Joined: Dec 18, 2004 Posts: 4459 Location: One Mile From the Columbia River
Posted: Thu May 08, 2008 8:10 pm Post subject: Re: Americans to be banned from overseas oil trading
If I can't invest in oil contracts overseas I'll simply invest here. I don't see this dampening oil prices one bit. The only way to reduce oil prices is to destroy demand or increase supply. Supply is only going down... particularly supply available for export, which, regarding oil availability and price, is primarily what most of the world cares about at this time anyhow. Demand appears to be raging along strongly too.
Furthermore, at (almost) $4.00/gallon, I don't see demand shrinking one bit around here. In fact, I bet the LA freeways, for example, are more jammed with cars at 5pm today than they were five years ago at the same time of day. And next year they'll still be just as jammed with cars with gas at $5.00 or $6.00/gallon.
We'll all be watching this, of course, but my prediction is that schemes and gimmicks such as this recent silly idea coming from Congress will have no effect on oil prices. Unless something truly draconian is passed by Congress, traders will find a way to invest. It's all pretty basic. Supply is shrinking and demand is growing, therefore prices will continue to climb. _________________ Got Dharma?
Posted: Thu May 08, 2008 8:14 pm Post subject: Re: Americans to be banned from overseas oil trading
Jack wrote:
Let's see now...who really controls the oil?
KSA? Mexico? Venezuela? Russian Federation? ExxonMobile? Or some mere hedge funds and speculators?
Are we saying that KSA, with all its oil, all its resources, is less of a factor than some group of hedge fund operators? I find that difficult to believe.
^
Complete crock of crap. You don't understand how the world oil market functions. The price of oil in contracts throughout the world is set by adding a premium or discount to the price of crude on the NYMEX. The function of the futures markets is "price discovery". As of today, open interest on the NYMEX for light sweet crude is 300,000 contracts. Each contract is for 1000 barrels, and thus is worth about $124,000. Current margin requirements are about $7000 per contract, so the amount of money controlling the NYMEX light crude market is about $2.1 billion. That's a spit in the bucket for hedge funds, and shows why oil prices are so easily manipulated/buffeted by large speculators.
But hey, you don't have to believe me. Take it from the authority, Matt Simmons -- Chairman of the world's top investment bank in the energy industry:
Matt Simmons wrote:
Effectively, the changing perceptions of a small handful of speculators now appear to set the price for West Texas Intermediate crude oil, which in turn sets the general price for almost all other crude grades throughout the world.
If this is true, the world's most important commodity is being priced by a handful of hedge funds or individual speculators who, as a group, invest less than $100 to $150 million at any period of time.
Matt Simmons wrote:
For all those that fervently believe price movement always reflects fundamental changes in the physical markets, the discussion in this paper bears careful reading. Our work strongly suggest that large swings in the funds' net position in oil contracts on the NYMEX have driven virtually every significant movement of crude oil since the MG position was unwound in 1994.
Source(pdf) _________________ A periscope up every ass!
Posted: Thu May 08, 2008 8:27 pm Post subject: Re: Americans to be banned from overseas oil trading
eastbay wrote:
We'll all be watching this, of course, but my prediction is that schemes and gimmicks such as this recent silly idea coming from Congress will have no effect on oil prices. Unless something truly draconian is passed by Congress, traders will find a way to invest.
No need to stop investment. The focus should be taxing gains from investment. One idea i like is a quick and E-Z modification of the tax code, so that bone-crushing taxes are levied on capital gains from commodity speculation. _________________ A periscope up every ass!
Posted: Thu May 08, 2008 8:28 pm Post subject: Re: Americans to be banned from overseas oil trading
eastbay wrote:
If I can't invest in oil contracts overseas I'll simply invest here.
Do you suppose that's the ultimate goal here? To drive up prices on the NYSE futures market? That would encourage more people to sell their oil on the NYSE. Is this a back handed attempt to subvert Iran's proposed oil bourse for example? _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Joined: Dec 18, 2004 Posts: 4459 Location: One Mile From the Columbia River
Posted: Thu May 08, 2008 9:07 pm Post subject: Re: Americans to be banned from overseas oil trading
smallpoxgirl wrote:
eastbay wrote:
If I can't invest in oil contracts overseas I'll simply invest here.
Do you suppose that's the ultimate goal here? To drive up prices on the NYSE futures market? That would encourage more people to sell their oil on the NYSE. Is this a back handed attempt to subvert Iran's proposed oil bourse for example?
I wouldn't put it past them (Congress). It would be hilarious if this silly law caused the price of NYMEX oil futures contracts to increase! _________________ Got Dharma?
Posted: Thu May 08, 2008 9:07 pm Post subject: Re: Americans to be banned from overseas oil trading
JohnDenver wrote:
You don't understand how the world oil market functions.
And you do? They why, pray tell, are you not advising the hedge funds? Or do you have so much money you wouldn't care to worsen your tax liability with further income?
I seem to recall you didn't believe in all this "peak oil" business. So...change your mind?
Posted: Thu May 08, 2008 10:54 pm Post subject: Re: Americans to be banned from overseas oil trading
Threadbear has it right...
Quote:
Levin said the solution can be found in closing the loopholes that allow electronic traders to buy oil outside of the United States. Levin noted that the "Enron loophole" will be ended if President Bush signs legislation that Congress passed as part of the proposed Farm Bill.
The "Enron loophole" was codified in the Commodity Futures Modernization Act of 2000, allowing oil futures to be traded electronically in unregulated markets outside of the jurisdiction of the Commodities Futures Trading Commission.
Problem is that the CFTC has been forced to look the other way by this loophole.
Please review this article (dated 5/2/08 ) from Financial Sense, it goes over a Senate Investigation that was overlooked by mainstream media:
“Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC,including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called “futures look-alikes.”
The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.
The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated:
“The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.”
In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day.”
This is not to take away and freedoms. Every exchange has limits on how much anyone can buy. Everyone knows that on Wall Street if you purchase more than 6% (of the total stock issued by said company) of any company's stock the SEC will call you up and ask if you are attempting a Hostile Takeover?
By the way JohnDenver, you are off about only 300,000 "open interest". The exact number is "302673" for only June 2008 contracts.
Here is the first few lines of their table @ http://www.nymex.com/lsco_fut_csf.aspx?product=CL
Quote:
Last Open
High Open
Low High Low Most Recent Settle Change Open Interest Estimated Volume Last Updated
It's been the de-regulation that's created the possibility for these types of events to happen, both in energy and agriculture. Let's also keep in mind that those who make the laws quite often look out for their own best interests so don't be surprised to find out that someone is going to profit from this outcome. Follow the money trail folks...it usually tells the truth in politics.
Joined: Dec 07, 2005 Posts: 1865 Location: Australia
Posted: Thu May 08, 2008 11:10 pm Post subject: Re: Americans to be banned from overseas oil trading
Stopping Americans trading oil overseas would just be another curb on the small people.
It wouldn't stop the big players. They all have overseas entities that they could use for this.
In fact you can probably see an exodus of funds and financial institutes as soon as something like this is put in place. _________________ Lets take a ride, and run with the dogs tonight
In suburbia
You cant hide, run with the dogs tonight
In suburbia
- Pet Shop Boys
Posted: Thu May 08, 2008 11:11 pm Post subject: Re: Americans to be banned from overseas oil trading
Cashmere wrote:
threadbare wrote:
I absolutely believe in peak oil and think that a price in the mid eighties reflects that. Further, I think even if the price rises no further, the entire social focus will shift towards alternatives, because 4.00 per gal gasoline, is onerous for many.
Posted: Thu May 08, 2008 11:20 pm Post subject: Re: Americans to be banned from overseas oil trading
Micki wrote:
Stopping Americans trading oil overseas would just be another curb on the small people.
It wouldn't stop the big players. They all have overseas entities that they could use for this.
In fact you can probably see an exodus of funds and financial institutes as soon as something like this is put in place.
And ending apartheid, "would only hurt the blacks in South Africa"--according to Maggie Thatcher.
Posted: Thu May 08, 2008 11:23 pm Post subject: Re: Americans to be banned from overseas oil trading
smallpoxgirl wrote:
eastbay wrote:
If I can't invest in oil contracts overseas I'll simply invest here.
Do you suppose that's the ultimate goal here? To drive up prices on the NYSE futures market? That would encourage more people to sell their oil on the NYSE. Is this a back handed attempt to subvert Iran's proposed oil bourse for example?
God, SPG, have you joined the Big Oil truth movement? Sounds mighty conspiratorial!
You will be wearing mismatched socks, a tinfoil hat and trying to bend spoons with your mind, shortly.
Joined: Dec 07, 2005 Posts: 1865 Location: Australia
Posted: Thu May 08, 2008 11:32 pm Post subject: Re: Americans to be banned from overseas oil trading
Quote:
Why wouldn't stop the big players?
As mentioned, they have overseas enitites.
So Goldman for instance would simply stop trading through the US entity and continue through some of their overeas companies.
As these are overseas companies they wouldn't be stopped by a rule that prevents Americans. _________________ Lets take a ride, and run with the dogs tonight
In suburbia
You cant hide, run with the dogs tonight
In suburbia
- Pet Shop Boys
Posted: Thu May 08, 2008 11:53 pm Post subject: Re: Americans to be banned from overseas oil trading
Micki wrote:
Quote:
Why wouldn't stop the big players?
As mentioned, they have overseas enitites.
So Goldman for instance would simply stop trading through the US entity and continue through some of their overeas companies.
As these are overseas companies they wouldn't be stopped by a rule that prevents Americans.
So you think a govt who will check the heels of my shoes at the airport, can pick through the minutia about my tax situation, can surveil me picking my nose from a satellite several miles up in the sky, should they choose, can't develop IT systems and reregulate to prevent a leviathon like Sachs from breaking the law, by trying to do an end run around it?
The only thing that has been missing when it comes to reigning in corporate excess and speculation, is political will. This could change, and it may not just be political theatrics, as other govts, the Chinese and Indians for example, will have to do something, too.
It's a survival issue for govt. leaders. Reign in the crooks, or be overthrown or voted out.
Posted: Thu May 08, 2008 11:58 pm Post subject: Re: Americans to be banned from overseas oil trading
vaseline2008 wrote:
By the way JohnDenver, you are off about only 300,000 "open interest". The exact number is "302673" for only June 2008 contracts.
Thanks.
Pardon the error.
That doesn't affect my point in the slightest, however. The current total open interest on NYMEX light crude is about 1.4 million contracts. Since the margin requirement for one contract is about $7000, all of the light crude contracts on the NYMEX can be controlled for about $9 billion. For hedge funds, that is pocket change.
That's why it's very easy for hedge funds and other speculators to jack up the price of oil and other commodities.
Jack wrote:
I seem to recall you didn't believe in all this "peak oil" business. So...change your mind?
I've always believed in peak oil. It's the "peak oil is going to cause doomsday" bullshit that I don't believe in. And no, my mind hasn't changed one iota. _________________ A periscope up every ass!
Posted: Fri May 09, 2008 12:05 am Post subject: Re: Americans to be banned from overseas oil trading
threadbear wrote:
So you think a govt who will check the heels of my shoes at the airport, can pick through the minutia about my tax situation, can surveil me picking my nose from a satellite several miles up in the sky, should they choose, can't develop IT systems and reregulate to prevent a leviathon like Sachs from breaking the law, by trying to do an end run around it?
Dang threadbear, you're my new hero. Rock on! A periscope up every ass!! _________________ A periscope up every ass!
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