One group, closetheenronloophole.com - - a coalition of oil dealers (the people who deliver heating oil in trucks, etc.) and other groups - - argues that certain unregulated energy trading platforms provide an environment for what the group calls "excessive speculation and energy price manipulation."
Capitol Hill
In Washington, several lawmakers have requested inquiries of the energy markets. Among them are U.S. Senators Maria Cantwell (D-Washingotn), Dianne Feinstein (D-California), and Ron Wyden (D-Oregon), who sent a letter to the chairmen of the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC) giving them 45 days "to develop a plan to deliver effective oversight for energy markets and implement anti- manipulation provisions."
Oil closed Tuesday up $2.34 to $90.20 per barrel. Oil is up more than 40% in 2008 and more than 100% since January 2005 - - large increases, to be sure - - but is the rise the result of manipulation or just objective events?
The bulls' retort
Many oil analysts and oil bulls are quick to argue that oil's current elevated price is justified by market fundamentals, including: 1) rising demand in emerging markets (especially China), 2) continual increases U.S. gasoline demand despite elevated prices, 3) a barely-adequate refinery system in the U.S., 4) geopolitical concerns (Iraq, Iran, Venezuela, Nigeria), 5) the modest safety cushion between global supply and global demand, and 6) the weak U.S. dollar, among other factors.
Other analysts and theorists argue that a reduction in the return on principal in other asset classes (stocks, bonds, real estate) has produced an 'oil as asset' environment - - i.e. that investment funds and large investors are investing in and holding onto oil, due to its high rate of return. Some in this camp further assert that if a large investor(s) were able to able to buy a large percentage of oil contracts, it (they) could, in theory, support oil's price and keep it 'artificially' higher than it would be under normal market forces.
Oil Analysis: In the absence of universal data on oil contracts, it's difficult, if not impossible, to reach an informed generalization regarding possible oil price manipulation. And that, in and of itself, justifies the inquiry and request by U.S. Senators Cantwell, Feinstein, and Wyden to the CFTC and FERC.
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Reader Comments (Page 1 of 1)
12-11-2007 @ 4:56PM
joe said...
Have you heard of price fixing. Oil demand has remained fairly constant year over year. However, demand is slightly lower in 2007 over 2006. This would argue for a softening of prices but for price fixing. price fixing has been an element of the oil business since the 1930s. Nothing has really changed.
12-11-2007 @ 5:20PM
David Huston said...
The real problem (7) with the current and the eventual prices of oil is that it is a finite product, with a finite supply, which, when drained, will force the US (and the rest of the world) to use some other energy resources or substitutes. Most reliable estimates of oil supplies are that they've peaked worldwide - perhaps even in Saudi Arabia - and that by the middle of this century supplies will have sharply declined: in the face of burgeoning demands for black gold in China, India, and elsewhere. In short, there's every reason to find environmentally friendly substitutes for oil, starting now.
12-11-2007 @ 5:29PM
Eddie said...
In other news, panelists at a major American university open a panel to discuss whether the sky is in fact blue. Tune in at eleven, when we post their findings regarding the wetness of water.
12-11-2007 @ 5:29PM
Joseph Leslie said...
The price of butter goes up, you switch to margerine! In 1979, I was working on a project here in Colorado for the US Department of Energy, to make the United States Energy self sufficient! The Carter Administration realized that you depend on unfriendly sources for something that is very important to you!
Well our Great Fearless Leader, Ronald Regan killed the program because "the US Government has no business in the Energy Business"! So here we are today! If this project had been completed we would be able to tell OPEC, "We'll call you if we need any oil"!
12-11-2007 @ 9:18PM
LENNY STEBULIS said...
YOU'RE SERIOUS, RIGHT...?? YOU DON'T NEED TO BE A GENIUS TO ANSWER THAT. THE OIL LOBBY OWNS CONGRESS AND HAS SINCE CHRIST WAS A CORPORAL...
DEMAND IS DOWN FOR GASOLINE (NO ONE CAN AFFORD TO "FILL UP" ANY MORE), WE HAVE WARMER THAN NORMAL TEMPERATURES, YET HEATING OIL SUPPLIES ARE "TIGHT", CRUDE PRICES HAVE BEEN DOWN OVER $10 A BARREL FOR OVER A WEEK, YET GAS PRICES HAVENT DROPPED IN PROPORTION TO THE CHANGE WHEN IT'S RISING (3 CENTS A GALLON FOR EVERY $1 A BARREL INCREASE IN CRUDE) AND YOU ASK IF PRICE FIXING IS GOING ON,,,???????
IT'S GOOD TO KNOW SOMEONE WILL BE ABLE TO WRITE FOR THE COMEDIANS IF THE WRITERS STRIKE CONTINUES....
BY THE WAY... HAS ANYONE HEARD A PEEP FROM THE PRESIDENTIAL WANNA BE'S ABOUT GAS OR OIL PRICES...??? DIDN'T THINK SO.....
2-28-2008 @ 4:53PM
Chuck said...
There is more to this than "Price Fixing." In the event of a major attack, this country does not have enough oil to defend itself. Shell Oil's CEO reports that his company is only allowed to drill in 15% of the known oil reserves. These high energy prices are taking anywhere from several hundred dollars a month to thousands and is leading to the collapse of the American economy. Once the economy collapses, were is the government going to get tax revenue?
2-28-2008 @ 7:53PM
Chuck said...
I have been friend's since my teens with a man whose father was the CEO of an oil company, and my wife was good friend's with the CEO's wife of Texaco and spent time in both of their homes. They weren't the people you descibe but good patriotic citizens.
2-29-2008 @ 3:37PM
Chuck said...
Back in the late 1890's there were reports that oil was going to run out. Now oil reserves larger than the Saudi fields have been discovered in the Eastern Gulf of Mexico and the Arctic that will supply Americas needs for the next seventy five years. Many geologists feel that the earth constantly produces petroleum as a natural resource that will supply all the worlds needs for a thousand years!