It appears that the wool is being removed from the eyes of Congress, either by choice or by necessity. the question is if Congress will enact real reforms, or make a lot of empty gestures.
Congress To Probe Oil Price Spike on Tuesday
By Mark Huffman
http://www.consumeraffairs.com/...
Oil traders will come under increasing scrutiny in Washington this week as two Senate committees hold hearings on whether speculators are to blame for part, or all, of oil's spectacular price rise this year.
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Acting Chairman of the Commodity Futures Trading Commission Walter Lukken will try to explain the price surge when he appears Tuesday before a joint hearing of two Senate panels - the Committee on Agriculture, Nutrition and Forestry and an Appropriations Committee subcommittee on financial services
According to our book, "Crazyman's Economics", the true role of a self-regulated agency is to:
- ensure the exchanges are successful
- ensure the winners get their money
- ensure the brokers and exchanges get their money
- ensure the brokers and exchanges are not required to keep records and statistics which are negative to their success.
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OPEC oil ministers also appear to agree. The oil ministers for both Iran and Saudia Arabia, the world's two largest oil producers, say there is no oil shortage and prices are not being influenced by supply and demand.
According to the National Futures Association, prices are determined using a myriad of factors. That means that supply and demand are but one of countless factors that determine commodities prices.
Larson says all the money that has lately been pouring into the market cannot help but have a distorting effect. "The amount of money invested in energy futures has increased more than 1000 percent since 2000," Larson said. "Then, there were $9 billion in the energy futures market. Today, that number is up to $250 billion."
Commodities are traded at a price between "reasonable profit" and pricing itself out of the market. A producer will not produce a product for long at a loss. So producers are working at a baseline of profit and above. In the case of crude oil, it has been proven that Americans are willing to pay $140 a barrel for oil, so until that high mark is established, expect prices to continue going up.
In the House, at least one lawmaker isn't waiting to hear from market executives and regulators. Rep. John Larson (D-CT) has introduced legislation that would take speculators out of the unregulated energy futures markets. Larson is convinced that it is these speculators who are unfairly driving up the cost of gas and home heating oil.
His bill would require that anyone who invests in oil futures on the "dark" markets be able to actually take inventory of the product in which they are investing. That means no speculators who are out to make a profit by buying a contract and one price and selling it days later for a higher price, could participate.
"I know that this is a bold step. But, given the gravity of the current situation, bold action is exactly what's needed," Larson said.
This is indeed a bold move, and would remove the gambling from the market. Let's hope he has the support to get this passed.