Restrict speculators and cut the price of Gasoline to $2/gallon? Expert testimony before Congress

This is pretty astonishing.  We’ve been told that about 60% of our current oil prices are due to speculation, and the following article seems to back that up.  $2/gallon of gasoline if we regulate speculation?!  Though it seems not all experts are in agreement on this issue, check it out:

The price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy-futures markets, four energy analysts told Congress on Monday.

Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.

Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters’ assessment at a hearing on proposed legislation to limit speculation in futures markets.

Krapels said that it wouldn’t even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in futures markets.
“Record oil prices are inflated by speculation and not justified by market fundamentals,” according to Gheit. “Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel.”

Read the rest of ths story here:{2673C102-68E0-41D9-9C9A-10EE2E723948}&dist=msr_13



20 Responses to “Restrict speculators and cut the price of Gasoline to $2/gallon? Expert testimony before Congress”

  1. 1 dcbarton June 26, 2008 at 12:56 pm

    The problem with that theory is the international aspect of the oil trade. We are competing with China and India for a limited supply of oil. Consumption is currently equal to or exceeding production of crude by OPEC. We might be able to control speculation in the US, but we cannot control it in other countries. And if CHina and India need the oil, they will bid more than we do, the only way for us to get the oil we need is to outbid them, or to drill our own. Since we can’t afford to outbid them, we need to start drilling again, at least until alternative forms of energy are more available and reliable.

  2. 2 theradicalmormon June 26, 2008 at 1:44 pm

    Oil is exchanged on the New York Mercantile Exchange and in other markets around the world. Would restrictions on the New York Mercantile Exchange speculators not have a world-wide effect?

  3. 3 Vedaland June 26, 2008 at 1:48 pm

    The oil crises is a mind crises.
    Here is how to end it:

  4. 4 dcbarton June 26, 2008 at 4:51 pm

    Restrictions onoil in the New York Mercantile Exchange would just restrict the US from buying oil on the international market. If China and India are still willing to pay $136 a barrell, what would happen to us if we say we will only pay $65? We will price ourselves out of oil. We can’t set the price unless we are the producers.

  5. 5 theradicalmormon June 26, 2008 at 5:19 pm

    Sounds like the world needs a Tobin tax on oil speculation then.

    Could we convince other nations to go along with such a tax? I’d be interested in trying.

  6. 6 dcbarton June 26, 2008 at 7:52 pm

    A world tax? Who do that? And why? It won’t bring oil prices down, taxes never do. Companies don’t really pay taxes, they always pass them on to their customers.

  7. 7 theradicalmormon June 26, 2008 at 8:27 pm

    The Tobin tax is a tax on speculation, (and thus a way to restrict speculation worldwide) not a tax on oil companies. Tobin won the Nobel prize in economics for it in 1981. It’s worth a look into.

  8. 8 dcbarton June 27, 2008 at 10:46 am

    It boils down to the same thing, and will do nothing but raise the cost of oil. The thing to look at is cause and effect, what is causing oil prices to be so high? It is the increased demand versus the lack of supply. To bring oil prices down, you have to address that problem

  9. 9 theradicalmormon June 27, 2008 at 7:30 pm

    I take it you don’t agree with experts who claim that 60-70 percent of recent oil price increases are due to speculation then?

  10. 10 dcbarton June 28, 2008 at 12:31 am

    That was just a handful of “experts”. There are others, in fact, a greater number of “experts”, that say it is because of increased demand from China and India combined with a lack of increase of production. “Experts” are like any one else, you will never get 100% agreement on any problem.

  11. 11 theradicalmormon June 28, 2008 at 6:26 am

    I hear what you are saying. I enjoyed this discussion on Wikipedia of the various effects on the price of oil by supply, demand, and the artificial demand caused by speculation.

  12. 12 dcbarton June 30, 2008 at 1:37 am

    I haven’t had a chance to look at your wikipedia links, but when I get time, I will. In the mean time, I would also suggest that the demand is caused by the consumers not reducing their energy usage. There are other aspects as well, the panic does have alot of basis in people being told by the media that there is a problem with supply, and with speculation. Everybody agrees to a cutback in energy usage, but everybody thinks their things are important and other people should be the ones to cut back. I keep hearing about people reducing their driving and changing their habits. As a truck driver I see them every day, nobody is slowing down to save fuel, carpooling doesn’t happen, and the traffic is just as bad now as it was a year ago. I will point out that in 1979 we were waiting in lines for hours on end to get a half a tank of gas, that isn’t happening now. We still have to accept the fact that there is more international demand for a limited amount of oil, that alone will drive up the price of oil, but the liberals in Congress would have us believe that we are being victimized by the greedy, rich speculators. The fact remains, we are being victimized by our own ignorance. We should have been drilling and producing our own oil all along, and we need to start now. Congressmen on the left tell us that it would be ten years before we saw a reduction of price in oil by drilling our own, but I would ask what will the price be in ten years if we don’t start now.

  13. 13 theradicalmormon June 30, 2008 at 7:05 am

    Agreed we consume way too much. However, I think it is high time we get off the old oil horse and get a new ride. Alternative energy sources would be sweet way to cut our imperialistic foreign policy around the world into pieces.

  14. 14 Daniel June 30, 2008 at 7:52 pm

    Opening up new exploratory avenues for drilling will not lead to more fuel for a decade or longer, this is a straw-man argument by corporate-owned politicians to fool the public into letting them drill in Alaska.

    I want to believe it’s speculation, but we’ll see when this law is passed and what effects it has over the next couple of months …

  15. 15 dcbarton June 30, 2008 at 10:09 pm

    First point, alternative energy is a long way from being a viable choice. The alternatives we have now, the same people who want alternative energy won’t allow. They claim wind generators kill birds, solar panels reflect light that blinds birds, hydroelectric dams up rivers and interferes with the fish. They want but refuse any alternative energy.
    Second point, our imperialistic foreign policy. Like, maybe purchasing energy from foreign countries who would have absolutely no economy if we had not purchased oil from them, when we had the capabilities of producing our own oil?
    Daniel, drilling won’t produce oil for a decade or longer, except that we will be producing in less than a year by merely opening wells that we already drilled then capped when Carter forced us into a greater reliance on foreign oil. Another valid point to consider is that the left used the same argument 10 years ago when the Republicans wanted to drill in ANWR and Clinton blocked that. If we had started drilling ANWR then, we would have the oil now and not be so reliant on the middle east now. You talk about the straw-man arguments, but ignore the fact that we are competing with countries like China and India more everyday as their economies grow.

  16. 16 theradicalmormon June 30, 2008 at 10:59 pm

    Here is what the economist Dean Baker said today on the subject:

    “Undoubtedly, most of the increase in oil prices is real. Is some of it due to speculation? It seems almost impossible for me to believe it isn’t. There are sharp movements in oil and other commodities. These sharp movements are not just responses to changes in underlying supply demand. Inevitably speculation exaggerates these moves.”

    “In response to the question of where is the oil being stored. First, with a product with highly inelastic demand, we don’t need very much oil to be pulled off the market to affect the price. But the obvious place that the oil would be stored is in the ground. Do we know exactly how much oil would be pumped at $140 a barrel, if producers anticipated it would rise no higher? Obviously the rate of current production will depend on future price expectations of price. That doesn’t make for a grand conspiracy of speculators, but it does mean that the expectation of higher prices in the future can lead to higher prices in the present.”

    “This doesn’t mean we should have price controls or ban speculation. My policy recommendations would be to tax the speculation. We tax casino gambling, why not tax gambling in financial assets? We could easily raise over $150 billion a year on a comprehensive set of financial transactions taxes. We could even use the money to pay for a cut middle class income taxes.”

  17. 17 theradicalmormon July 1, 2008 at 4:48 pm

    Alternative feul is not viable for the time being, but apparently neither is drilling offshore a practical way of increasing oil supply for then next ten years or so. In ten years, alternative energy sources could get quite a head start if we put our minds to it.
    As far as our imperialist oil policy (I’m kind of surprised you require clarifcation here) goes, I’m referring to the wars we undertake in order to control access to oil and the military force we spread around the world in order to protect oil from production to pump. The Iraq war is a glaring example of this policy. We knew well ahead of time the vast value of the prize the Iraq war would give us. For example here:

    and a very nice fresh article today from Counterpunch that explains the situation in detail here:

  18. 18 dcbarton July 2, 2008 at 2:26 am

    They said the same thing about drilling ten years ago, when oil was $62 a barrel, look where we are now. We have plenty of wells that don’t need drilled, just reopened, they can be producing in less than a year. As far as alternative energy, the Government just announced that they had to delay solar power in the western states for several years because the enviromentalists are demanding enviromental impact studies. The people that push the hardest for alternative energy are the same people blocking it. We can alternative energy in 10 to 15 years, the same man that predicted internet in American homes in the early ’80s has recently predicted that solar power can provide all of our energy needs in just another 5 years. But the enviromentalists are not allowing it. Where do we go from here? Back to kiving in caves?

  19. 19 theradicalmormon July 2, 2008 at 8:16 am

    Here’s another expert that thinks speculation is behind the spike in oil prices… the King of Saudi Arabia!!

  20. 20 fntcyfctry July 7, 2008 at 6:32 pm

    So many experts at nothing, amazing.
    Crude is not produced, it is extracted.
    we do not need to drill or store oil, over 805 of all extracted crude is returned to the deposit since there is no one waithing for it as in this emaginary hi demand everyone speaks of, Where are the lines?, the stations closed due to lack of available product, You clowns have no idea how a deposit is rated for extraction do you.
    its rated at 200 years. how much do we need to pump a day to empty the deposit in 200 years, the wells are built to that spec, then oil is extraxted t less than 10% of that rate, what doesnt get put into a tanker, goes back into the ground, what do you think? you can turn pumps off and on like your pool filter?
    where di this sudden unquenchable demand come from? did the martians leave 1 billion cars with drivers here lastnight. get ya heads out of the sand, the problem is not as complex as yu would like to convince yourselves, One word, GREED!

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