Posting in Government
President Obama has tasked the Justice Department with determining whether fraud or manipulation in oil futures markets has contributed to rising gas prices.
Amid rapidly rising gas prices, President Obama has asked the U.S. Department of Justice to investigate whether Wall Street speculators could be manipulating oil markets, according to reports.
The price you pay at the pump isn’t only determined by demand or what your gas station decides to charge: Wall Street plays some role in how much consumers ultimately pay.
Investment bankers make bets on oil futures, which are contracts between buyers and sellers where the buyer is speculating on whether the price of a barrel of crude oil is going to rise. The buyer receives the barrel at a fixed price.
Massive oil storage facilities cater exclusively to investment banks, which purchase the oil at the price established in the futures contract. If the price of oil rises, the bankers can make a quick and handsome profit.
In this artificial market, world events such as the recent turmoil in the Middle East affect the average price of a barrel of crude oil.
This practice has drawn the scorn of businesses, consumer advocates, politicians, and unions alike. Critics claim that bankers are making a quick profit at the expense of national interests.
Interest groups like S.O.S. Now have formed to oppose crude oil speculation. S.O.S. was formed by an unlikely collation of the aforementioned groups, which don’t normally see eye to eye.
President Obama’s interests lie -- at least in part -- in getting himself reelected. A Gallup poll from late last month found that Americans are increasingly uneasy about the state of the economy despite falling unemployment numbers and record corporate profits.
It is very likely that gas prices are a major factor in the public’s economic assessment. The average price of gas has risen 30 cents just to US$112 within the past month and nearly a dollar over the past year. Obama has given the issue of oil speculation this full attention.
"We are going to make sure that no one is taking advantage of the American people for their own short-term gain," Obama said at a rally in Reno, NV. today. Attorney General Eric Holder gave the President’s actions cold water.
"Based upon our work and research to date, it is evident that there are regional differences in gasoline prices, as well as differences in the statutory and other legal tools at the government's disposal," Holder said in a memo, the AP reports.
"It is also clear that there are lawful reasons for increases in gas prices, given supply and demand. Nonetheless, where consumers are harmed by unlawful conduct that has the effect of increasing gas prices, state and federal authorities will take swift action."
Apr 21, 2011
pauc1 (#2) and philwhite42 (#4), You guys are so funny. The price of oil is set on a world market. The US doesn't have enough reserves to seriously affect the world price of oil no matter how much we drill for it. Drill baby, drill! sounds good to the rubes like you but in the end it won't make a noticeable difference in the price of crude oil. The issue of building new refineries is another lame duck. New refineries have not been built because existing refineries have had enough capacity added to cover demand. I remember reading about a proposed new refinery neat Bakersfield, CA. The reason it was not built is because the existing refineries in the area made it clear that they would undersell the new one until they bankrupted it. It had nothing to do with environmental regulation or government permitting.
To tell you the truth what they are doing is legal. The problem is their are too many cRooks in the kitchen. Their are way to many people making money off of one product that being oil. There is just not enough money to go around, and every one is in looking for a piece of the pie. It is time to take a more direct approach. Algae to oil only $0.10 a gallon that be $55 a barrel. It can be done locally can use same infrastructure as oil. Can even take a few short cuts and have diesel at $1.50 a gallon. Its environment friendly. The technology is hear to day. Need proof. I would be glad to show you how.
What he said: ?We are going to make sure that no one is taking advantage of the American people for their own short-term gain,? Obama said. What he meant: "I did it first. How dare the market infringe on my right as dictator! What he said: "Nevertheless, where consumers are harmed by unlawful conduct that has the effect of increasing gas prices, state and federal authorities will take swift action.? What he meant: "This administration already has an unlawful long-term plan to make oil unaffordable. It's our plan. Ours! Keep your hands off or we'll make you unaffordably green, too." The price of oil is rising due to the following factors. This is an incomplete list. * Speculators, yes. Not the biggest problem. * Restricted supply and fear of further restrictions that have already been announced by oil-wielding countries, so they can fill the coffers of terrorists around the world. * Increased demand in China and India that will only accelerate. * Domestic supply that is being restricted, hampered, postponed, and taxed by unlawful and regulatory means. This is a bald-faced, calculated attack on the market by liberals to advance their insane agenda. * Devaluation of the dollar. Thanks, Fed. * Inflation. Thanks, Fed. * Larger commuting distances to find work. Keeps demand strong. * Gas-hog SUVs, trucks, and luxury cars that Americans are so in love with. Keeps demand strong. * Hypocritical government officials. I could go on all night. I don't have time. I have to find a more lucrative job to pay for higher taxes, higher priced medical insurance, and higher gas prices. Or maybe I could compromise my moral principles, become a liberal, and make everyone else pay for it.
Gas prices are going up because they are tied to the dollar, which is being driven down in value because the Federal Reserve Bank is printing trillions of worthless paper dollars. We are being robbed and then believe the robbers when they tell us they are investigating the crime. It looks like the Smart Planet is a ship of fools.
Can you spell "lip service"??? Obama is just a tool of Wall Street, except he knows what to say to the public to keep them thinking "hope & change"! I can't see how he can be sincere about stopping manipulation, when he favors Cap and Trade! Won't cap and trade amount to a regressive tax for working people while permitting the wealthy to pollute to their heart's content with so-called "green credits"? Won't it create a faux economy subject to the same speculation and rife with the sames manipulations of those that are able to game the system that he's assailing now with the petroleum market? Haven't we learned anything from the so-called "derivatives" debacle? I think I'd rather have a handful of fearful Arab sheiks squeezing me than someone like old T Boone "Swift Boat" Pickens! Is our memory that short? My biggest fear is that profiteers and carpetbaggers are going to amass wealth and power on the backs of the American public (as they always have), all in the name of the greening of America. What's the matter with re-legislating stricter anti-pollution laws and simply fining those that can't comply with the regulations? The proceeds collected could then fuel green energy research and advancement. To me, setting up an entire economy like Cap and Trade means even more money out of my pocket and into the pockets of wealthy speculators, all the while doing little or nothing to improve the environment. This should be obvious to anyone, and the fact that Obama favors Cap and Trade suggests to me that he's insincere about oil price manipulation, too.
Like I said above, in the long run we still end up paying a market price. The difference is the volatility. When the bubble bursts, we end up paying well below what would otherwise be the market price, like we did between the fall of '08 and the summer of '09. And I'm not defending volatility, either. I agree that it's harmful to the economy in that it makes it difficult to build and execute worthwhile business plans. It definitely is another factor inhibiting any meaningful economic recovery. But the "reforms" most likely batted about in Washington more resemble the price-control regime of the '70s than any healthy market reform. I'd rather have what we have now than the gas lines we had in the '70s. But the youngsters don't have any first-hand recollection of the fun that was either, so it's just as likely that we'll have to go through that painful lesson again
My biggest issue with allowing speculators into the gas market is that by doing so you guarantee that prices are going to go up at the pump because you are adding another person looking for a profit from the product. There is no incentive for these people to keep prices reasonable or stable. Yes, someone can bid the oil up to $500 a barrel and be stuck with it, but if Obama is worried about a group of people working together bidding up the price of oil from $70 to over $100 there is an easy fix. Get the speculators out of the market. The wild fluctuations in oil/gas/diesel prices have hurt many industries from airlines to freight haulers and even the mail. Part of why the smarter people in the federal government had those regulations in place was to prevent wild swings in the economy driven by rapidly changing fuel prices. Stable prices lend to having a stable economy. The old system had been in place for decades and had worked. Why allow Congress to change things when something works? Just like they repealed Glass, Steagall after it kept banks out of trouble for over 70 years. Look at what happened within a few years of the repeal.
Of course, speculation takes place, as it does for all commodities. But the only true effect of the opening up of oil markets to speculation is short-term volatility. Speculators can bid the price of oil up to $500-a-barrel if they really want to, but at some point someone blinks, the bubble bursts and the price falls back well below the long-term baseline until someone gets the nerve to bid up again. The reality is that there would be very little demand for $500-a-barrel oil, and whoever gets caught holding the contracts when the bubble bursts gets skinned. It always corrects, and nobody else cries when that happens. What the bubbles do allow is for hypocritical politicians to pontificate and the awfulness of it all, and use it as justification for more market meddling to fix it. For example, progressives have been arguing for decades that they wish that American consumers would be forced to pay for fuel what most European citizens do; typically more that $6/gallon. And yet look at them decry the situation when gas gets to be near $4! What's the deal guys? You'd think they'd be pleased that the high prices consumers are now facing are pushing American's into considering ditching their SUVs for Volts.
Drill baby, drill! What a hypocrite Obama is. Stop restricting where we can drill for oil. Look in the mirror Barry if you want to see the problem.
Why is Obama pretending to do anything about these gougers? He knows he isn't going to CHANGE anything for the better with this investigation.
The biggest factor in the gas prices is the US govt. With different requirements across the US the costs of refining are increased. With the problems of permitting, a new refinery is difficult. And above all, the idiotic restrictions on drilling onshore, offshore, and in Alaska make the us SUCKER BAIT for OPEC. Look at "speculators" if you wish, but Mr. President, look in the mirror first.
What is going on right now with gas prices should be a crime, but the US government legalized it. Prior to Clintons second term the only companies allowed to buy gas futures were the regional distributors and major businesses that depended on large amounts of fuel at stable prices. Transportation industries like trucking, trains, air lines, shipping firms, etc or power generation companies. These industries had a vested interest in keeping prices low so you never saw wild speculation driving prices. If a conflict dried up oil supplies the price spike would gradually move through the system until weeks later the more expensive oil showed in gas prices at the pump. Clinton opened the gas futures markets to a select few hedge funds in return for campaign support. Bush expanded the list a few times after each of his elections. Under Obama the market has become a free for all with any person with cash being granted permission to speculate. Literally a friend of a connected person with $10 million in the bank can get permission to buy gas futures. By allowing these vultures into the market the US government has allowed another layer of profit taking to be inserted between the oil well and the gas pump. Any time you add a layer to a business process you add cost that is passed onto the consumer. The easy fix is to kick these vultures out of the market and get rid of this 21st century version of the Tea Pot Dome.