Obama's refusal to get tough on oil speculation biting him in the a$$?

[brentspeak]

It's clear that speculation is a major factor in the rising cost of fuel at the pump. However, in October of last year, Obama's CTFC (Obama's people have the 3-2 majority on the commission) apparently buckled to lobbyist pressure, and imposed weak position limits on energy futures markets.

As Bernie Sanders noted at the time:

http://thehill.com/blogs/e2-wire/e2-wire/188239-market-regulators-impose-oil-speculation-curbs

In a statement, the liberal senator called the rules a “positive development” but said they’re too weak.

“Under this rule, a single Wall Street speculator will still be allowed to hold positions equal to 25 percent of the physically deliverable supply of crude oil, gasoline, and heating oil. That’s not enough,” Sanders said.

If Obama doesn't want voters to see national averages of $4-$5 at the pump by the time Election Day comes around, he needs to (for once) tell his financial industry buddies to "stuff it" and get the CTFC to narrow the position limits to somewhere around 5%.

[uponit7771]

1. Don't we have enough of the GOP blaming him for high prices too?

Anyway hopefully its just timing, let the whaling and knashing of teeth get to peak and dump oil on the
...market from reserves along with gasoline and then watch the speculators faces melt daily as prices go down.

Then scream to high heaven what he did just to make sure people know that it can be done while watching GOPers claim "free market"

[TheWraith]

2. To some, anything other than beating futures traders to death in the streets is "weak." nt

[unionworks]

10. strikes me as strange

To see some defending bleeding the 99% dry on this site. Oh, you got payroll tax cuts passed? No problem, we jack up prices at the pump and take itright back off of you.. Suckers.

[Better Believe It]

21. Good point! One can't propose curbing oil speculation without curbing such speculation!

Do you know of another way?

[sudopod]

56. Hyperbolic posts like this are why no one takes you seriously. nt

[girl gone mad]

3. Have you seen this report from McClatchy?

WikiLeaks: Saudis often warned U.S. about oil speculators

WASHINGTON — When oil prices hit a record $147 a barrel in July 2008, the Bush administration leaned on Saudi Arabia to pump more crude in hopes that a flood of new crude would drive the price down. The Saudis complied, but not before warning that oil already was plentiful and that Wall Street speculation, not a shortage of oil, was driving up prices.

Saudi Oil Minister Ali al Naimi even told U.S. Ambassador Ford Fraker that the kingdom would have difficulty finding customers for the additional crude, according to an account laid out in a confidential State Department cable dated Sept. 28, 2008,

"Saudi Arabia can't just put crude out on the market," the cable quotes Naimi as saying. Instead, Naimi suggested, "speculators bore significant responsibility for the sharp increase in oil prices in the last few years," according to the cable.

What role Wall Street investors play in the high cost of oil is a hotly debated topic in Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.

Read more here: http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-saudis-often-warned.html#storylink=cpy#storylink=cpy

Not only has our government refused to crack down on the speculation, they've repeatedly propped up the speculators with bailouts, handouts, cheap pools of money, quantitative easing, etc. Of course the banks would go right back to doing what they were doing in 2008. What else were they going to do? Vanilla retail banking is boring and the carcass of our middle class had already been picked clean.

[BadgerKid]

35. +1. n/t

[woo me with science]

74. +10000. nt

[ProSense]

4. It

"Obama's refusal to get tough on oil speculation biting him in the a$$?"

...would help if people paid attention to things that are happening. The President is addressing oil speculation.

Finally, after many delays, the government board responsible for regulating commodity futures markets finalized a rule in October to limit speculation, a power it was given by the Dodd-Frank Wall street reform law. However, the rule won’t go into effect until next October, as the Commodity Futures Trading Commission (CFTC) needs to collect “one year of interest data” first. The financial industry is fighting the new rule, but just today, the CFTC took action against a company in different market, providing an example of how the energy regulation can effectively work.

http://www.democraticunderground.com/1002340540

CFTC fines New York firm $140,000 for violating spec limits
http://www.futuresmag.com/News/2012/2/Pages/CFTC-fines-New-York-firm-140000-for-violating-spec-limits.aspx

[SunsetDreams]

5. Thanks for those facts

[babylonsister]

6. Thanks, Pro... Oh, those pesky facts! nt

[MrCoffee]

7. $140k in fines on a firm with $30 BILLION in assets

That'll teach them.

[ProSense]

9. Yeah,

"$140k in fines on a firm with $30 BILLION in assets That'll teach them."

...this is always the case with fines. I would like to see the fines for speeding increased to say $2,000. Do you think that would stop people from speeding?

What amount would you have fined them, and the justification?

[MrCoffee]

12. $1,000,000 and 10 years in prison, per 7 USC 13(a)(2)

The statutory penalty for felony attempt to manipulate the price of a commodity.


http://www.law.cornell.edu/uscode/text/7/13

[ProSense]

14. Well,

"$1,000,000 and 10 years in prison, per 7 USC 13(a)(2)

The statutory penalty for felony attempt to manipulate the price of a commodity."

...you could petition to have them charged with a felony. Be sure to present the evidence.

[MrCoffee]

16. That's what I said about the national mortgage settlement!

Funny how that works...

[girl gone mad]

18. People make money from the act of speeding?

Your analogy might work if it you made it small fines for speeding given to Nascar drivers after their races.

Speculators make gobs of money in these markets. Small fines will not deter them.

[ProSense]

20. The

People make money from the act of speeding?

Your analogy might work if it you made it small fines for speeding gives to Nascar drivers after their races.

Speculators make gobs of money in these markets. Small fines will not deter them.

...analogy works fine: a penalty is a penalty.

Also, that's "gobs" minus $140,000 for this company.

In any case, I see that the focus is on the fine while ignoring the larger point: speculation is being address as part of the implementation of Dodd-Frank.

[MrCoffee]

22. You brought up the fine. Why?

[ProSense]

24. I

"You brought up the fine. Why?"

...brought up the fine and Dodd-Frank, both are relevant.

[brentspeak]

32. You

"brought up" Dodd-Frank without addressing the pertinent point of the OP -- that Obama's CTFC voted to impose only a token 25% position limit on energy contracts. And your own link mentions that even that harmless stab at energy market speculation won't go into affect until October, 2012 (not that such a generous allowance to the financial institutions would do much to stem their rampart market manipulation, anyway).

Very sporting of you to shoot your own posts in the foot. Thanks.

[ProSense]

33. Well,

You "brought up" Dodd-Frank without addressing the pertinent point of the OP -- that Obama's CTFC voted to impose only a token 25% position limit on energy contracts. And your own link mentions that even that harmless stab at energy market speculation won't go into affect until October, 2012 (not that such a generous allowance to the financial institutions would do much to stem their rampart market manipulation, anyway).

Very sporting of you to shoot your own posts in the foot. Thanks.

...the rule you consider "token" is being challenged in court.

Wall Street Groups Seek to Delay CFTC Limits on Speculation

By Tom Schoenberg

Two Wall Street groups asked a federal judge to delay a U.S. Commodity Futures Trading Commission rule that limits speculation, saying the regulation is already imposing “significant, irreversible costs.”

The International Swaps and Derivatives Association Inc. and the Securities Industry and Financial Markets Association filed a request yesterday with U.S. District Judge Robert Wilkins in Washington, urging him to put the rule on hold while he considers their legal challenge.

<...>

The groups, in one of the financial industry’s highest- profile efforts to weaken 2010’s Dodd-Frank law, filed lawsuits in two federal courts in Washington in December challenging the rule setting caps on the number of contracts a trader can have.

<...>

The rule is among the most controversial provisions of Dodd-Frank, and spurred more than 13,000 public comments to the CFTC from supporters including Delta Air Lines Inc. (DAL) and opponents such as Barclays Capital. The agency voted 3-2 at an Oct. 18 meeting to approve the final regulation, with Jill E. Sommers and Scott O’Malia, both Republicans, voting in opposition.

- more -

http://www.bloomberg.com/news/2012-02-08/wall-street-groups-seek-to-delay-cftc-position-limits-rule-1-.html

[brentspeak]

37. Therefore, we're to take it that you

buy the financial industry lobby's bogus position that a meaningless 25% position limit not yet in effect is already imposing "“significant, irreversible costs" to the industry?

[ProSense]

45. I

"Therefore, we're to take it that you buy the financial industry lobby's bogus position that a meaningless 25% position limit not yet in effect is already imposing "“significant, irreversible costs" to the industry? "

..don't have to "buy" anything, but I'm sure that for you this effort is proof that they love it!

[unionworks]

8. it apparently isn't enough

Fining one firm isn't going to do anything.

[ProSense]

11. The

"it apparently isn't enough Fining one firm isn't going to do anything."

...fine is what it is, but the additional point is that Dodd-Frank addressed speculation and the rule-making is in process.

[girl gone mad]

27. This law the CFTC used has been in place since 1936.

http://en.wikipedia.org/wiki/Commodity_Exchange_Act

Who knows why they decided to start enforcing it a little bit yesterday, but it has nothing to do with Dodd-Frank.

[ProSense]

28. Wait

"Who knows why they decided to start enforcing it a little bit yesterday, but it has nothing to do with Dodd-Frank."

...who said it did? Maybe you shoud read the original comment: http://www.democraticunderground.com/?com=view_post&forum=1002&pid=344265

[girl gone mad]

29. You keep bringing up Dodd-Frank.

The fact is, we've had laws in place to limit speculation for decades. The laws are not enforced.

It's highly doubtful the additional Dodd-Frank limits will ever see the light of day, but they do nothing to address speculation since the problem has never been an insufficient legal framework with which to pursue market manipulators.

[ProSense]

30. Yes

"You keep bringing up Dodd-Frank."

...it was part of my original point: http://www.democraticunderground.com/?com=view_post&forum=1002&pid=344265

[brentspeak]

38. And you keep waltzing around

the key point that a mere 25% position limit will do nothing to curb energy market manipulation via speculation.

Quit while you're behind?

[ProSense]

46. Why

"And you keep waltzing around the key point that a mere 25% position limit will do nothing to curb energy market manipulation via speculation."

....would I need to "keep waltzing around" your opinion? Here's what it will do: work a lot better than simply fining them $140,000.

[DCBob]

13. +1

thanks for the facts.

[AtomicKitten]

34. But Cantor promised ...

[Oasis_]

15. What happened later in 2008?

That's right. The price of oil absolutely crashed and the speculators took a huge bath. The market will self-correct this bubble as well. Because it's not driven by increased global demand, the correction will come much sooner than later and prices will return to their true values.

Rounds of quantitative easing has surely served to exacerbate the problem, but in the end all of the data strongly infers lack of global demand, therefore the prices will reflect it much sooner than later. Once the bubble bursts, we will enjoy oil at a price below its true global value for a period time.

Oasis

[Andy823]

17. Well...

Not before the greedy bastards, speculators, make a killing, and that is the big problem. We do need to stop them with tougher and tougher laws to prevent this from happening. Problem is that now with republicans in charge of the House, nothing is going to get done about it.

I hope the bubble busts soon, and all the speculators lose their shorts because they got to damned greedy, again!

[girl gone mad]

23. We don't have a self-correcting market..

we have a perpetual bailout machine for the financial oligarchs. Few traders would have taken a bath in 2008 since they flip these contracts very quickly. They are essentially getting in the middle of transactions which would would happen whether or not they are involved, but they lean on the demand side to drive up the price. They are rarely left holding the bag, but rest assured that if they are, they will simply socialize the losses via some newfangled government program or just steal money outright a la MF Global.

[Oasis_]

39. Good point

However commodity speculation has lots of positives as well. It gives large purchasers (such as airlines) a healthy degree of stability knowing what their fuel costs will be over a pre-determined period of time.

To your second point, this is exactly why bailouts should never happen in ANY industry (I would argue instead for bridge loans in the relatively few instances it's justified)

The largest financial institutions now realize that government is there to bail them out if their bets turn sour--a horribly counter-productive disincentive to true free markets.

We averted lots of relatively short term pain with this, but the long term consequences are just as harmful.

[villager]

19. You can't pretend to be populist while buckling to the corporate owners of your political party

...and we're approaching crises-points-of-no-return where -- should Obama be returned to office -- he'll have to choose one or the other.

[woo me with science]

72. He chose sides a long time ago.

The populist rhetoric is insulting as hell.

[cherokeeprogressive]

25. Does the 100,000,000+ gallons of gas, diesel and jet fuel we export PER DAY

have anything to do with it, or is it ALL speculators?

http://news.yahoo.com/first-gas-other-fuels-top-us-export-200739553.html

[FarCenter]

26. How does Obama get tough with Swiss trading companies trading oil in London?

The price of oil is largely determined in markets outside of the United States, and the traders are companies domiciled outside the US as well.

[Ikonoklast]

31. Seal Team 6.

You just have them shoot anyone wearing a Bowler hat walking around The City.

[brentspeak]

41. Most of the speculation originates on Wall St.

Meaning, mostly US-based investment houses. They have the most capital to swing the markets in volatile fashion.

http://www.cbsnews.com/2100-18560_162-4707770.html?pageNum=2&tag=contentMain;contentBody

[FarCenter]

48. Meet The Mysterious Trading Firms Who Control The Price Of Commodities

http://www.businessinsider.com/presenting-the-worlds-16-largest-commodity-traders-2011-10?op=1
Vitol
Glencore
Cargill
Koch Industries
ADM
Gunvor
Trafigura
Mercuria
Noble Group
Louis Dreyfus
Bunge
Wilmar International
Arcadia
Mabanaft
Olam
Hin Leong

American banks participate in running the casino. The guys in the list above place the bets for themselves and the big bettors. Who the big bettors are -- who knows?

[Hotler]

36. Obama getting tough! Bwaaaahahah! Call me when he finds a spine.

Banksters still walking free. Our president doesn't do tough.

[babylonsister]

40. Call ME when you figure out who could do better. Who are you rooting for? nt

[Hotler]

50. I'm not rooting for anyone. I'm registerd Dem, always have been....

and I'll vote dem. Because of that I do not think I have to toe the line and believe that Obama can do no wrong. The man has no fight. He lets the repugs walk all over him . Our elected Dems let the repugs walk all over them also. Sure we don't have the vores on the hill, but that is no reason not to act tough and fight back and call the repugs out for their shit. Is it to much to ask that the man throw the Wall St. crooks in jail? Cheney had no problem telling dems to go fuck themselves. Obama could to the same.

[New Yawker]

59. I'm a Dem also..

And I can't stand Obama for some reason... let me think... he toes the corporate line more than the Republicans and favor the Republicans a little bit more.

I want a President who will move the direction AWAY from what the current direction is.

Here's what I want in a President (and I know I won't get it all):

1) Ending the Afghanistan war and drawdown in less than 3 months (yes, it'll cost more for a bit, but after that $0 on Afghanistan)
2) Ignores all right-wing lies and points out the facts on NATIONAL TV
3) Speaking of TV - introduce a new bill that will regulate the media and give it a balance. Cut off Fox, or put on Fox Left. (Whatever that may be). Same for Rush - put on a counterbalance and let the people listen to the truth and decide which one is better.
Right wing hate radio/TV is what is killing America today.
4) Ending the War on Drugs, declaring it a massive failure - legalize marijuana and promote it as a cash crop (believe it or not, this is what we really need right now - this helps create jobs up to the wazoo)
5) Release all drug-related non-violent offenders - they are a waste of resources and should be focused on the real criminals - namely Wall Street speculators and bankers.
6) Declare that all financial records and credit records will be destroyed and forgotten and America will have a chance to start fresh on credit. If one company is caught trying to access credit records to check on rating for a job, then the company is forced to hire that person, regardless of credit history, and pay that person $5,000 penalty.
7) Due to illegal speculation, order that Amercians 99%'ers will get an additional $15,000 per year for living wages, force Congress to pass legislation that will always provide for a safety net, including living wages and Medicare for all. At 10% copay, not 20% - again, punishment for insurance companies, and cut the middleman out - let the insurance deal with other things - like home, auto, life insurance.
8) COLA kicked up to 200% for SSA - and to pay for it, issue a permanent 25% surtax on all assets on the 1% on top of the taxes. If the 1% doesn't want the 25% surtax, then they need to open up their business to create additional jobs.
9) Declare the Citizen United as unconstitutional, and order Congress to amend the Constitution to permanently put CU out of business. Equal time for ads, debate, and force all candidates to fly commercial. Let them get to know the people, not insulate themselves from the people.
10) You add your own!

[AnotherMcIntosh]

53. He doesn't do tough? He does with liberals and progressives.

To quote Rahm, his former chief-of-staff, "Where else they going to go?"

[bhikkhu]

42. If you define "major" as 5 or 10 percent, sure

...but that leaves 90% of the cost of oil to production costs, refining costs, transportation costs, and the inevitable effect of an economic recovery on price.

I'd take the "evil speculators!" line more seriously if someone could explain how you can portion out how much is speculation and how much is the simple result of increased demand on a finite supply.

If people - the end users - are willing to pay that much all around the world for all the oil and gasoline that the world can produce, then what are we supposed to do about it? In the last ten years that I can recall, the only thing that brought down the price was recession.

[Vincardog]

63. Demand is down. Gas cost me $1.25/gallon last Feb in Quito and $3.50 gallon the same day in Miami.

[bhikkhu]

65. Demand is up, and the price of gas in Quito is heavily subsidized by the government.

The article that's from is worth reading if you want to get up-to-date: http://theshortsideoflong.blogspot.com/2011/06/crude-oil-demand-growth-for-2012.html

[Vincardog]

66. in the USA.

[bhikkhu]

67. Without tariffs and nationalized oil holdings, there is no US oil

...its all global market. All the oil pumped out of the ground here is sold on open markets. All the gas refined here is sold on open markets. For better or worse, the cost of transport is dirt cheap, there aren't any barriers to export, and everybody's money spends the same.

[Vincardog]

68. In a neo-liberal world

[bhikkhu]

69. I have no idea what that means.

I suppose I could google it or something, but labels (which might be intended to make things simple and self-explanatory) too often just end discussions, polarize people, and close minds.

I try to avoid labels, and to think things out for myself without them.

[cbrer]

43. How can one expect

The market to stabilize/normalize in the face of speculation, and the fact that oil companies are heavily subsidized?

All "Free Market" mechanisms are short circuited. It's hard to believe that those involved with this discussion can discuss the current situation, it's past, or it's future without admitting the need for serious legislative intervention.

Absent this, all other forces combine to a perfect storm of sorts that in addition to funneling profits to these mega corpowads, and adding to our burgeoning pollution problem, are RETARDING the development of alternate energy sources which we are paying for already.

Can anyone suggest a realistic method for halting this rape?

Especially with the current power structure in place?

[Oasis_]

44. We still consume far more

than we produce. 25% of the world's production is consumed in the United States. If we simply decided that we're not going to sell on the global market others would follow suit and the remaining oil would sell at a premium--causing prices to absolutely skyrocket as we cannot possibly produce domestically enough to meet our demand.


We completely blew a golden opportunity 35 years ago, as had we went down the road Carter had advocated we'd be infinitely ahead, but now prices are going to force us to re-examine our strategies.

[Sarah Ibarruri]

47. It will. His forte is doing nothing and allowing things to happen...

but that won't work with oil. Oil runs everything, and it's destroying our people to be paying these prices to keep the mega-rich living ever-better.

[Spider Jerusalem]

49. Well no, actually, it's not at all clear speculation is behind the rise in oil prices.

See here for an analysis of the price spikes in oil in 2008 which many have blamed on speculation: http://www.dallasfed.org/research/eclett/2011/el1111.html

And the linked piece is extremely weak because it neglects the simple fact that while demand for gasoline and oil in the US may be down compared to 4 or 5 years ago, worldwide? It isn't. You can't say "well demand is down IN THE US" and expect prices to magically lower, not when you're talking about a global market with global demand at near-record levels, and not when the US imports more than half of the oil it uses. Refined fuel is delivered to retailers on a "just-in-time" basis. If this gasoline is being exported from the US to Mexico, the Caribbean, China, etc? It's being used; they're not stockpiling it. The author also commits a pretty fundamental error in claiming that Brent crude trades at $10 a barrel more than oil from the Gulf of Mexico; it doesn't. The price range of Gulf crude oils has been tracking Brent for a while now. As has the price of most of the oil that's imported into the US. As have oil prices for almost all grades of crude oil worldwide. So the price of oil is not $108 a barrel, or whatever it is today, it's $125. I invite you to look at the average gasoline price from 2008, when oil was in the $115-125 range; compare that to the average price now with oil at about the same level. Here, I've done it for you; $118 a barrel, 25 April 2008...average pump price for one gallon of unleaded = $3.50. (links for that data here because the formatting is broken: http://bit.ly/as2QhY and http://bit.ly/AkdTl7 ).

If you want to know what's more likely behind the sustained rise in oil prices...it's increased demand and the lack of supply capacity. And things are very probably going to be this way for the foreseeable future (or, there'll be another economic collapse due to unsupportable energy costs, and massive demand destruction, and then a recovery that leads to the same thing happening all over again).

[WI_DEM]

51. I don't know about that but your biting him in the ass again

Oh well, who cares, right? there is no difference between Obama and one of those republicans, right?

[AnotherMcIntosh]

55. Well I, for one, am glad that he's doing something that makes him different from the Republicans.

[krshnbrn]

52. 4-5 a gal.

If Obama doesn't want voters to see national averages of $4-$5

Way too optimistic, imho. 8-10 once the next war starts.

[spanone]

54. once the next war starts....that'll be when the thugs regain the white house

[mistertrickster]

57. He should sell part of the oil reserve and

burn the speculators at their own game.

Nothing will stifle speculation faster than highly leveraged gamblers losing tons of money.

[gulliver]

71. I'll bet he actually does that.

It will be interesting to see the Republicans arguing against doing that.

[benld74]

58. Easy peasey - Change the 25% rule to NO TRADING AT ALL

[librechik]

60. US lost the opportunity to regulate oil as a commodity back in 2006--what did we expect

when we got handed an oil man for President?

http://bit.ly/zkVW58

[dmosh42]

61. It's right out in the open now! Nobody on consumers side in our government!...

The media has a hard time explaining this one, and the biggest buyers of crude is Goldman, Sachs, and Morgan Stanley. Not American airlines, or truck companies or other actual users. All the scumbags are bought!

[just1voice]

62. It's biting us in the ass, we all have to pay for it

Obama is a big bank tool, just look at his cabinet and advisers. The problem with American politics is that most politicians are big bank tools, our system is corrupt throughout. It is clear that Obama will not appoint an attorney general that will go after any banking criminals in any meaningful way but in our corrupt system the bigger question is: who would get to be prez that would go after banking criminals and put them on trial for their crimes?

Answer: no one, we are a corrupt country.

[B Calm]

64. If the republican congress does nothing

about it, maybe we should nationalize the energy industry. . .

[Black and Gold]

70. How do you guys explain

the fact that the only commodity where speculation is banned, onion speculation, there is much more volatility?

[girl gone mad]

75. Why would anyone bother wasting time on such a silly comparison?

[rdking647]

73. one problem with this.

lets say he did it tomorrow and teh sec limited position to 5%. brent crude in londodn has no such limit. so someone could jack up the price of brent. (which is already happening). that would cause us crude to rise as well as people played the spread.