Obama blames speculators for high gasoline prices

[Brian4Liberty]

Do you honestly think that goldman,jpm, and other big banks are speculating on the price of oil? I can assure you that the big investment banks are neutral to changes in the price of crude for the most part. The reason being is that most of their trades are taking the opposite side of their clients who wish to hedge with the Bank.

If they are not involved at all in oil trading, why would JP Sachs and friends have special exemptions from the CFTC when it comes to trading commodities (including oil)?

Some lawmakers have targeted Goldman Sachs Group, Inc. and other investment banks that have received exemptions from speculative position limits.

http://www.marketwatch.com/story/deutsche-commodities-fund-loses-cftc-exemption-2009-08-19

NEW YORK (MarketWatch) -- Goldman Sachs Group, already under fire for reaping record trading profits in the aftermath of the financial crisis, is now fighting to defend one of its biggest sources of revenue -- commodities trading -- with regulators considering setting limits on Wall Street speculators.

Representatives of the firm, along with those of other big investment banks, are scheduled to appear at a series of hearings held by the Commodity Futures Trading Commission starting Tuesday -- part of the Obama administration's biggest move yet to clamp down on commodities speculation, which has roiled the prices of everything from oil to corn and wheat in recent years.

http://www.marketwatch.com/story/spotlight-on-goldman-as-commodities-hearings-begin-2009-07-28

 

[ILUVRP]

you can bet everything you own that these guys are pumping the commodities markets , one thing to remember , unlike stocks when any commodity hit a new high every short contract ( same # short as long ) is loseing money , the longs with their 5-10% margin just press up the bets, shorts have to cover , its like a big snowball, it feeds on its self. its not against the law to make money this way . i just say if Washington wanted to do anything about it , all they have to do is raise margins to 90% , how would this hurt any American, airlines can afford to pay 90% to headge their fuel ,think about it when you pay $5/gal gas and fund more bad arabs .

i will add , do you really think that if i were a heavy hitter , went to goldmansucks and said " but 5000 december crude oil contracts at the mkt " that gms would offset my trade , they can't , they are not a bucket shop yet ( ?). they would have to go on the mkt and short 5000 contracts, so now they would be short 5000 contracts .

 

[ItsTime]

ANNANDALE, Virginia — US President Barack Obama blamed oil "speculators" on Tuesday for soaring gasoline prices that risk weighing down the US recovery and could dampen his 2012 election hopes.

"It is true that a lot of what's driving oil prices up right now is not the lack of supply. There's enough supply. There's enough oil out there for world demand," Obama said at a campaign-style event not far from Washington.

"The problem is, is that oil is sold on these world markets, and speculators and people make various bets, and they say, 'you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply,'" he said.

http://www.google.com/hostednews/af...ocId=CNG.c2bfdeae6f04b1a245a230bead308a7a.441

Well which is it Obama, in 2010 you claimed the world consumed more oil than it produced. Now he is claiming there is enough?

http://finance.bnet.com/bnet/news/read?GUID=13488595

And if it is not sold on world markets, how does he think it should be sold? or does he think we should just steal it?

 

[ILUVRP]

i know that in the 70's before future mkts in crude oil , just supply and demand , the world price of crude was $8/ba
We tried stealing it in Iraq , didn't work

i would add about goldman , if i gave them a order to buy 5000 contracts of crude at the mkt , it would move the price of crude up , goldman would front run it ( buy before my order , then sell on the raise )

 

[jclay2]

If they are not involved at all in oil trading, why would JP Sachs and friends have special exemptions from the CFTC when it comes to trading commodities (including oil)?

I didn't say that they do not trade. I said that they are for the most part neutral to a change in the price of oil. When an airline or other major of user wants to hedge their oil production, they go to a bank like jpm and do an otc transaction that is not on an exchange. The reason being is that airlines and other users of oil do not want to mess with margins and the other problems with maintaining a trading book to hedge their consumption. To offload the risk, banks go onto the exchanges and purchase/sell futures contracts. If they have a lot of clients who hedge BIG amounts, they will often hold a huge amount of the open interest on any futures contract. Even though they hold a majority of the futures contracts, they are not speculating because it is a necessity to stay neutral to price changes. The actions of the banks on a more broad view then are determined by their clients. If clients are worried about the price of oil, they will enter into a long transaction with the bank. The bank will then go onto the exchange and buy futures contracts to hedge the short position with the client. The buying of futures contracts then drives up the price. Does that make sense.

 

[vita3]

ILUVRP is on point in this thread.

 

[devil21]

Now, Obama has directed the DoJ to "go after" speculators. Nevermind the DoJ has been letting the biggest criminals off the hook for the last 3 years.

http://www.zerohedge.com/article/obama-holder-declare-war-oil-traders-speculators

 

[mport1]

I can't stand all the demonetization of speculators. Speculators should be highly praised. They smooth out market fluctuations by providing supply when it is in need. http://mises.org/daily/4466

 

[Live_Free_Or_Die]

nt

 

[hugolp]

I can't stand all the demonetization of speculators. Speculators should be highly praised. They smooth out market fluctuations by providing supply when it is in need. http://mises.org/daily/4466

This is true. The problem is that low interest rates and other money pumping actions by central banks affect the way speculators operate. So the money printing shows its results through the speculation and people blame the symptom (speculation) instead of the cause (central banking).

A couple of economists of the Bank of Japan just released a study on the rise of commodities and admit that central banks are one of the main reason of the rise of commodities: http://pragcap.com/the-boj-answers-the-trillion-dollar-question-what-is-causing-the-commodity-rally They say this:

However, as is frequently observed in equity and real
estate markets, when coupled with a prolonged
low-interest rate environment, enhanced market
expectations may entail a reduction in risk perception
of investors who view commodities as an investment
asset class. This causes commodity prices to
significantly deviate from the level explained by
fundamentals, otherwise called a “bubble”.

But its easier to blame the symptom than the original cause, and politicians, as always, use the ignorance of the people.

 

[Seraphim]

Here's a dose of reality Mr. Obama:

http://www.ronpaulforums.com/showthread.php?288747-Obama-s-Gulf-Drilling-Policy-Costing-Jobs

 

[enjerth]

I agree. Bernanke is speculating that he's fixing the economy.

 

[HOLLYWOOD]

Obama: Hey everybody look over here at this sparkling shining glitter object.... while I and my regime called Washington DC destroy your savings/currency/standard of living.

OH the Political Blame Game 101... "I came into Egypt, not knowing"

 

[Godisnowhere]

Obama knows the currency is causing the problem. In fact they are planning the currency devaluation and it appears to be happening now. The scary part is what the next parts of the plans are. How about global currency, global leadership all which will be proclaimed as "necessary" to resolve the coming crisis. Media will be aligned in this also. Do not be surprised if all Christians suddenly leave the earth and the leaders will explain away this happened as "necessary". My hope is to catch that wave going up and the only way is to receive, believe, and follow Jesus Christ, NOW.

 

[easycougar]

Obama knows the currency is causing the problem. In fact they are planning the currency devaluation and it appears to be happening now. The scary part is what the next parts of the plans are. How about global currency, global leadership all which will be proclaimed as "necessary" to resolve the coming crisis. Media will be aligned in this also. Do not be surprised if all Christians suddenly leave the earth and the leaders will explain away this happened as "necessary". My hope is to catch that wave going up and the only way is to receive, believe, and follow Jesus Christ, NOW.

As a Christian, I agree with you on this...I don't get your choice of user name though.

 

[Brian4Liberty]

I didn't say that they do not trade. I said that they are for the most part neutral to a change in the price of oil. When an airline or other major of user wants to hedge their oil production, they go to a bank like jpm and do an otc transaction that is not on an exchange. The reason being is that airlines and other users of oil do not want to mess with margins and the other problems with maintaining a trading book to hedge their consumption. To offload the risk, banks go onto the exchanges and purchase/sell futures contracts. If they have a lot of clients who hedge BIG amounts, they will often hold a huge amount of the open interest on any futures contract. Even though they hold a majority of the futures contracts, they are not speculating because it is a necessity to stay neutral to price changes. The actions of the banks on a more broad view then are determined by their clients. If clients are worried about the price of oil, they will enter into a long transaction with the bank. The bank will then go onto the exchange and buy futures contracts to hedge the short position with the client. The buying of futures contracts then drives up the price. Does that make sense.

Let's relate this to another product that they were heavily involved in: the mortgage/derivatives bubble. Was GS "neutral" in all of that? It seems that they like to play the role of casino and major gambler at the same time, albeit with a distinct advantage over the small time gamblers.

 

[efiniti]

Can you say "oil rationing"? Apparently when he said change he meant revisiting the 1970s.

 

[Brian4Liberty]

Can you say "oil rationing"? Apparently when he said change he meant revisiting the 1970s.

Or gasoline rationing. There is no shortage of crude oil (yet).

 

[jclay2]

Let's relate this to another product that they were heavily involved in: the mortgage/derivatives bubble. Was GS "neutral" in all of that? It seems that they like to play the role of casino and major gambler at the same time, albeit with a distinct advantage over the small time gamblers.

Yes, they do play the role of the casino! They price their clients more expensive than what the liquid exchange or dealer market will provide and then take the spread. Sometimes, as in the mortgage bubble, they will structure transactions so heavily in their favor that they can have huge gains regardless of the outcome of the underlying trading product.