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This isn't a supply & demand issue
Sunday, June 22, 2008
Bill O'Reilly on the high price of oil and gasoline - I had no idea this was such a simple problem to fix. More importantly, why isn't he in Jeddah this weekend?
According to this report, Rep. John Larson of Connecticut has actually proposed a bill that would require all "speculators" in oil markets to take delivery of crude oil.
13 comments:
Every contract leads to delivery. If there was some undue inflation in prices purely because of financial speculation, it would "boil off" every month when the contracts expire.
Everyone's got the China story wrong too. China has internal shortages because of the price caps. Its producers and refiners have been selling on the world market because of them. Raising prices doesn't kill net demand, it just reduces the shortages. That means supply gets taken off the world market to be sold in China, just like it is disappearing down a hole.
No one is checking their facts. When China last raised fuel caps last November it caused a global price jump.
About 30 seconds in to this thing. The bullet on the right says OPEC keeps supply low to drive up demand. I think its just poor wording but they keep supply low to drive up price and insure profits.
James
Aaron,
I've always been a bit confused on the delivery issue ... from Pg. 73 of Jim Rogers' Hot Commodities:
Studies have shown that less than 3 percent of futures contracts result in delivery or use of the underlying commodity. Pickup or delivery isn't required until the exact delivery date in the contract. To make sure they do not end up the owners of 5,000 bushels of corn or $20,000 worth of beef, speculators close out or unwind their futures positions before the expiration dates - i.e., sell or buy them on the exchange, thus liquidating their contracts.
It's always good to hear that the only thing standing between our Constitutional right to limitless oceans of cheap gasoline is -- them. Foreigners. Corporations. Always driven by greed.
Not like us. We need to "buy" houses 45 minutes, 60 minutes, 90 minutes away from our jobs. So we can't be "greedy".
Simple!
-- sglover
This sounds awesome. I hope they can get an EPA waiver to "deliver" the oil without barrels and just shoot it at the speculators out of a big hose! That would solve the problem in hurry!
Good lord such ignorance. No wonder we're in the mess we're in and no wonder clowns like O'Reily have the highest ratings. Populism, bread, and circuses.
"Imagine the nerve of those Saudis, wanting to sell only as much as they want! They act as if it's THEIR oil! So what if it's a wasting resource and they want to sell it down the line at higher prices rather than cheaply now?"
I wonder how Bill would feel if he were required to stay on the air 16 hours a day (w/o repeats) so that ad rates for his show would go down. So what if it shortened his lifespan and he had to retire in 2 years because of running himself down, right?
What is this magic by which a speculator opens a one sided position? It can only be Marvel super-villain, SpecuLator, with his power to open long contracts with no counter-party! Using his fiendish powers obtained from eating radioactive bull testicles, he pushes prices higher and higher! He buys oil futures, but no one sells them! Amazing but terrifyingly true!
Only the Isainators can stop him! But SpecuLator has purchased millions of hog futures, depriving the Insainators of their power-granting pork.
Tune in next week for the riveting conclusion!
We are entering the era of witchhunts.
yeah, that's good idea - make commodity speculators take physical delivery. After all, it worked so well in keep the real estate bubble in check.....
Hate Bill O'Rielly, but he is right on.
If the costs to produce Oil have remained somewhat constant someone must be pocketing all this profit.
Oh yeah, XOM has record profits but actual gas stations not profitable so they are being sold.
Lets not confuse an Oligarchy with Capitalism.
Looks like a duck, sounds like a duck...
Unbeknownst to a vast majority is the fact that some savvy speculators like Goldman Sachs and Morgan Stanley have been quietly building storage facilities around the world to take such physical deliveries of oil. Thanks to the generosity of a certain B. Bernanke, these IBs have pawned garbage paper at the Fed's window and borrowed roughly $300B to erect another ponzi scheme in the commodities markets. You my friends, have aided these clowns to jack up the price of oil by not pressurizing Congress to shut down the various lending facilities. Mark my words - since most IBs in the US are practically insolvent, this is their last bet in order to survive and they will do anything and everything in their capacity to keep oil prices high - even if it means igniting a war somewhere!
I know that the Iranians have an oil exchange opertating in Kish that prohibits futures due to Islamic beliefs, does anyone know what the price is on thier spot market where you are forced to take delivery, they also only trade in non-dollar currency
ps Im not sure if they are trading oil yet,the famous internet cables going down has stalled thier efforts, but they are trading nat gas and it would be interesting to know the spreads with our markets
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