Well, Look What's Driving Up Oil Prices

Oil Prices Spike Exacerbated By Wall Street Speculation, Federal Reserve Study Finds

WASHINGTON -- Two economists at the St. Louis Federal Reserve have published findings that indicate that Wall Street speculation is responsible for 15 percent of the increase in oil prices over the past decade, a finding with significant implications for the recent sharp rise in gas prices.

While politicians have little ability to alter the price swings of commodities like oil, regulators have both the authority and policy tools to do so. The Commodity Futures Trading Commission is responsible for overseeing the financial market for oil. The 2010 Wall Street reform bill gave the CFTC new power to limit excessive speculation, but the rule will not go into effect until later this year.

According to St. Louis Fed economists Luciana Juvenal and Ivan Petrella, speculation in oil markets was the second-biggest factor behind the past decade's price run-up, behind increased global demand for oil, which accounted for 40 percent of the increase.

"Speculation was the second-largest contributor to oil prices and accounted for about 15 percent of the rise," the economists wrote. "The effect that speculation had on oil prices over this period coincides closely with the dramatic rise in commodity index trading -- resulting in concerns voiced by policymakers."

http://www.huffingtonpost.com/2012/03/2 ... f=business

You can hear the surprise in *MY* voice...

I already posted this weeks ago in the other gas price thread. <!-- l --><a class="postlink-local" href=" 285bound.com/Forums/viewtopic.php?f=6&t=18474&start=40 " onclick="window.open(this.href);return false;">viewtopic.php?f=6&t=18474&start=40<!-- l --> Besides you didn't bother to read the whole article. I wouldn't mind some reasonable limits on the size of positions and less leverage, it needs to be regulated by the CFTC, along with other strategic commodities.

The most recent Fed study concludes that economic fundamentals are still the primary determinant, saying only that speculation can "exacerbate" price swings.

"Global demand remained the primary driver of oil prices from 2000 to 2009," Juvenal and Petrella wrote.
....Speculative demand can and did exacerbate the boom-bust cycle in commodity prices. Ultimately, however, fundamentals continue to account for the long-run trend in oil prices.

What is causing speculators to buy oil futures? An administration that has shut down drilling in the Gulf of Mexico, cancelled pipelines, and further reduced oil supplies to American consumers.
If speculators believed Obama supported increased oil drilling, and supported the Keystone pipeline and was reducing tension in the Middle East, they would be selling oil futures, not buying.

One again LJ, please read an Economic 101 text book before you read the journalism dropout students of the Huffington Post.

Joe- we can read it for her- but we can't make her understand it.

LJ still wont acknowledge that Obama's policy on energy has contributed to the high prices. LJ still can't admit that de-valuing the dollar has anything to do with it too.

Speculators may exacerbate the situation in the very short run as prices go up- but they also may exacerbate the situation as prices fall too! The overall affect is pretty much zero.

Right now- a tight demand structure is being cited as the main reasons- Obama could have eased that by allowing the supply to be increased- instead he has fought any efforts to expand the supply.

"We expect fundamentals will continue to tighten during 2012,"

"The seaborne oil market is extremely tight," says one bullish hedgie. "As much as the politicians love blaming speculators, if the market was up on speculation and not fundaments, the physical market would be trading at a discount."

http://finance.yahoo.com/news/oil-prices-200-barrel-think-175303270.html

I suspect its the Huffing and Puffing post panicking and trying to deflect blame for high gas prices away from Obama. Must be some new polling data showing voters are getting ticked off. LOL I guess their $20/week payroll tax cut disappeared at the gas pumps.

I won't admit that Obama's policies have added to energy prices until you guys admit that Bush's policies did the same thing in 2008.

And save your insults over "Economics 101" for someone who gives a sh*t. When the Federal Reserve says the speculators add 15% to the price, and that's second only to the 40% run-up from GLOBAL increased demand, you can take your snark and shove it.

But you guys keep regurgitating your right-wing talking points... I'm sure there are some dummies out there who believe it.

That's exactly what is going on- the Obama administration has all their flunkies out in force - trying to deflect the blame to "ABO" - anyone but Obama.

I'm starting to change my mind about high gas prices- in fact I think I'd like to see them go through the roof this summer......

Till- lets say the first Tuesday in November!!

If the oil futures go up when Iran threatens to shut down the strait it's because the speculators are looking to lock in a much lower price for the oil than would be the case if the strait actually gets shut down. 15% is nothing compared to what the cost per barrel would jump to overnight if the strait does get shut down. At that point we would all be thanking our lucky stars that someone speculated on the future price and that we could buy the oil at that significantly lower price than we would otherwise have the opportunity to pay. If the strait isn't closed, and supply increases such that the speculator loses money, no one is going to shed a tear for them, but we are all going to be pretty thankful that the price goes up gradually rather than doubling overnight if the opposite happens and I'm betting that LJ and her professional "progressive" scape goating pals wouldn't be sending them thank you cards under that scenario either.

Shall we comb the archives to see what "progressives" were saying about the price increases four short years ago and compare that to what the "progressives" are saying now? I'm guessing they won't really like having that done for some odd reason and I don't think the "change" between then and now would be because they've become more enlightened as to how future markets work over the course of the last 4 years either.

LadyJazzer wrote: I won't admit that Obama's policies have added to energy prices until you guys admit that Bush's policies did the same thing in 2008.

If it was Bush's policies, we'd admit that they were the cause, but that wasn't the cause back then. Back in 2007-2008 the cause of the increase wasn't an interruption in the supply, or the threat of an interruption in the supply as it is now. When Bush was president the average growth of the global GDP was averaging 5% a year and demand was growing faster than the supply was. High demand and low supply equals a high price - that's what anyone who was paying attention in Econ 101 learns. The current spike in prices is due to fears of an interrupted supply, not an inability for the current supply to meet or exceed the existing demand. If we had been engaged in making sure that there were reserves outside of the Middle East that could be used if supply from the Middle East was interrupted, we would not be seeing this price increase. Obama's policies, and those of the Democrats, has been to restrict the ability to find those reserves, or to begin action on developing them, for the last 6 years. They stopped the drilling for oil in the Gulf, they refuse to allow drilling in ANWAR, they are tying up the fracking to increase production in existing wells with rules, regulations and court cases - all of which lower the reserves and which make any interruption in the supply a more serious affair than it otherwise would be.

speculation in oil markets was the second-biggest factor behind the past decade's price run-up, behind increased global demand for oil, which accounted for 40 percent of the increase.

Grady For Elk Creek Fire wrote:

speculation in oil markets was the second-biggest factor behind the past decade's price run-up, behind increased global demand for oil, which accounted for 40 percent of the increase.

Great point! When you have hundreds of millions of new car owners in India and China, you have to increase oil exploration just to keep oil prices stable.