day, which makes the United States rank
first in that category.
oil-refinery-capacityxlsx
http://rankingamerica.wordpress.com/2009/05/11/the-us-ranks-1st-in-oil-refinery-capacity/
Keith Willshaw
On Jul 9, 3:47 am, "Keith Willshaw"
<ke...@nospam.kwillshaw.demon.co.uk>
>
>> Especially when the US lacks the capacity to refine
>> the
>> oil it does use. What do you plan to do, ship it to Europe for refining ?
>>
>> Keith
> Probably not
> There is a chart at the citation
> The U.S. ranks 1st in oil refinery capacity
> Posted 11 May 2009
> Filed under: Ranking of 1, energy | Tags: energy, oil, oil refinery,
> petroleum |
> According to British Petroleum, the United States has an oil refinery
> capacity of 17,455 barrels per day, which makes the United States rank
> first in that category.
> http://rankingamerica.wordpress.com/2009/05/11/the-us-ranks-1st-in-oil-refinery-capacity/
17,000 barrels per day wouldn't keep Rhode Island supplied , the real
figure is more like 18 million barrels per day
The US uses 20.8 million barrels per day of oil and imports
3,437,000 barrels/day of refined petroleum products in
addition to domestically refined oil
http://www.eia.doe.gov/basics/quickoil.html
As to a lack of refining capacity note that no new refineries
have been built in the US since 1976
Keith
Jack Linthicum
<ke...@nospam.kwillshaw.demon.co.uk> wrote:
> "Jack Linthicum" <jacklinthi...@earthlink.net> wrote in message
>
> news:6bb8e442-4053-4da6...@t33g2000yqe.googlegroups.com...
> On Jul 9, 3:47 am, "Keith Willshaw"
> <ke...@nospam.kwillshaw.demon.co.uk>
>
>
>
>
>
> >> Especially when the US lacks the capacity to refine
> >> the
> >> oil it does use. What do you plan to do, ship it to Europe for refining ?
>
> >> Keith
> > Probably not
> > There is a chart at the citation
> > The U.S. ranks 1st in oil refinery capacity
> > Posted 11 May 2009
> > Filed under: Ranking of 1, energy | Tags: energy, oil, oil refinery,
> > petroleum |
> > According to British Petroleum, the United States has an oil refinery
> > capacity of 17,455 barrels per day, which makes the United States rank
> > first in that category.
>
> 17,000 barrels per day wouldn't keep Rhode Island supplied , the real
> figure is more like 18 million barrels per day
>
> The US uses 20.8 million barrels per day of oil and imports
> 3,437,000 barrels/day of refined petroleum products in
> addition to domestically refined oil
>
> http://www.eia.doe.gov/basics/quickoil.html
>
> As to a lack of refining capacity note that no new refineries
> have been built in the US since 1976
>
> Keith
somebody missed a set of zeros, 17,000,000 barrels a day
Mark Borgerson
ke...@nospam.kwillshaw.demon.co.uk says...
>
> "Jack Linthicum" <jackli...@earthlink.net> wrote in message
> news:6bb8e442-4053-4da6...@t33g2000yqe.googlegroups.com...
> On Jul 9, 3:47 am, "Keith Willshaw"
> <ke...@nospam.kwillshaw.demon.co.uk>
> >
> >> Especially when the US lacks the capacity to refine
> >> the
> >> oil it does use. What do you plan to do, ship it to Europe for refining ?
> >>
> >> Keith
>
>
> > Probably not
>
>
> > There is a chart at the citation
>
> > The U.S. ranks 1st in oil refinery capacity
> > Posted 11 May 2009
> > Filed under: Ranking of 1, energy | Tags: energy, oil, oil refinery,
> > petroleum |
>
> > According to British Petroleum, the United States has an oil refinery
> > capacity of 17,455 barrels per day, which makes the United States rank
> > first in that category.
>
> > http://rankingamerica.wordpress.com/2009/05/11/the-us-ranks-1st-in-oil-refinery-capacity/
>
>
> 17,000 barrels per day wouldn't keep Rhode Island supplied , the real
> figure is more like 18 million barrels per day
Yeah. They couldn't read their own graph----The vertical axis is
clearly labeled as "Thousands of barrels per day".
OTOH, this source: http://www.statemaster.com/graph/ene_pet_con-energy-oil-consumption
says that Rhode Island only uses about 18 million barrels of oil per
year. So 17,000 barrels per day is about 1/3 Rhode Island's
daily usage. It's a good think the example wasn't comparing
daily production to Connecticutt usage. That state only uses about
2100 barrels per day. Those folks must not drive a lot or
have large industries or airports. Either that, there's some
anomaly in the data. Connecticutts usage is a factor of
5 lower than the next higher state (Nebraska).
California and Texas together account for about 1/3 of US
oil usage. That's probably due to commuters and industry
in California and industrial usage in Texas (oil in, plastic,
feedstocks and fertilizer out).
>
> The US uses 20.8 million barrels per day of oil and imports
> 3,437,000 barrels/day of refined petroleum products in
> addition to domestically refined oil
>
> http://www.eia.doe.gov/basics/quickoil.html
>
> As to a lack of refining capacity note that no new refineries
> have been built in the US since 1976
>
> Keith
>
Mark Borgerson
Jack Linthicum
> In article <S5s5m.55923$TT5.33...@newsfe18.ams2>,
> ke...@nospam.kwillshaw.demon.co.uk says...
>
>
>
>
>
> > "Jack Linthicum" <jacklinthi...@earthlink.net> wrote in message
> >news:6bb8e442-4053-4da6...@t33g2000yqe.googlegroups.com...
> > On Jul 9, 3:47 am, "Keith Willshaw"
> > <ke...@nospam.kwillshaw.demon.co.uk>
>
> > >> Especially when the US lacks the capacity to refine
> > >> the
> > >> oil it does use. What do you plan to do, ship it to Europe for refining ?
>
> > >> Keith
>
> > > Probably not
>
> > > There is a chart at the citation
>
> > > The U.S. ranks 1st in oil refinery capacity
> > > Posted 11 May 2009
> > > Filed under: Ranking of 1, energy | Tags: energy, oil, oil refinery,
> > > petroleum |
>
> > > According to British Petroleum, the United States has an oil refinery
> > > capacity of 17,455 barrels per day, which makes the United States rank
> > > first in that category.
>
Might be in state prices, Connecticuters go over the line for cheaper
gas, making Rhode Island look like a big consumer?
Mark Borgerson
@r33g2000yqn.googlegroups.com>, jackli...@earthlink.net says...
in Connecticutt are nuclear powered. (Ob. SMN content) Not
a lot of marine fuel oil sales in Groton compared to Narragansett
Bay.
Gas prices in Conn. don't seem much different from RI.
Massachusetts, to the North is about 20 to 30 cents
cheaper per gallon. Unless you have to drive by the
cheaper station, it doesn't make much sense to
travel far to save 5 cents a gallon.
http://www.gasbuddy.com/GB_Map_Gas_Prices.aspx
Mark Borgerson
Jack Linthicum
> In article <286e70a1-f0a3-46ec-a966-9bc79b907058
> @r33g2000yqn.googlegroups.com>, jacklinthi...@earthlink.net says...
Tell that to the people I see doing just that during the $4 gas
season. BTW the current prediction is for $2 gas by September 1st.
Richard
wrote:
We're already there in Houston.