[Moogs]

http://www.cnn.com/video/live/live.html?stream=stream4

[Maybe soon we can] watch the scumbags squirm and watch them try to spin that there is "a free market".. Cartel + Big Oil + Speculators = raped consumers.

[Moogs]

Speculator extraordinaire Soros now speaking on "bubbles".

[Banana]

Pssh, CNN wants me to put in a fancy thingamigjig plugin to view it without the courtesy of linking to text article.

That said, I truly hope anyone doesn't do something very dumb based on this meeting... like adding more regulations or nationalizing the oil industry.

[Moogs]

Flip4Mac FTW. It's free and doesn't take long to download.
http://www.flip4mac.com/

[Banana]

Yes, it did suggest this, but meh. No thanks. I'll just wait for text.

[Moogs]

Initial responses to the question of "is the price based on supply and demand or speculation and other factors", a couple of individuals on the panel suggest [...] the real cost of a barrel of oil is about $40, not $130+. All members indicated this is not supply and demand based. IOW, we should be paying around $2 (absent taxes) for a gallon of gas.

We are getting r-a-p-e-d because the "regulators" put in place by the current administration has allowed London and Dubai-based regulation agencies to protect our interests in the oil trade. IOW, no protection at all. These people running this game are human filth.

[Moogs]

Goldman Sachs, Morgan Stanley... the assholes saying "Oh yah, it's going to $200 a barrel"... are taking huge, long-term positions in the market behind the scenes. Hmmm. Gee. Wonder why that is.

[Moogs]

And of course, it all comes back to roost... prior to 2000, for 70-some years, we had commodity and trading controls in place to prevent speculators, foreign markets and commodities buyers from gaming the system like this. Bottom line from everyone who testified, no less than $1 a gallon is going directly into speculators' pockets, and another $.50 to $1 to other players not directly tied to the cost of moving oil from under the ground to your gas tank.

Another interesting thing I learned is gas station owners aren't making squat off this. They're in trouble too...

[Kickaha]

Originally Posted by Moogs We are getting r-a-p-e-d because the "regulators" put in place by the current administration has allowed London and Dubai-based regulation agencies to protect our interests in the oil trade. IOW, no protection at all. These people running this game are human filth.

Agreed, but just to clarify... the speculators went to the London and Dubai exchanges because we *cracked down on them*. The current administration *regulated* them... so they moved.

So which do you want... regulation, or not? The situation would have been the same had a Democrat signed the regulation into law. We shined a light on them, so the cockroaches scattered to the dark corners elsewhere. You can't locally regulate a global commodity - the best you can do is say "Not in our house" but you're still subject to the (lack of) regulations elsewhere. IMO, the better stance to take is to keep them here, but fine-tune the regulation to be *just* onerous enough to prevent rampant abuse, but *lax* enough not to send them scurrying to other less-regulated markets. Oops. Gee, if only there was some way to predict the moves someone was going to make due to changes in the rules, kind of like a game...

Gotta say, I find it kind of ironic that the UK, home of "Socialize, videotape, and regulate" is where the speculators went to get away from regulation. Um, guys? You wanna do some house-cleaning? Thanks.

[kretara]

Originally Posted by Moogs Another interesting thing I learned is gas station owners aren't making squat off this. They're in trouble too...

I know a gas station owner and he confirmed this to me a year or so ago.
He makes FAR more money on a bottled water or a coke than he makes on 10 gallons of gas.
The extra's that he sells (candy, maps, drinks etc..) are what makes him money. Selling gas is the cost of doing business.

[Moogs]

Kick the impression I have is that the CFTC still has the ability -whether US speculators go to London or Dubai markets or not- to enforce certain trading regulations, such as ensuring these assholes can cover their margins, etc. They only have to account for like 6% of the amount being traded, and there's no controls on affecting behavior that needlessly drives up prices such as banks making self-serving predictions about the cost of oil, etc.

If the CFTC did its job and used the powers it already has, this would reign in their ability to game the system, BUT the CFTC claims there is no need because "Dubai's regulatory system is pretty much like our system". IOW, they're trusting Dubai and London-based regulatory agencies to protect US consumer interests when they have absolutely no interest in doing so. The whole thing is a collusive effort between foreign market agencies, big banks, US speculators and in some cases those companies that control supplies of things like heating oil here in the US.

Based on a couple of the testimonies, that $1+/gallon padding could be gone virtually overnight with the controls we *could* institute, but so far the CFTC has refused. Congress now needs to compel them to regulate trades involving US companies and "product", which is what the hearing was about.

This is a clear cut case of look the CFTC (or whoever controls the CFTC ultimately) looking the other way so their cronies in the industry can get as much as they can until someone cracks down, based on everything I heard. Other than Soros, who played the "it's more complicated than that" card a few times, sort of suggesting we should just live with higher prices.. the panel testifying gave very damning information about how the players in the current system continually drive up the price, without there being and fundamental economic reason to do so. OPEC also games the system in such a way that they end up getting a nice premium but there is no means of us removing that burden based on what I heard, which where the alternative energy investment and policies come in.

[Banana]

Regulators can always be bought out.

Besides, high price just means more people will be conservative with how they spend for their commuting and whether they'll buy a honk-ass SUV next time.

[Moogs]

Banana, this is a case of changing the rules of trade so that the actual terms of the trade are properly documented (not currently being done in these overseas markets), and in terms of the buying party demonstrating they have the assets to cover a certain margin, etc. IOW they can change the process overnight, to one that is based on fundamentals, not loopholes and gaming the system to drive up price while buying larger and larger long term stakes.

Also I got the distinct impression that the knee-jerk reaction will be for those foreign agencies to threaten departure from trading with companies and speculators here (if regulated in this way), but the one guy had it right. It's a bluff. Most of those foreign exchanges absolutely need to stay involved with US-based markets or they will lose a ton of money / opportunity. They will much sooner deal with the regulation than leave completely.

[Kickaha]

Originally Posted by Moogs Kick the impression I have is that the CFTC still has the ability -whether US speculators go to London or Dubai markets or not- to enforce certain trading regulations, such as ensuring these assholes can cover their margins, etc. They only have to account for like 6% of the amount being traded, and there's no controls on affecting behavior that needlessly drives up prices such as banks making self-serving predictions about the cost of oil, etc. If the CFTC did its job and used the powers it already has, this would reign in their ability to game the system, BUT the CFTC claims there is no need because "Dubai's regulatory system is pretty much like our system". IOW, they're trusting Dubai and London-based regulatory agencies to protect US consumer interests when they have absolutely no interest in doing so. The whole thing is a collusive effort between foreign market agencies, big banks, US speculators and in some cases those companies that control supplies of things like heating oil here in the US.

Yes, yes, and yes.

Except... the price of oil is globally set. It's not something that *we* can regulate. What do you want them to do, say "US companies will pay no more than $50/barrel!"? Great! Now our import market dries up, and we're solely internally driven. Which isn't a bad thing, IMO, but it means a major shift in our economics... which could be.

No matter which way you slice it, there's a transition coming, and it's going to hurt.

Based on a couple of the testimonies, that $1+/gallon padding could be gone virtually overnight with the controls we *could* institute, but so far the CFTC has refused. Congress now needs to compel them to regulate trades involving US companies and "product", which is what the hearing was about. This is a clear cut case

Ooooooh, I wish you hadn't said that. "Clear cut cases" on Capitol Hill tend to be PR pieces that obscure the reality. If it is truly a clear cut case, be assured legislation will be passed to obfuscate it into not being one. If it's not a clear cut case, then it will be presented as one.

of look the CFTC (or whoever controls the CFTC ultimately) looking the other way so their cronies in the industry can get as much as they can until someone cracks down, based on everything I heard. Other than Soros, who played the "it's more complicated than that" card a few times, sort of suggesting we should just live with higher prices.. the panel testifying gave very damning information about how the players in the current system continually drive up the price, without there being and fundamental economic reason to do so.

Sure there is - now the oil companies know how high they can jack up the prices once the speculation gets reigned in.

OPEC also games the system in such a way that they end up getting a nice premium but there is no means of us removing that burden based on what I heard, which where the alternative energy investment and policies come in.

Alt energy investment FTW. The rest is just pissing in the wind.

[Dave]

Originally Posted by Banana Regulators can always be bought out. Besides, high price just means more people will be conservative with how they spend for their commuting and whether they'll buy a honk-ass SUV next time.

I don't have a honk-ass SUV, I already am being conservative in my gas consumption, and prices are still killing me. Anyway you slice it, more money being spent on gas means less money I have to spend on stuff I actually want.

[Moogs]

Originally Posted by Kickaha Yes, yes, and yes. Except... the price of oil is globally set. It's not something that *we* can regulate. What do you want them to do, say "US companies will pay no more than $50/barrel!"?

No what I think is being suggested is more an issue of trade mechanics. IOW, these small-time companies trying to game the system can't just come in and buy up huge amounts of futures or whatever unless they can demonstrate that they (today) could cover the larger, more conservative margin limit being suggested, can document exactly who is buying what from whom, at what rate, etc. Right now it seems much of the speculation / price spiraling is caused by "dark market" trades where things aren't being properly documented, processes not followed etc. Just like in Trading Places... the Dukes couldn't cover their margin calls and got pwned. All right, maybe not "just like" but its a funny analogy.

I agree though that:

a) prices are going to stay above $2.50 no matter what, it's only a matter of controlling the rate at which it increases.
b) people are going to have to change their habits because the cost of everything will hinge on oil prices (food, clothes, computers...) until the demand for that oil is cut down dramatically in the transportation sector...
c)... on account of having reliable, competitive alternatives (that hopefully are less greenhouse-inducing).

d) Ethanol is a big LOSE. Have to expend more energy / oil to make and transport a gallon of ethanol than we do a gallon of gas. Plus, outrageous farm subsidies for same have side-effect of curbing food / grain supply for other purposes.

[Mugge]

In the related news: I've just heard on TV that the Norwegian oil trust is now worth the equivalent of 7 million crowns per Norwegian. However, since the money is locked in a trust, supposedly until the time that the oil runs out, the Norwegian workers are looking for a way of getting a little advance payment. So now some of the Norwegian oil workers are threatening to go on strike come Monday. This will probably give the oil another nudge upwards. It's not only the suits in London who are trying to make the most of the situation.



On a more general note, I don't think speculation will have much unwarranted effect on the long term price. In the end the oil price will be determined by supply and demand. Keeping these long term positions is not inexpensive for the speculants, so they wouldn't buy into them unless they themselves believe said positions are realistic.

The reason why Americans are recoiling in pain over the increased oil prices can be found in this Economist article. America simply doesn't put the oil it gets to good use compared to other economies. On a free market, the oil (as a constraint) will go to the highest bidder. So the key to winning is making the most of the oil you get your hands on. Or have you own oil supply.

[Moogs]

Well I don't want to get into a price pain pissing match but before it starts, we should note if taxes are removed the price of gas in Europe and the US are about the same. It's the taxes that causes the big net difference.

AFA supply in teh US, one of the senators showed some type of simple chart (in defiance of oil lobbyists who were giving him shit at some town hall meeting, saying all that's needed is more drilling licenses in the US), and it showed the last 5 years or so drilling licenses have been triple the prior numbers, and it hasn't impacted price at all. Adding US supply won't change the price. Probably because of how it's sold (or maybe put into the US reserve).

[Mugge]

Probably because whatever oil can be drilled up from under US soil is too little to affect the oil price. Unless they decide to decant Alaska. I don't disagree that the "raw" price on oil is somewhat the same world-wide. In fact, I insist it will be so. Arbitration will see to that. The reason why gasoline is so cheap in Iran is because the government subsidises it.

No pain pissing entry from me: I ride a bike, my utilities bill is fixed and Denmark is a net exporter of oil.

[Swox]

I wish our government would nationalize our oil reserves because: (a) it would piss off Albertans (and who doesn't enjoy doing that?); and (b) we'd all be rich, like Norway! (or is it Denmark?!) W00t!

We could even spend the massive $ we'd make on alternative tech, so we'd be rich forever and ever!

[Kickaha]

Yeeeeeeah, keep smoking those beaver musk glands there...

[billybobsky]

Originally Posted by Moogs d) Ethanol is a big LOSE. Have to expend more energy / oil to make and transport a gallon of ethanol than we do a gallon of gas. Plus, outrageous farm subsidies for same have side-effect of curbing food / grain supply for other purposes.

Yes and no. It depends upon the source -- creative vertical farms near major cities, for instance, could provide ethanol relatively cheaply and at a massive energetic cost benefit...

[Axl]

I'm just sitting at the back and observing these kinds of threads to digest what the smart folks have to say…

What are some arguments against nationalizing oil reserves?

[ctt1wbw]

And why does everyone blame the SUV owner? There are more cars than there are SUV's and cars need gas, too.

[AWR]

What he said.



Thanks for the blog, Moogs. Yesterday I read a rather bleak portrait of what would happen to the world economy if speculators started to move en masse to short positions on oil. I think it was Soros in fact who made this observation.

In the meantime, I can't say I will enjoy filling up a car being delivered in a couple of weeks at USD9/gallon for diesel (or USD195/tank).

[Mugge]

Originally Posted by Axl I'm just sitting at the back and observing these kinds of threads to digest what the smart folks have to say… What are some arguments against nationalizing oil reserves?

I assume that you mean "oil companies", as the oil reserves are usually given by the state as a concession that is limited to a fixed period in return for a share of the profits.

Depends on the kind of nationalisation. If you merely let the government own part or whole of the oil companies, but otherwise let the price and distribution be dictated by the market then the difference is not noticeable to the consumer (or shareholder in a partly nationalised oil company). However, if you decide on some other pricing and distribution scheme then you are essentially choosing a planned economy approach. And this would be the point where our dear Banana would point out that the persons doing the planning, most likely the politicians, would be the item some people would try to buy in order to get a better deal on the delicious oil.

Originally Posted by ctt1wbw And why does everyone blame the SUV owner? There are more cars than there are SUV's and cars need gas, too.

Maybe it's some conspiracy masterminded by Greenpeace.

[Brad]

Originally Posted by ctt1wbw And why does everyone blame the SUV owner?

Because the typical SUV consumes disproportionately more fuel than the typical coupe or sedan for their uses and the SUV owners don't need the extra capabilities of the SUV. Thus, SUVs are exceedingly wasteful in contrast to other passenger vehicles. Simple as that. Trim the fat where it's in obvious excess first.

There are more cars than there are SUV's and cars need gas, too.

The Ford F-series had been the number-one selling "car" in the USA for two decades... until we got hit with the fuel price spikes of the past couple months (from the fuel-economy thread).

[ctt1wbw]

So? I can think of NUMEROUS cars that get WORSER gas mileage than MANY suv's. Let's start blaming them.

[ctt1wbw]

Originally Posted by Brad Because the typical SUV consumes disproportionately more fuel than the typical coupe or sedan for their uses and the SUV owners don't need the extra capabilities of the SUV. Thus, SUVs are exceedingly wasteful in contrast to other passenger vehicles. Simple as that. Trim the fat where it's in obvious excess first. The Ford F-series had been the number-one selling "car" in the USA for two decades... until we got hit with the fuel price spikes of the past couple months (from the fuel-economy thread).

And here we go again with another person who thinks they are the car police. Who are YOU to say what people need in a car/suv and what people do not need? My wife and I own a business that delivers 3 different newspapers and has about 10 employees. Every single one of them has an suv or a minivan. If you want a job with us and have a treehugger hybrid, you ain't gettin employed. So yes, people need suv's to do their jobs and make money.

[Moogs]

SUVs are a bad idea fuel-economy wise and traffic-wise and people are finally starting to pick up on it. That's why used car lots are now overflowing with them and GM just shut down 4 SUV plants.

None of that is to say cars are inherently fuel-efficient or not a problem themselves. It's just a question of magnitude. SUVs make bad problems worse and for the most part they were a vanity purchase for most people, penis compensation purchase for others. YES, some people really do need their capacity, but most don't. It's just a fact. Most are driven around by suburban Moms and Dads with 2.2 kids and corporate jobs, who don't have a boat or anything else that needs towing. The end.

Of course I expect Cadillac to pick up on this vibe about 8 years from now. Meantime they'll keep selling Escalades like they're going out of style *cough*.