It used to be to trade Futures Contracts on a barrel of Oil, you had to agree to the delivery of that barrel Oil at some "future" date.
An Airline, wanting to lock-in low prices.
An Oil heating company, ramping-up the necessary "winter supply".
A Gas refinery, keeping that "free market" flowing.
Not anymore. These "steroid market" days. Anyone with a hedge fund, or a million dollars in mad money, can play the Oil Market, like they were playing the ponies.
The problem with this Casino system is, someone still has to take care of the horses, after the race is done. Someone still has to pay through the nose at the pump, after the Hedgies have "made book" -- pocketing millions in the inconsequential process of driving up the price of a gallon of gas ...
A gallon that they will never see. Yuk!!!
Speculation - not demand or regulation - behind dramatic gas price increases
by Kevin G. Hall, McClatchy -- Feb 22, 2012
WASHINGTON - U.S. demand for oil and refined products - including gasoline - is down sharply from last year, so much that United States has actually become a net exporter of gasoline, unable to consume all that it makes. Yet oil and gasoline prices are surging.
[...]
"Speculation is now part of the DNA of oil prices. You cannot separate the two anymore. There is no demarcation," said Fadel Gheit, a 30-year veteran of energy markets and an analyst at Oppenheimer & Co. "I still remain convinced oil prices are inflated."
Consider that light, sweet crude trading on the NYMEX changed hands at $79.20 a barrel just four months ago, but soared past $105 a barrel Tuesday afternoon, partly on news that Iran would halt shipment of oil to Britain and France. But those countries already had stopped buying Iranian oil. And Didier Houssin, the International Energy Agency's director for energy markets and security, said that "there are alternative supplies that can make up for any loss of Iranian exports," The Wall Street Journal reported.
[...]
Speculators make the world go round --
their rarefied world
... that world of "Where is that next Quick-Buck opportunity?"
Some insist that Futures speculators are needed to "cushion the markets" from severe international shocks.
Sometimes shocks that haven't even happened yet. Shocks that may not happen. Shocks that may have no concrete effects. No worries they'll price in that disruption of "future" supply anyways. Just to brighten up your daily commute.
Well, isn't that special?
Speculating about oil prices
by Jon Talton, seattletimes -- Feb 22, 2012
[...]
That demand is back after the Great Recession, even if American demand is relatively muted. China, still growing fast, is a huge oil user, yet it has few oil reserves in-country. In addition, the Iranian nuclear tensions are no mere kerfuffle. Many serious observers believe Israel will strike against Iranian nuclear facilities this spring, before they can be put deep underground and an Iranian bomb becomes a reality. If this happens, the potential disruption to supply from the Persian Gulf could be catastrophic. A futures contract needs a buyer and a seller, and the Iranian crisis is creating a persuasive case for relatively higher oil.
[...]
Well then,
can we assume all those "futures contract traders" are
"stocking up" on Oil supplies so we will weather that
"potential disruption to supply from the Persian Gulf"?
No, we can not. That would be silly. They are paper-traders -- not product-makers.
Congress occasionally takes on the Oil Bookies, and occasionally even threatens legislation to re-regulate this high tech "price gouging" activity.
Oil speculation: What Congress wants
Lawmakers are threatening to get tough on traders and have introduced 9 different bills. But it's unclear if they'll succeed.
by David Goldman, CNNMoney.com staff writer -- June 24, 2008
[...]
Congress is vowing to take actions that it believes will reverse runaway crude and gasoline prices. Oil rose above $136 a barrel on Monday -- more than double what it cost a year ago -- and gas hovered around $4.07 a gallon. {Deja vu all over again}
Lawmakers have introduced nine different bills on speculation -- not to mention many more that tackle other causes of escalating fuel and oil prices. Several of the speculation measures have bipartisan support.
[...]
Regulating traders abroad
"Prevent Unfair Manipulation of Prices Act of 2008" (H.R. 6330).
[...]
Raising margins
"The Consumer-First Energy Act of 2008" (S. 3044)
[...]
Limiting hedge funds
The "Oil Speculation Control Act of 2008" (S. 3131)
[...]
Ending most speculation altogether
H.R. 6264, would only eliminate speculation in "dark, unregulated markets" and not speculation altogether.
[...]
Too bad though, Congress knows how to "
threaten legislation" -- but the GOP-led Congress DOESN'T knows how to "
pass legislation"; at least not legislation that protects
ACTUAL Consumers, instead of the market players who walk away with OUR hard-earned cash. Day-in, day-out. Season-in, Season-out.
H.R.6330
Latest Title: Preserving American Income on Dividends Act of 2010
Latest Major Action: 9/29/2010 Referred to House committee.
Status: Referred to the House Committee on Ways and Means.
S. 3131:
Oil Speculation Control Act of 2008
Last Action: Jun 12, 2008: Read twice and referred to the Committee on Agriculture, Nutrition, and Forestry.
Status: Referred to Committee
S.3044
Latest Title: Consumer-First Energy Act of 2008
Latest Major Action: 6/11/2008 Senate floor actions.
Status: Motion to proceed to measure considered in Senate.
H.R. 6264 (Rep. Larson)
Status: Referred to the House Committee on Agriculture Limits over-the-counter derivative transactions in energy commodities (defined as crude oil, heating oil, gasoline, or diesel fuel) to persons whom the CFTC has certified as having the capacity to produce, manufacture, or accept physical delivery of the commodity.
Get ready for those "summer driving prices" folks -- it's being
"priced-in" as we speak.
Long as those "free markets" keep flowing -- who is really hurt by a little LOT of speculation on the price of a barrel oil, that no one will really take delivery on anyways? Yuk!!
Consumers are resilient, we'll adapt (some of us anyways). Hedge Funds and Millionaires -- not so much. We must always mind their profit margins now, mustn't we?
That's what the GOP-led Congress is all about, given their track record. They really excel at "shuffling papers" some would say. Real Consumer-protection -- not so much. So much for their road of "good intentions" ... long as they can always take up futures trading themselves, what's the problem people?
It's just how the "Free Market" goes round ... best not to question it, and just pay up people.