Tuesday 31st of December 2024
Home » Blogs » John Richardson's blog

following the money .....

following the money .....

Independent experts, however, said that government could take at least three other steps that could force oil and gasoline prices down immediately. Neither Bush nor McCain nor Obama endorse any of them. 

Perhaps the quickest action, the experts said, would be ordering curbs on financial speculation. Financial industry heavyweights have acknowledged in recent testimony before Congress that such speculation is driving oil prices higher. 

Pension funds, endowments and other big institutional investors are pumping big money into index funds linked to commodities, including oil, driving up demand - and prices. The popular Goldman Sachs Commodities Index attracted $260 billion in investment last year, compared to $13 billion five years earlier. 

Complicating any effort to harness that, about 30 percent of the trading in crude oil is done in "dark areas" - markets in London and Dubai - that aren't regulated by the U.S. Commodity Futures Trading Commission (CFTC). 

President Bush could order the CFTC to regulate U.S. investments in those markets with a snap of his fingers, said Michael Greenberger, a law professor at the University of Maryland and a former director of trading for the CFTC. 

"Essentially this could be ended this afternoon if the Bush administration had the stomach to do it," he said. "Those abdications of responsibility and allowing these exchanges to trade in 'dark' markets ... provides an environment for speculators to thrive." 

The CFTC is investigating the link between speculation and oil prices but hasn't scheduled any action. 

These Steps Could Lower Oil Prices, But Nobody'll Take Them

not in the news .....

Spain is the latest country to be hit as a wave of protests against high fuel prices has spread to France and Portugal. 

The price of diesel has risen to €1.30 a litre, up from €0.95 a litre a year ago, and in other European countries prices are as high as €1.50 a litre—equivalent to US$9 a gallon. In recent days, oil prices topped a record US$139 per barrel, and investment bankers Goldman Sachs say the price could rise to US$200 over the next year. 

On Monday, the Spanish National Federation of Transport Associations (Fenadismer), which represents 70,000 truck drivers, began an indefinite strike joining a second group, the Platform for the Defence of the Transport Sector, whose members stopped work last week. The larger Spanish Confederation of Merchandise Transporters, CETM, has not joined the strike. Most drivers in Spain are self-employed or work for small and medium-sized haulage companies. 

Truckers’ leaders warned that the strike could bring the country to a standstill if the Spanish Socialist Workers Party (PSOE) government failed to set a minimum price for transport services, adjust contracts to reflect fuel price increases and lower taxation on fuel. 

Fuel Protests Sweep Across Europe 

meanwhile, back at the slot machines ….. 

Futures contracts have been around, of course, for years, and such contracts can serve a useful purpose. Airlines, for instance, can use futures “to lock in” the price they’ll have to pay for oil in the future. But manic trading in futures has no redeeming social value. Such trading, as billionaire investor George Soros told a June 3 U.S. Senate hearing, only serves to help inflate commodity price bubbles. 

Government regulators of commodity markets used to recognize this reality. They placed rules on commodity markets that limited speculative trading. Those rules for energy, by the end of 2000, had almost all been deregulated away. 

Since then, commodity trading volume has jumped six-fold. This speculative shot in the arm, Consumer Federation of America research director Mark Cooper believes, is adding at least $40 a barrel to the price of oil, about a third of the recent going price. 

Congress has taken notice, and lawmakers have begun discussing reform fixes. But the hedge fund industry is trying to shift that attention, arguing that oil price hikes simply reflect the vagaries of global supply and demand. Any congressional probe into commodity speculation, billionaire hedge fund manager Boone Pickens noted earlier this month, would be a “waste of time.” 

Why Oil Prices Are So High