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A Bull Market Sees the Worst in Speculators
Diana B. Henriques, New York Times
In Washington, financial speculators have fat targets on their backs.
They are being blamed for high gas prices, soaring grocery bills and volatile commodity markets, and lawmakers are lashing out at market regulators for not cracking down on them more vigorously.
“You study it, but you don’t act against this incredible increase in speculation,” Senator Carl Levin, Democrat of Michigan, complained to a senior official of the Commodity Futures Trading Commission at a recent Senate hearing. “Unless the C.F.T.C. is going to act against speculation, we don’t have a cop on the beat.”
Just this week, Senator Joseph I. Lieberman, the Connecticut independent, said he was working on a proposal to ban large institutional investors from the commodity markets entirely. The same day, the Bush administration endorsed another Senate proposal to create a new federal interagency task force to investigate commodity speculation.
(13 June 2008)
Action against oil speculators could backfire
Jane Merriman, Reuters
Politicians in the United States and Europe want curbs on speculators to cool record high oil prices, but the imposition of new regulation could do more harm than good, a senior UK futures market executive said.
“We must avoid a knee-jerk reaction that could be damaging to the markets,” said Anthony Belchambers, chief executive of the UK-based Futures and Options Association.
(13 June 2008)
If a Hurricane Strikes (Part 1 of 2)
Bill Paul , Energy Tech Stocks
Experts Say Oil Could Spike to $200, Natural Gas to $16 Mcf, and Stay Elevated for Year or More
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Should a Category 3 or higher hurricane roar through the energy-producing region of the Gulf of Mexico this summer, oil prices could spike to around $200 a barrel from about $135 currently and natural gas prices could hit $16 per thousand cubic feet (Mcf), compared with less than $13 currently. If damage was severe, prices could stay elevated for a year or more due to costs and rig availability.
That’s the view of experts EnergyTechStocks.com asked to assess the impact a major hurricane in the Gulf of Mexico would have this summer, a time when, as everyone knows, energy prices already are at record levels. The experts hedged their bets.
… Coming Tomorrow, Part 2 of Hurricane Woes – Airlines Grounded?
(16 June 2008)
Out Of Control(s)
Art Pine, Congress Daily (National Journal)
If you think the United States is encountering some serious economic strains from today’s skyrocketing global crude oil prices and soaring gasoline costs, consider what China is facing.
Yes, China’s increasing appetite for petroleum is part of the reason that global crude oil prices are at record highs. Yes, Chinese motorists are paying only $2.50 a gallon for gasoline, not $4 a gallon. Yes, Beijing is striking deals with oil-rich dictatorships to ensure long-term oil supplies, often offering them trade concessions and military aid.
But China is facing one big problem the United States won’t have to surmount this time as it moves to adjust to more costly petroleum: Beijing is going to have to pare back its enormous energy subsidies and fuel-price controls. And in the long run, that might prove more painful than anything the United States will go through.
Like many emerging-market countries, China is rife with government controls on energy. Its oil industry is run almost entirely by the state, which imports crude at global prices and sells it at a discount to state-owned refineries. Gasoline prices are rigidly controlled; they’ve risen 9 percent since early 2007, compared to 80 percent in the United States.
Fuel-price controls might have seemed fine when oil prices were lower, but the recent price surge — to nearly $140 a barrel — makes it almost impossible for China to sustain them. If Beijing keeps fuel prices low, it risks seriously draining its foreign exchange reserves. If it lets prices soar, it risks worsening inflation and more political unrest.
(9 June 2008)
Eliminating Subsidies Won’t Cut It (Demand for Oil That Is)
Jeff Vail, The Oil Drum
jeffvail on June 13, 2008 – 10:00am
Cheap gas and diesel due to government fuel subsidies has become one of the favored whipping boys of late-a convenient way to blame high oil prices on the actions of some other government or faraway people (See 1 2 3 4 5 6 7 8).
But how much can subsidies really be blamed for present oil demand? Would cutting a 30% gasoline subsidy reduce demand by 30%? Why not?
I’ll stake out and defend a somewhat extreme position: reducing, or even eliminating fuel subsidies will not cause a significant, long-term reduction in demand and may even cause demand to increase more quickly than with subsidies in place. More importantly, we must not fall prey to claims that cutting fuel subsidies is an easy solution to our energy problems.
(13 June 2008)
Can We Have Rationing Now Please? An Exclusive Interview with David Fleming
Rob Hopkins, Transition Culture
…we are already seeing the rationing of fuel underway, but it is rationing by ability to pay, the most socially devisive and dangerous method. I think we are nearing a point where, if people are familiar with the advantages of such an approach, pressure could be coming from the community level up for rationing, something unimaginable even last year. To explore this further, I interviewed David Fleming of the Lean Economy Connection, the creator of the Tradeable Energy Quotas system, still, in my mind, the most straightforward carbon/energy rationing system. You can find out more about TEQs here. His setting out of the benefits of beginning their introduction now is compelling, and one which, in current circumstances, one would imagine any competent government would find highly compelling.
Rob Hopkins: How do you see the unfolding events of the past few weeks? (ie. the runaway price and it starting to make the price of petrol/diesel rise, with the impacts being felt acutely by those on lower incomes and in rural areas)?
David Fleming: Well, this is the beginning of the breakdown of the energy market. High prices are a sign that some people are having to forgo some or all of the oil which they would have expected to buy. In some cases, those purchases are absolutely essential to their livelihoods, and if they are priced out of the market in the oil auction, they will not be able to do really fundamental things like buying the kerosene they need to power their irrigation pumps. So far, most of those who have been affected to this extent are the poor – third world farmers, for instance. But it is coming our way.
The oil market is a complex system, and when complex systems break down they do so chaotically, so that it is impossible even in theory to say in any detail what will happen next. But the outcomes are certain. The energy famine, with oil in the lead, and the other fuels not far behind, is beginning, and, as the gap between supply and need widens, the market will begin to break down. Markets can only stand a certain amount of stress before behaving in peculiar ways. For the past century, the oil market has been a buyer’s market. There are many oil buyers (billions of us), as well as many sellers, and this has kept it stable. In contrast to this, a seller’s market, where a few sellers can determine the price by determining the supply, is unstable. If just one of the sellers stopped pumping oil, or drastically reduced the amount of oil being sold, some of the shipments on which we in the rich countries depend would simply stop.
(13 June 2008)
BP Statistical Review of World Energy 2008
BP
(June 2008)
