NEW DELHI: There seems something surreal about the continuing rally in international prices of petroleum crude. In terms of fundamentals, stocks (http://economictimes.indiatimes.com/News/Economy/Speculative_trading_needs_piping_to_regulate_oil_p rice/articleshow/2997123.cms#) are ‘high’, supply quite ‘satisfactory’, and demand is actually ‘easing’. Yet crude oil prices keep going up and up and up. The sustained rally in oil quotes do call for a closer look at the role of speculation in hardening prices.
Can proactive policy and higher margin requirements reasonably curtail speculative activity at the main commodity bourses? The option certainly needs to be explored, including that for fledging domestic oil trading (http://economictimes.indiatimes.com/News/Economy/Speculative_trading_needs_piping_to_regulate_oil_p rice/articleshow/2997123.cms#). Also, there are policy implications that follow from buoyant oil prices. In particular, the policy of high taxes factored into domestic prices of the main oil products would need to be fully reviewed.
The latest flare-up, with oil touching $120 per barrel, is reportedly for operational reasons, including a pipeline bottleneck in the UK and outages in Nigeria. But the fact remains that crude oil supplies have recently touched a six-year high. Also, in the US, stocks of petrol are seen at a five-year peak. Further, those for middle distillates like diesel have come back from a steep deficit in inventory levels to what are now well above those last year.
The point is that global oil production does outpace consumption, notwithstanding strong demand from China and elsewhere. Which brings us to the issue of speculation. Could it be that speculative activity can be done on the cheap?
For example, reports say that at the New York Mercantile Exchange (NYMEX), the premier energy futures market, it costs just over $3,000 to garner 1,000 barrels of crude, valued at upwards of $70,000. As more and more speculative funds buy into crude oil futures, the spot prices seem to get increasingly distorted. Note that there has been a huge explosion in the number of financial players in the energy markets. Abroad, there are now literally hundreds of energy hedge funds, up from just about 180 in circa 2004. Many are strictly energy commodity funds, trading exclusively in oil or oil future (http://economictimes.indiatimes.com/News/Economy/Speculative_trading_needs_piping_to_regulate_oil_p rice/articleshow/2997123.cms#)and options, and not say stocks of oil majors. In tandem, large investment banks like Goldman Sachs have stepped up their participation in the energy markets.
A speculator in the market is supposed to be one who does not produce or use the commodity, but risks own capital trading futures in that commodity, in hopes of making a profit on price changes. The fact remains that large financial institutions and other investment (http://economictimes.indiatimes.com/News/Economy/Speculative_trading_needs_piping_to_regulate_oil_p rice/articleshow/2997123.cms#) funds have been pouring billions into energy commodity markets, of late. The sustained purchases of oil futures contracts by speculators have, it appears, created a parallel demand for crude.
It may well be driving up the price of oil to be delivered in the future, in the like manner that additional demand for a physical barrel of oil drives up the price on the spot market. As far as the oil market is concerned, it would seem, the demand for a barrel of crude that results from the purchase of a futures contract by a speculator is just as potent as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum.
That said, it would be difficult to properly quantify the effect of speculation on oil prices. However, reports say that several analysts do estimate that speculative purchases of oil futures have added “as much as $20-25 per barrel” to the going rates. It could well be argued, rightly, that speculative trading (http://economictimes.indiatimes.com/News/Economy/Indicators/Speculative_trading_needs_piping_to_regulate_oil_p rice/articleshow/msid-2997123,curpg-2.cms#)brings about greater liquidity to the futures market.
In the process, corporates and investors seeking to hedge their exposure to commodity prices can find counterparties willing to take on the price risks. It could also be said that since speculative purchases of futures contracts can be done at relatively low cost, compared to that in the physical market, oil futures (http://economictimes.indiatimes.com/News/Economy/Indicators/Speculative_trading_needs_piping_to_regulate_oil_p rice/articleshow/msid-2997123,curpg-2.cms#) do aid price discovery.
However in oil, large speculative buying or selling of futures contracts can well distort the market signals when it comes to supply and demand in the physical market. It can have consequential detrimental effects economy wide. Oil, after all, is a slippery business. Also, it’s by far the most heavily traded commodity in the marketplace. Besides, trading in ‘paper barrels’ has grown quite significantly in recent years.
At NYMEX and the InterContinentalExchange, average daily contracts added up to nearly 800 million barrels per day (a contract corresponds to 1,000 barrels) of oil last year. As a comparison, the average daily global production in 2007 was only 86 million barrels.
Additionally, oil futures are also traded in the unregulated over-the-counter markets. It could well mean added distortions in the spot price. What’s surely called for are steep and proportionately rising margin requirements in speculative trading. Key policymakers like finance minister P Chidambaram need to press for it in global fora. Oil volumes remain rather small in domestic commodity trading; but the Forward Markets Commission can be proactive in setting margins requirements, as a regulatory benchmark. Also, tariffs and duties on oil would need to be further reduced, as has just been done for steel and cement.
http://economictimes.indiatimes.com/News/Economy/Speculative_trading_needs_piping_to_regulate_oil_p rice/articleshow/2997123.cms
"Run-up in Oil Prices Due to Speculation?"
it seems obvious
Saudi King: 'We will pump more oil'
By Anne Penketh in Jeddah
Monday, 16 June 2008
REUTERS
http://www.independent.co.uk/news/world/middle-east/saudi-king-we-will-pump-more-oil-847830.html
Saudi Arabia will raise oil production to record levels within weeks in an attempt to avert an escalation of social and political unrest around the world. King Abdullah signalled the commitment to the UN secretary general, Ban Ki-moon, at the weekend after the impact of skyrocketing oil prices on food sparked protests and riots from Spain to South Korea.
Next month, the Saudis will be pumping an extra half-a-million barrels of oil a day compared to last month, bringing total Saudi production to 9.7 million barrels a day, their highest ever level. But the world's biggest oil exporters are coupling the increase with an appeal to western Europe to cut fuel taxes to lower the price of petrol to consumers.
Senate approves plan to stem flow of oil speculation::
in oil markets that has been blamed for some of the recent run-up in oil prices. the recent increases in oil prices is due to speculation and investment by
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/23/MNSV11T5QT.DTLHOME |
Saudi Arabia, which has called an emergency meeting of oil producers and consumers in the port city Jeddah next Sunday, says the energy crisis has not been caused purely by market pressures but by a speculative bubble. Saudi Arabia and Opec believe there are no shortages to justify the sudden surge in prices.
Mr Ban held talks with King Abdullah at the royal palace in Jeddah on Saturday evening for more than an hour which were dominated by the energy crisis. The Saudi monarch shared his concern that the oil price was "abnormally high" although he blamed "national policies" in the West, Mr Ban told The Independent yesterday. "He was also suggesting that consumers should play their own role," Mr Ban added.
Just before his departure for London yesterday, he had a telephone conversation with the Saudi oil minister, Ali al-Naimi, who told him that Saudi Arabia had raised production this month by 300,000 barrels per day at the request of consumers, and next month would raise output by a further 200,000 barrels per day. Mr Ban said: "He told me they will respond positively whenever there is a request for an increase in production. So there will be no shortage of oil."
Mr Naimi said Saudi Arabia was responding to requests from between 30 and 60 consumer countries. Finance ministers from the Group of Eight nations meeting in Tokyo yesterday added to the chorus urging Saudi Arabia to increase production.
The UN chief said he had asked the Saudi minister whether the additional output would be enough to help stabilise the market, adding: "He said the consumers and others should play their own role."
Mr Ban, who flew to Saudi Arabia after a meeting in London with Gordon Brown at Downing Street on Friday as Britain was in the grip of a protest by lorry drivers, conveyed the concerns of world leaders about the impending oil crisis. The South Korean secretary general said: "Unless we properly manage these issues, this may create a cascade of all other challenges and prices, affecting not only social and economic issues but also creating political instability."
But it appears the Saudis are just as worried that record prices – on Friday oil was being priced at just under $135 a barrel – could dampen growth in the industrialised West and lower demand, which would in turn hurt the kingdom.
As well as the protests in Britain, which continued with a go-slow by lorry drivers on the M6 on Saturday, oil-related protests have swept Europe and Asia in recent weeks. Violence has erupted in Spain, riot police were deployed in Malaysia, several Indian states have been hit by fuel-related strikes and most of South Korea's main ports have been paralysed by blockades.
Mr Ban said the King shared his view that the prices of oil and food were intricately linked to the issue of flooding and drought caused by climate change and needed to be dealt with comprehensively.
"But while he acknowledged this concern, he also expressed his own concern that common effort and co-ordination are required, particularly from consumer countries," Mr Ban said.
Saudi Arabia, which is the only Opec member with spare capacity, has been under pressure from the Bush administration to increase production, with petrol now costing a record $4 (£2) per gallon in America. But the Saudis argue that although the barrel has jumped as high as $140 recently, they are earning less in real terms owing to the decline in the value of the dollar. Until now they have hesitated to announce a large increase over a sustained period, sticking to the Opec line which blames Western speculators for the increase.
Opec countries generally follow the Saudi lead on raising levels of production, although the cartel's president, Chakib Khelil, has said it will make no new decision until a September meeting in Vienna.
Gordon Brown is to attend the unprecedented meeting of oil producers and consumers in Jeddah, and the Energy minister, Malcolm Wicks, met Mr Naimi in Riyadh on Saturday.
The US, the world's biggest oil customer, which has expressed considerable frustration with the Saudi position, will be represented at the meeting at ministerial level. Yesterday's Arabic-language newspapers had dampened down speculation about an increase in Saudi production.
The Al Riyadh newspaper quoted oil ministry sources who said that if there had been no increase in demand, there was no need to increase supply. A commentator in Al Watan newspaper said: "Why should we please consumers and increase production?" pointing out that the value of the dollar was in decline.
Saudi Arabia is keenly aware of the political and economic effect of the oil market on the upwards spiral of food prices, and contributed $500m to the World Food Programme ahead of the food summit in Rome to enable the UN agency to cope with escalating problems in feeding the world's poor. Mr Ban thanked King Abdullah for that gesture.
Mr Ban's talks in Saudi Arabia also focused on regional Middle East issues, including Lebanon, Israel/Palestine and Somalia, where a UN-brokered process backed by the Saudis has just produced a peace agreement.
Saudi Arabia calls on oil producers and consumers to find a solution to high prices .. و«مجموعة الثماني» تطالب بزيادة الإنتاج And «the Group of Eight» demanding increased production
كتب عواصم ـ وكالات الأنباء ١٥/٦/٢٠٠٨ Books capitals news agencies 15/6/2008 أكد وزير البترول السعودي علي النعيمي أن اجتماع منتجي النفط ومستهلكيه الذي تستضيفه المملكة في ٢٢ يونيو الحالي يجب أن يسعي لإيجاد حل لأسعار النفط المرتفعة التي تضر بالاقتصاد العالمي. The Saudi Oil Minister Ali al-Naimi that the meeting of oil producers and consumers hosted by the Kingdom on June 22 in the current must strive to find a solution to high oil prices affecting the global economy.
وقال النعيمي إن عوامل السوق الأساسية لا تبرر أسعار النفط المرتفعة الحالية التي تقترب من ١٣٥ دولاراً للبرميل، وأضاف قوله إن المملكة العربية السعودية دعت لهذا الاجتماع من منطلق دورها الإيجابي في العلاقات الدولية بمختلف جوانبها، واهتمامها بالاقتصاد العالمي، He said that his fundamental market factors do not justify current high oil prices that are approaching $ 135 a barrel, he added, saying that Saudi Arabia invited to the meeting out of its positive role in international relations in various aspects, and interest in the global economy,
Senate is moving ahead with oil speculation bill | courier-journal ::
The U.S. Senate is moving ahead with a Democratic plan to curb speculation in oil markets that has been blamed for some of the recent run-up in oil prices.
http://www.courier-journal.com/apps/pbcs.dll/article?AID=/20080727/BUSINESS/807270362HOME |
The Becker-Posner Blog: The Rise in the Price of Oil-Becker::
increases in the world price of oil, in 1973-4 and 1980-81, were due to to bullion) and triggering the inflation that led to the run up in oil prices
http://www.becker-posner-blog.com/archives/2008/05/the_rise_in_the.htmlHOME |
وباستقرار السوق البترولية الدولية، وحرصها علي تعاون الدول المنتجة والمستهلكة والجهات ذات العلاقة من أجل العمل معا لمواجهة قضية عالمية قد تكون لها آثار سلبية علي الاقتصاد العالمي وبالذات اقتصاديات الدول النامية. And the stability of the international oil market, and its eagerness to cooperate producing and consuming countries and relevant agencies to work together to address a global issue that may have negative effects on the global economy and the economies of developing nations in particular.
وجاءت تصريحاته، مساء أمس الأول، في الوقت الذي قالت فيه نشرة متخصصة، دون أن تذكر مصدرا لمعلوماتها، إن السعودية تدرس زيادة كبيرة لإنتاجها من النفط، وهبطت أسعار النفط متأثرة بهذه الأنباء. The tone of the statement, yesterday evening I, at a time when the trade publication said, without mentioning the source of its information, that Saudi Arabia is considering a significant increase of oil production and oil prices fell affected by this news.
وفي غضون ذلك ذكر وزراء مالية مجموعة الدول الثماني الصناعية الكبري أن ارتفاع أسعار النفط والسلع يشكل تهديدا للاقتصاد العالمي. In the meantime, said the finance ministers of the Group of Eight major industrialized that the high oil and commodity prices posed a threat to the global economy.
وقال وزراء المالية في بيان إن أسعار السلع المرتفعة، خاصة النفط والغذاء تشكل تحديا خطيرا لاستقرار النمو في مختلف أنحاء العالم فضلا عن التداعيات الخطيرة علي أولئك الأكثر عرضة للخطر وربما يزيد من الضغوط التضخمية العالمية. The finance ministers said in a statement that high commodity prices, particularly oil and food pose a serious challenge to the stability of growth in different parts of the world as well as serious repercussions on those most at risk and possibly increase the global inflationary pressures.
وطالب وزراء مالية مجموعة الثماني في اجتماعهم في اليابان الذي اختتم أعماله أمس الدول المنتجة للنفط بزيادة إنتاجها وزيادة الشفافية في سوق النفط من أجل الإبطاء من أسعار النفط الخام الآخذة في التصاعد بسرعة صاروخية، He asked the finance ministers of the Group of Eight meeting in Japan which concluded yesterday, the oil producing countries to increase production and increase transparency in the oil market for delay of crude oil prices to escalate rapidly emerging missile,
وقال وزراء مالية المجموعة التي تضم الولايات المتحدة واليابان وبريطانيا وفرنسا وكندا وألمانيا وإيطاليا وروسيا، إنه يمكن جعل سوق النفط أكثر كفاءة من خلال التشجيع علي مزيد من الشفافية والمصداقية في بيانات السوق، بما في ذلك الأرصدة النفطية. He said finance ministers group, which includes the U.S., Japan, Britain, Canada, France, Germany, Italy and Russia, he could make the oil market more efficient by encouraging greater transparency and credibility in the market data, including the oil stocks.
http://www.almasry-alyoum.com/Default.aspx?r=t
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do you have no green party over there ? ;-)
only the same 2 parties since centuries is a bit antiquated
well, maybe Al Gore to found a new party ...
Yes, there is market speculation for energy and food commodities, two "sure bet investments" that are being used to recover losses from the home loan debacle.
Of course, you will not hear of a direct admission from market regulators that they are allowing this 'natural price rise' to occur for this reason - a balancing of the books, so to speak. Nonetheless, it's pretty obvious that hard hit financial institutions are looking to recoup their recent losses and pushing their investors towards certain high yield practices, as the formerly 'safe' investment, the real estate (bubble market), has deflated.
The purported logic behind the rise in food prices is that investment attention is long overdue for agriculture; sinking money now into food production will help future supply.
I see this is a circular logic, since it's advocating Western corporate ownership of farming in developing nations, a modern equivalent of the 19th- and 20th century colonial natural resources grab in the Third World by industrialized (and well armed) nations. Corporate farming in developed countries as numerous negative consequences (listed below) with a not so long list of positive aspects, so one should view the excuse for rapid run up in commodities as being somewhat bogus (not withstanding expected global harvest shortages in 2008-09 due to climate, either drought or flood, or from pathogens or insects).
Negatives of Big Agriculture:
Utter dependence on groundwater harvesting to meet surface water/precipitation shortages.
Monoculture induced problems, sans crop rotations and alternate row cropping to naturally improve soil nitrogen content.
Absolutely piss-poor soil carbon management practices, producing total dependence on synthetic fertilizers and genetically manipulated crops to boost harvest yields.
Near total dependence on chemical management of pests and disease.
Continued subsidies, despite the rapid rise in price to record highs in recent months (many government contracts with various agricultural groups recently negotiated - last few months, in the midst of rising prices).
Total IGNORANCE of soil biochemistry and microbial ecology for plant and soil health, a legacy of 1950s boom in petrochemical based production of pesticides and synthetic fertilizers.
Dependence on GMOs to fight drought, plant diseases and climate-induced insect infestations, rather than use modifications in agriculture practices to improve soil and plant health.
The BIG ONE: recent studies have proved suspicions that modern agricultural practices shift natural soil carbon sequestration to carbon emission through deliberate and prolonged short-circuiting of natural biogeochemical cycling within the soil matrix, especially at depth (where important anaerobic processes are disrupted). Agriculture is, in fact, a major polluter. Not just CO2, but NOx and SOx as well.
Glaring blindness to ABUNDANT soil research of the past 4-5 decades is the longterm degradation by modern agricultural practices of soil quality, in the increasing susceptibility to disease, loss of drought tolerance and weed resistance.
Modern agriculture can induce soil erosion during climate extremes through loss of soil particle adhesion and macrostructure - sterile soils, largely devoid of historical organic matter content, cannot retain water and micronutrients properly. These soils are also unable to properly retain applied chemicals. The answer in the past decade has been to apply a synthetic polymer, polyacrylamide, as a temporary particle binder that holds poorly structured soils together during the worst of the Spring run off, after planting. While this affords a positive effect in reducing turbidity and hardness (from cation leaching), it does not last for more than a few months at best. The unpolymerized form (monomer) is a potent neurotoxin; total polymerization is a physical impossibility and little is mentioned of the legacy of longterm use of these polymers.
This is the 'advanced agricultural technology' solution being broadly peddled to the Third World by corporate farms looking for cheap labor and land for 'investment purposes'. Be afraid. Be very, very afraid.
The surficial logic behind allowing oil prices to rise 'according to market demand and supply economics', is farcical. It's simple not true. Recent rise in crude oil pricing is due primarily to market speculation - a nice phrase the masks the grim reality of corporate greed and government subservience to corporate demands, at all cost. That the rapid rise directly and indirectly affects nearly all other markets, immediately escalating the cost of living and future costs of all goods and many services, is patently obvious.
Not so obvious is that the much touted investments in alternative energy have been lagging and, in their absence, a growing number of nations are once again turning to nuclear energy (with astronomically high waste management costs), rather than encourage (or demand) changes in consumer habits and lifestyle. And worst of all, 'developing nations' have been 'Westernized' in their lifestyle, and that means a dramatic shift away from a relatively lower pollution load, and energy conservative footprint. Urbanization is eating up land and increasing natural resource consumption - and pollution without regard to longterm, nonreversible consequences.
Thus, the rise in oil may well catalyze the much dreaded global economic recession-cum-depression, when coupled with rapidly rising commodity and transportation costs.
The tail is wagging the dog.
Should you wish a punch line to this post consider the following: modern lifestyles are very nearly 100 percent dependent on petrochemicals in manufacture. The vast majority of road surfaces also use petrochemical byproducts (asphalts).
What are you going to replace them with, when the present supply of oil peaks in the next few years and increasing consumption from developing nations eats up the remainder at thrice the previous pace?
suppose there were no oil in the ground.
What would energy/ethanole cost ?
Shouldn't we tax oil, so it has that price ?
For the benefit of our anchestors, who may not
have oil in 100 years or such
(and who inherit our debts to be reduced by the taxes)
I think, oil-taxes in Europe are much higher
than in USA
1 gallon gasoline in Germany costs about $8.70
German "green party" had it in their program since 1998 to even increase taxes so gas
would have costed 5DM (instead of 2DM). They formed a coalition with "SPD" and only a
small fraction of this 5DM was implemented.
From June 3, 2008 US Congressional testimony --
Soros Says Record Oil Prices Result of `Bubble' (Update3)
By Matthew Leising
June 3 (Bloomberg) -- Billionaire investor George Soros said the record oil prices weighing on the economy are the result of a "bubble'' caused by speculation from index funds and a tight balance between supply and demand.
``The bubble is superimposed on an upward trend in oil prices that has a strong foundation in reality,'' Soros said in testimony before the Senate Committee on Commerce, Science and Transportation. ``The rise in oil prices aggravates the prospects for a recession.''
The committee is holding hearings on potential energy price manipulation. Congressional leaders are pushing the Commodity Futures Trading Commission and other agencies to step up efforts at overseeing the markets for fuels such as gasoline as retail prices are forcing consumers to drive less. The hearings come as oil has retreated from a record $135.09 a barrel on May 22.
The average nationwide pump price for regular gasoline rose to a record $3.978 a gallon yesterday, AAA (http://www.fuelgaugereport.com/) said. The price was above $4 in 12 states and the District of Columbia.
Gasoline demand in America fell 4.7 percent last week, which included Memorial Day weekend, from a year earlier, according to MasterCard Inc.'s SpendingPulse report. Sales have declined in 16 of the past 19 reports.
Soros laid some of the blame on recent oil price rises on commodity index funds, which only buy oil contracts, helping to push prices higher.
Not `Legitimate'
``Commodity indexes are not a legitimate asset class,'' he said. He added that raising margin requirements would not affect index trading but could function to limit speculation.
Soros attracted renewed controversy with his 10th book warning that an exploding ``superbubble'' threatens the global financial system, the New York Times reported on April 11. The book bases its conclusions on the idea that individual inclinations and actions generate market fluctuations, rather than the conventional view that markets move toward some kind of equilibrium, the newspaper said.
The current oil market price ``is a textbook illustration of my theory'' on bubbles, Soros said in an interview after his testimony today. ``The buying is based on a misconception'' as well as a fundamental driver of higher prices, he said.
Soros said he does not consider himself an expert in oil markets and is not investing in them now. ``I stay away from the oil market because it is a very tricky market.'' He added ``I don't find it an attractive market.''
Failing Americans
The Senate committee also heard testimony from a consumer advocate who said U.S. regulators are failing Americans by not properly regulating energy markets.
Minnesota Senator Amy Klobuchar (http://search.bloomberg.com/search?q=Amy+Klobuchar&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said the U.S. spends $600,000 per minute on foreign oil. ``I want to follow the money and figure out how American consumers are getting ripped off,'' she said. ``We need a cop on the beat. We also need a prosecutor on the beat.''
Mark Cooper (http://search.bloomberg.com/search?q=Mark+Cooper&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), director of research for the Consumer Federation of America, said the current commissioners of the CFTC and Federal Energy Regulatory Commission are to blame for allowing energy prices to rise to records.
``Just fire the commissioners and clean the problem up,'' Cooper told the committee. He compared the federal regulators' reaction to recent price spikes to ``the regulatory equivalent of the FEMA's response to Hurricane Katrina,'' referring to the Federal Emergency Management Agency.
``Americans are suffering needlessly due to the financial bubble'' in energy prices, he said.
Soros disagreed with Cooper's analysis that $40 of the current oil price is related to the cost to get it out of the ground, $40 is added by the ``OPEC cartel,'' and $40 is due to speculators in the market.
`Underlying Factors'
``I think that is an exaggeration,'' Soros said. ``There are serious underlying factors for the rise of oil.''
Soros said too much regulation of oil markets could drive trading into unregulated areas such as the over-the-counter market.
Oil has gained 91 percent in a year. The CFTC said last week it's been investigating the transportation, storage and trading of U.S. crude since December. The commission took the unusual step of announcing an on-going investigation due to ``unprecedented market conditions,'' it said May 29.
The agency said today that it will tighten rules for investors and index funds, including increased disclosure about holdings in agricultural markets, after farmers and lawmakers alleged speculators had inflated food prices. It also said it's investigating possible manipulation of the cotton market.
Incomplete Data
Senator Jeff Bingaman (http://search.bloomberg.com/search?q=Jeff+Bingaman&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), chairman of the Senate Energy and Natural Resources Committee, said last week that acting CFTC Chairman Walter Lukken (http://search.bloomberg.com/search?q=Walter+Lukken&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) may have used incomplete data in discounting speculators' impact on soaring oil prices.
Speculators are not driving oil prices higher, according to energy exchange executives.
``We don't see that from our data, but I think it's important the CFTC assure everyone about what's driving prices,'' Nymex Chief Executive James Newsome (http://search.bloomberg.com/search?q=James+Newsome&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said in a May 30 interview. ``Our data indicate the prices are moving by fundamentals.''
Intercontinental Exchange's Chief Executive Officer Jeff Sprecher (http://search.bloomberg.com/search?q=Jeff%0ASprecher&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) agreed. ``In fact, it looks like the amount of speculators in energy markets has been decreasing as a percentage. What's been increasing is hedgers,'' he said in an interview the same day.
Commercial Users
``We've seen this rapid influx of commercial users,'' Sprecher said. ``That's why we want to get data in the hands of regulators so they can provide assurance it's not speculators'' causing prices to rise.
A U.S. probe into whether speculators manipulated oil prices up to more than $135 a barrel is a ``waste of time,'' billionaire hedge-fund manager Boone Pickens (http://search.bloomberg.com/search?q=Boone+Pickens&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said yesterday.
``What you're trying to do is trying to find a scapegoat and place blame for it when what you have is demand that is greater than supply,'' Pickens said in an interview. ``We're using 400,000 barrels of oil less today than we did a year ago, but the Chinese are now using 500,000 barrels greater than they did last year.''
Pickens himself was criticized for his comments on the investigation.
``To say that investigation and, by implication, regulation, are useless is an indication that what he wants is a Wild West, not an orderly market that has some reaction to supply and demand,'' Judy Dugan, research director of Consumer Watchdog, a nonprofit based in Santa Monica, California, said in a telephone interview.
Airline Industry
Record oil prices are hurting industries such as airlines. Higher fuel prices may push some carriers into bankruptcy by next year, Soleil Securities Corp. said in a note to clients on May 21.
AMR Corp., parent of American Airlines, and UAL Corp., owner of United Airlines, are more likely to be forced into Chapter 11 in 2009 if fuel prices don't fall to ``sustained lower levels,'' analyst James M. Higgins (http://search.bloomberg.com/search?q=James+M.+Higgins&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said in the report.
To contact the reporter on this story: Matthew Leising (http://search.bloomberg.com/search?q=Matthew+Leising&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in New York at mleising@bloomberg.net (mleising@bloomberg.net).
Last Updated: June 3, 2008 14:49 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=awcupddOAymk&refer=home
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There is the peak oil theory. Lifeaftertheoilcrash.net and other sites. Speculation or not the price of a gallon of gas in my town is $4.35 for regular.
There is a formula; the price of a gallon of gas is 1/20 of the price of a barrel of oil over a delayed period of 6-18 months. Point being using this formula, we are buying the gas that sold at $80+/barrel. We have yet to see the price of gas from the $100.00/barrel ($5/gallon) or the $120/barrel ($6) prices and it sold at $139. a couple of days ago ($7). Throw a hurricane in the equation and the prices will go up faster.
The G8 and the Saudi's will do little except bounce the ball back to the individual and advise that they work around the problem.
"This ain't no technological breakdown, Oh no this is the road to hell" Chris Rhea
Imo, as long as there is oil and high profits, there will be no major steps towards alternatives. Only when the end of oil is actually seen, will companies get serious about alternatives.
This is from the MSNBC link:
“Why is Exxon Mobil resisting the renewable revolution,” asked Markey, noting that the other four companies together have invested $3.5 billion in solar, wind and biodiesel projects.
$3.5 billion is a paltry sum when divided among 4 companies posting the kind of profits they are enjoying, with no end in sight.
Exxon is spending $100 million on research into climate change at Stanford University, replied Simon, but current alternative energy technologies “just do not have an appreciable impact” in addressing “the challenge we’re trying to meet.”
From the above statement, it doesn't appear to me Exxon is trying to meet any challenge; only investing in an issue that is popular.
If the speculators were transportation companies hearing the message by DOT to stock up, then I wouldn't have a problem with that. Just plain greed is a different story.
Here are some figures from the following articles:
http://www.kansascity.com/business/story/598038.html
Record oil boosts profits for BP, Royal Dutch Shell
BP posted a 63 percent surge in first-quarter net profit to $7.6 billion (4.9 billion euros)
Shell reported a 25 percent rise, to a record $9.08 billion (5.81 billion euros).
Revenue at BP jumped 44 percent to $89.2 billion (57.1 billion euros)
Sales at Shell soared 55 percent to $114 billion (72.95 billion euros).
Last week, ConocoPhillips reported a 16 percent rise in net income to $4.14 billion.
http://www.msnbc.msn.com/id/23901712/
Congress questions Big Oil’s big profits
Appearing before a House committee, the executives were pressed to explain why they should continue to get billions of dollars in tax breaks when they made $123 billion last year and motorists are paying an average of $3.29 a gallon at the pump.
“Our earnings, although high in absolute terms, need to be viewed in the context of the scale and cyclical, long-term nature of our industry as well as the huge investment requirements,” said J.S. Simon, senior vice president of Exxon Mobil Corp., which made a record $40 billion last year.
Rep. Edward Markey, D-Mass.: “These companies are defending billions of federal subsidies ... while reaping over a hundred billion dollars in profits in just the last year alone,” he said. The companies are reaping “a windfall of revenue” while poor people have to choose between heating and eating because of high energy prices.
http://www.nzherald.co.nz/category/62/story.cfm?c_id=62&objectid=10506726
Oil giants' profits soar as strikes fuel panic buying
BP and Shell will together make record profits of more than US$68 billion ($86.77 billion) this year if the oil price stays at current levels, say City of London forecasters.
If the futures market is correct and the oil price remains high, he says a "back-of-the-envelope calculation" will see BP record an annual after-tax profit of US$32 billion, while Shell would notch up US$36 billion.
Richard Griffiths, of broker Evolution Securities, says BP can expect to see extra operating profit of US$400 million for every one-dollar rise in the price of crude.
Everytime I hear some sort of expert saying "I expect an oil price of $158" I would bet almost every amount that this situation will occur. :(
President «OPEC» does not preclude the rise of oil prices to 200 dollars per barrel
كتب عواصم - «أ.ف.ب» ٣٠/٤/٢٠٠٨ Books capitals - «a. P. B» 30/4/2008 لم يستبعد رئيس منظمة الدول المصدرة للنفط «أوبك» شكيب الخليل، وصول سعر البرميل إلي ٢٠٠ دولار، إذا واصل الدولار الأمريكي تدهوره. Not excluding the Chairman of the Organization of Petroleum Exporting Countries «OPEC» Chakib Khalil, the arrival price of a barrel to $ 200, if the U.S. dollar continued to worsen.
وأضاف أن انخفاض قيمة الدولار بنسبة ١% يؤدي إلي ارتفاع سعر البرميل بمقدار ٤ دولارات، والعكس صحيح، ففي حال ارتفع الدولار بنسبة ١٠،% من المرجح أن يهبط سعر البرميل بمقدار ٤٠ دولارًا، ويقترب سعر النفط حاليا من ١٢٠ دولارًا. He added that the devaluation of the dollar by 1% leads to a rise in price by $ 4 a barrel, and vice versa, in case the dollar rose by 10%, it is likely that brings down the price by $ 40 a barrel, approaching the price of oil is currently $ 120.
كان سعر برميل النفط قد تراجع أمس في المبادلات الإلكترونية في آسيا، في حين قد تعود مصفاة النفط الاسكتلندية المتوقفة عن العمل بسبب إضراب إلي الخدمة. The price of a barrel of oil went down yesterday in electronic exchanges in Asia, while oil refinery could go back Scottish suspended from work because of a strike to the service.
وخسر سعر برميل النفط المرجعي الخفيف، تسليم يونيو، ٢٢ سنتا ليصل إلي ١١٨.٣٥ دولار في آسيا. Lost and the reference price of a barrel of light oil for delivery in June, up 22 cents to $ 118.35 in Asia. أما سعر برميل النفط المرجعي لبحر الشمال «برنت» تسليم يونيو، فخسر ٢٢ا ليصل إلي ١١٦.٢٥ دولار. The price of a barrel of oil benchmark North Sea «Brent» June delivery lost 22 of a hit 116.25 dollars.
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