It's probably unrealistic to think Congress will leap into action, but President Obama is making the push anyway for lawmakers to crack down on oil market speculators -- the very folks the administration argues are responsible for driving up prices at the pump.
"I call on Congress to pass a package of measures to crack down on illegal activity and hold accountable those who manipulate the market for private gain at the expense of millions of working families," Obama said. In terms of specifics, the president called for investing in "more cops on the beat to monitor activity in energy markets," increasing civil and criminal penalties, and giving those agencies responsible for overseeing oil markets "new authority to protect against volatility and excess speculation by making sure that traders can post appropriate margins, which simply means that they actually have the money to make good on their trades."
Will Congress actually take any of these steps? It's extremely unlikely. The White House is clearly invested, however, in demonstrating its commitment to working on the issue, and arguing to the public that the president and his team are taking every possible step.
At the same time, by focusing on speculators, Obama is implicitly making clear who bears the most responsibility for the recent trend (i.e., not him).
Oddly enough, the Romney campaign issued a rather angry response to this -- apparently, "more regulation" is bad, even when it involves lower gas prices and cracking down on speculators -- which, given Big Oil's role in financing the Republican campaign, doesn't really surprise anyone.
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Steve,
You seem to be sadly underinformed and misinformed about the role of speculators in the prices of commodities. Particularly relating to oil and gas speculators.
In this exception, Big Oil is not the main villain. The Financial Services Industry, the same old Wall Street crowd and Hedge Funds, are the main corrupters and disrupters of oil prices. There is ample evidence that the markets are being manipulated to raise (and sometimes lower) oil prices to make hugh profits for those who have zero intent of ever having oil delivered to them. Indeed, the CEO of Exxon has even testified to Congress that the price of oil is about 40% overpriced because of speculators.
Obama and his administration have been unfortunately silent about this. This latest salvo seems to be more political than results driven and that is very unfortunate.
For those whose memory goes all the way back to 2008, remember that oil prices went sky high. While the corporately owned media pushed the explanation that the bursting economy drove the prices down, they missed the real reason. When the markets dived, the speculators in oil had margin calls that they could not meet and the massive amount of speculation shrunk to almost nothing and the price of oil dropped like a stone.
Obama has not been silent about it! I am glad your astute but Obama has mentioned what he thinks it is before he could even prove it here. If you did not here about it. Blame the media tycoons, not Obama.
One problem with the distinction you are trying so hard to make. The Koch Brothers, who are quintessential oil barons, were found to be behind much of the oil speculation on Wall Street that caused a spike a couple of years ago....
Evidently, Steve, you've not heard of Intercontinental Exchange, Inc. To avoid further embarrassment, you've got some reading to do.
You are right, it is the financial speculators that is the issue here, but the oil companies are complicit in the fact that they are financing Rommney deregulation ideas. Now who do you think is making out on this too? The Oil Companies. Geez you just don't get it!
Didn't the article state that Obama was trying to crack down on speculators that are manipulating the oil prices for private gain or did I just read something different than you did?
While they are looking at oil speculation, look at the futures market in food. It is a double whammy with grain, beef, pork speculation since the rising gas prices drive up food costs even more.
Well, at least Romney spelled "Democratic Party" right...
So all speculators are American and will fall under any laws passed by the U.S. Congress?
One for skip.
A. Oil is a world market.
B. The world market is concerned about restricted supply because of Middle East instability. Law of Supply/demand: prices go up.
The futures market was created so end-users of oil (think not just refiners but trucking companies and power plants), grain, etc. could hedge against future costs. It's true that there's speculation that can cause volatility, but it also increases liquidity, which is a good thing.
How do you differentiate between the hedgers and the speculators? Insisting that futures investors take delivery of the underlying commodity would severely affect liquidity. The genie's out of the bottle.
All that needs to be done is for the Commodity Futures Trading Commission to increase the margins on oil speculation. Organizations handling futures trades - brokerage firms, etc. - are required to know whether a trade is behalf of a legitimate business that is hedging its exposure, or for a speculator hoping to make a profit. The CFTC has the power and authority to set margin limits. (See my comment below for more information.)
So "more regulation" on lower gas prices effecting the entire country is "bad" but "more regulation" is needed in women's uteruses?
Excellent point, Adam.
Guys--some of you ARE on womens' side, I see. Great! But may I suggest that "womens' uteruses" is clumsy. The plural form of "uterus" is "uteri."
Bringing home the fact that it's ALL of our UTERI in danger of being hacked.
Seriously--the GOP seems to have finally come to the fork in their road, and taken that last right turn into Nutso-land, and it doesn't even take the re-emergence of Crazy Lady Bachman onto the media airwaves, to guarantee this...gonna be an interesting summer. ROCK THE VOTE!!!!
Or, as Joe Peschi would say, "Two Utes".
Here are four Utes (and a couple of white guys). Peschi is kind of a putz.
CNBC, for hours now, has this program costing $52 Billion, not $52 Million which sounds closer to reality for a regulator's budget allocation. Of course, there is a wild string of ranting comments about fiscal profligacy and horrid waste.
Does Sarah Palin moonlight as a CNBC fact checker? Maybe the Floks at GE can figure this out or are they at an ALEC event?
Keep in mind that in May of last year, Eric Cantor met with the members of the Chicago Mercantile Exchange. In that meeting, Cantor emphatically told this group who are speculators, that the Republicans would block any attempts at regulating speculation.
So what's the Republican plan for gas pricing? That would be none.
@ Adam...That is SO true Adam!
Of course, the Romney campaign and Republicans would be upset by this. And that is because if speculation were curtailed the market would work more like a market is supposed to work, governed by supply and demand, and not subject to artificial manipulations by those out to game the system. Despite their pronouncements, Republicans aren't capitalists; they're enablers of those who have already gained the most from the system so that the advantaged's campaign contributions.
"...apparently, "more regulation" is bad, even when it involves lower gas prices and cracking down on speculators --"
And coming from a vulture capitalist I'm sure it makes perfect sense in his world.
Look these people On wall street are not only the problem but are also the big buyers of the republicans.
You don't know what your talking about. The de-regulation of Oil was done by President Clinton under pressure from Haliburton and further exploited during the Bush administration. Both parties do the same thing. George Soros made 9 billions Dollars last year from is knowledge and investments and a large sum of that came form oil. He is no republican.
While passing legislation to limit speculation would be the best route, the fact is that the Commodity Futures Trading Commission (CFTC) has the authority to raise margin limits for oil speculators.
And what exactly is a margin limit when it's not raining? The amount of real, cash money a speculator must put on deposit when they buy an oil futures contract. Currently, it is somewhere around 10% of the value of the contract and the CFTC could bump it up to 15% or 20%. The hedge fund managers would yowl and Wall St. traders would stammer something about hurting "job creators" but it would dampen a lot of the speculation without harming market liquidity.
The CFTC has done this previously without the world as we know it ending. It happened once when the Hunt Bros. were trying to corner the market in silver futures (which happened about 100 lifetimes ago and was the basis for the very funny book Silver Bears) and once when there was a speculative flurry in soybean futures. I'm sure there are other examples, as well, that closer market watchers than I could cite.
In any event, when the rash speculative trading subsided, the CFTC has - and could again - reduced the margin requirements.
These people aren't speculators! As with all the rich, they are out there creating jobs every minute of the day! I just heard that on NPR, so it must be true.
Very good conversation guys! Keep talking!
Should I call you Count?
So I guess speculation for carbon credits will no longer be legal?
I dont know a lot about margin calls or the speculation market,but I do know when I'm getting screwed. Watching CNBC I've seen a couple of what would be called speculators.They were telling the host that people with 401k's should be really happy when the price of oil goes up.Their reasoning was some of your money is invested in the oil market by your agent,and you make money when the price goes up.Now I'm not to smart about this subject but when the price of gas rises I'm spending a hell of a lot more per month than I'm making on my measely ass 401k. Right? Wrong?
Maybe now the Republicans will help wean America off the oil nipple? No? Then shut up.
The easiest solution to the issue of oil speculators is to require the owner of ANY oil futures contract to take delivery of the oil. End of story. Meaning that Southwest Airlines, trucking companies, etc. which have a legitimate need for oil in their business to access futures markets to help control the cost of oil. It would preclude the speculators from flipping oil contracts who have no intention of actually consuming oil. Why can't this happen?
I'm just speculating here but, it seems to me that we go through these rate hikes every few years and boom we get inundated with propaganda telling us we need more refineries on American soil or more wells or... Seems to me I remember being told by wildcatters that a lot of wells I saw out west were merely capped or had pressure heads on them waiting for oil to go to a hundred bucks a barrel back in the eighties. They probably want two hundred now. The entire estimated reserves within our borders would last about two years at present consumption if we stopped importing oil or so I was once told.
Personally I see little hope since as long as we have a wall street where people who have money can manipulate companies simply by an infusion of cash for stock while the actual workers are seen as an expense to be cut in favor of more profits for the lazy investors who have the most money invested...blah blah blah(sorry I seem to be getting carried away with this rant).
If the house along with the senate don't go Democrat this coming November, it's going to be a "damned if you do and damned if you don't" continuing saga for President Obama.
The idea that we have to live by the whim of oil speculators can be overcome.
Are you really tired of high gas prices? Are you ready to do something? The oil industry shrugs off the threats of boycotts. They know that Americans NEED gas and cannot go long periods of time without the commodity. One day boycotts are ineffective because consumers will stock up on gas the day before and the day after the boycott; creating two positive days for the oil industry. I am proposing a new way to boycott that will put the power of demand in the consumers control. Join OPERATION ROLLING BOYCOTT. Find us on Facebook.
There is the basic idea of how it will work. Instead of boycotting the whole industry at once, we boycott the four major oil companies one at a time; for a week at a time. At the end of the first month, we start over again, except this time, we boycott them two weeks at a time. At the end of that time period, we extend the time to three weeks per company. As the time passes, we will reward the company that brings their prices down first and the company that brings their prices down the furthest with an exemption; we will leave them out of the cycle once. We will continue to add time to each boycott until gas reaches $2.50 gallon.
The desired affect of a rolling boycott is to force the individual companies to compete for our business. While they can stand united against us, they cannot individually lose a weeks worth of revenue. They certainly cannot lose a months revenue. The companies will eventually consider the individual bottom line and start competing. It will be like having four gas stations on one corner.
The price of gas is something that affects us all; whether we drive cars or not. From a political standpoint, I reason that this type of boycott has aspects that both parties can support. Democrats will be able to embrace the opportunity to demonstrate the effectiveness of collective-bargaining. Republicans can demonstrate their support for free-market solutions. As members of the 99%, we can take control of the fuel market and remove the power of Wall Street as the only reason for fluctuating gas prices. We are organizing now and would like to begin by may. Please join and ask as many of your friends and family to participate. There is strength in unity.
I like the idea. I had a similar one but it involved boycotting only one major distributor, and just staying on that one until his price dropped sufficiently.
It seems that a 'rolling boycott' would be very difficult to coordinate.
Thank you DNA!!! Will look up the site...one problem I have in rural zones is none of the gas stations have the big oil monikers and thus, trying to boycott Exxon/Mobil is impossible. Almost all stations are tied to convenience store chains and have been unsuccessful in determining which oil company supplies which chain...
Two immediate problems I see are (1) People have no idea which oil corp supplies regional convenience store chains and some areas may have only one or two suppliers, and (2) this puts a worse hurt on the owners of said local businesses than it does on the oil corps, not only for losing the margin they'd make on gas, but also the loss of store revenue.
DNA-4188324, an interesting idea, particularly about the how the oil companies can't stand against consumers as individual companies.
The same tactic was used by the CIO in organizing unions in the auto industry back in the late 1930s. They would target one car maker, threaten production (and profits) with the threat of strikes and - voila! - votes were allowed on unions. Even with promises of assistance from other car makers, none managed to hold out, except Ford, for fear of seeing their share of the car market decrease.
The timing helped too, as the economy was picking up and people were beginning to purchase new cars, some for the first time in a decade!
It's about time!
This effort by the President was not intended to get past the Republican blockade. It was intended to continue to draw sharp distinctions between the two parties for the benefit of the voter. The voter has to be hit on the head as often as necessary to hammer home just exactly what the Republicans are capable of and what they really intend to do to the average American.
Every shot across the bow lights up another dark corner, exposing the evil that lurks there.
Its clear that Obama has no idea of how the commodity markets and business in general works. He has been bashing big business, the commercial and investment banks and the oil and gas industries. Thankfully this time around, the banks will not be contributing as much money to Obama.