Speculators are the cause of the run-up in oil prices! - Who knew?
As a longtime speculator (someone who risks losses for the possibility of considerable gains), I was unaware that those of us who attempt to profit from the price movement of the markets were the root cause of $147 a barrel, I mean, $128 a barrel oil.
I am writing after hearing a sound bite from today’s Democratic response to President Bush’s weekly radio address. The congresswoman who made the response from which the sound bite was excerpted said something to the effect that vile, selfish speculators were at fault for high oil prices.
I was taken by her vilification of speculators as it parallels much of what was said in 1932-1940 to place blame for the depression on greedy capitalists and opportunistic speculators.
I recently finished The Forgotten Man: A New History of the Great Depression by Amity Shales which makes the point that the length and the severity of the Great Depression was very likely exacerbated by placing blame for the ills in the economy and penalizing exactly the people who power our free enterprise economy.
I highly recommend the book. But, beware - the parallels to what was done and said in the thirties regarding speculators and business are being said, again today.
Have a great weekend - Jeff (writing from my bunker here in the Newport of the West)
Copyright © 2008 Jeff Quinto
All rights reserved
July 20th, 2008 at 10:57 pm
As a United Airlines frequent flyer, I recently received the following email:
“Last week, crude oil hit an all-time high of $146, and the skyrocketing cost of fuel is impacting our customers, our employees, the communities we serve, and the economy as a whole. United, and the majority of other major U.S. airlines, are asking our most loyal customers to join us in pushing for legislation to add more transparency and disclosure in the oil markets. Please see the attached open letter from the leaders of the U.S. airline industry.
“An Open letter to All Airline Customers:
“Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
“For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
“Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
“Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
“The nation needs to pull together to reform the oil markets and solve this growing problem.
“We need your help. Get more information and contact Congress by visiting http://www.StopOilSpeculationNow.com.”
YES, INDEED, I DID use that Link to contact all three of my congressional representatives with a letter decidedly different than United Airlines wants.
I also enclosed a copy of the following article by LA Times columnist Jonah Goldberg on the subject:
http://www.latimes.com/news/opinion/la-oe-goldberg15-2008jul15,0,24212.column
Hasn’t our government ever heard of this thing called SOLAR ENERGY?? Renewable resources? Independence from foreign oil — a phrase used by every President since Richard Nixon??? AAARGH!!!
This is utterly ridiculous scapegoating much like the current “tax the rich” mentality that just provides our government with an excuse for not doing its job. CONTACT YOUR CONGRESSIONAL REPRESENTATIVES.