Saturday, May 17, 2008

Speculators "may" drive oil prices up... ya think??


Big news in CNN Business - some folks are wondering if $130/bbl oil might be due to ... gasp... speculators! profiteers!

The article does have a nice walk-through on how futures markets work, and the "rationale" for their existence. The argument is that, done right, they make long term decision making possible, and smooth the ups and downs of markets out.

That's the argument.

No, no, the billionaires shriek; we're good, we're necessary, don't change a thing, it's all the fault of those other guys...

As they strip millions of dollars- a day- out of the market; without ever touching a barrel of oil; or in the food markets, a pound of rice.

As an ex- substitute high-school teacher (one of the things I've done in my checkered past to put coffee on the table) I'm sharply reminded of the lies told by the kids in class, when they're thinking no one can catch them.

"I always sit here, I have to, because of my asthma." Big innocent eyes.
"We never have homework on Thursdays, ask anyone."
"Teacher always lets us go to lunch 15 minutes early, because..."

Bullshit, all of it.

The people actually in the oil business are starting to get it- and they want the speculators out. "Beutel, from the consultancy Cameron Hanover and a former NYMEX floor trader, goes even further in blaming big-fund money. 'We want to see them out, they have no respect for our markets at all,' he said."

Oh, but how?? the regulators cry (all of whom come from the hedge-fund world) ... with big, innocent eyes.

While all their friends and relatives rake in the millions. (Which come, guess what- out of YOUR pocket. You think the middle traders absorb the increases?? Does the price at the pump go up every day?)

How- is incredibly easy. Revert to the rules from 2 years ago; today. Wait 3 months, and measure the impact. Who would suffer? Golly gee, a few billionaires would add only 10% to their pile in that time, instead of 30%. Nobody else.


3 comments:

ceridwen said...

Hi

I'm visiting again.

I've awarded you the Excellent Blogger Award - so welcome to come and visit on my blog to "collect" it (aka cut and paste the "Excellent Blog" logo). You are one of my 10 Excellent Bloggers I have nominated.

Regards

ceridwen

Anonymous said...

summary: WTO rules require Japan to buy rice from US that they don't use, and can't re-export without permission from US, which wasn't forthcoming.

http://business.timesonline.co.uk/tol/business/industry_sectors/consumer_goods/article3948493.ece

Japan's silos key to relieving rice shortage

"a quirk of World Trade Organisation (WTO) rules that obliges Tokyo to buy rice it does not need and that eventually rots in storage. The WTO rule, its many critics say, effectively turns millions of tonnes of high-grade American produce into feed for Japanese hogs and chickens.

Researchers at the Washington-based Centre for Global Development (CGD) said that if that distortion were removed, and the 1.5 million tonnes of unwanted US rice were released from Japan's storage silos, the crisis that has sent the price of the crop that feeds half the world surging up would be solved instantly. The centre has suggested that rice prices could halve by the end of the month.

Standing in the way of that, however, has been a rule that prevents Japan from re-exporting its reserves of US rice without permission from Washington, which has not been forthcoming until now because of the fear of domestic political repercussions from the US rice industry."

Despairing said...

Greenpa, I was going to email you this link but I can't see your email address on the site anywhere, so I've stuck it in the comments here.

There was a BBC Radio programme last night about food speculators which I thought you would like:

"Speculation in commodity markets has been blamed for adding to the recent surge in world food prices, which is painful for businesses and consumers alike."

You can hear it for the next week by going to http://news.bbc.co.uk/1/hi/programmes/file_on_4/default.stm and clicking on "Listen to latest programme"