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Stung by gasoline prices, Obama seeks new oil market crackdown

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It's a nice gesture but a little late. Should have done more when he had control of the House and Senate but missed opportunities and jaw-dropping blunders (hear about the US$850,000 party in Las Vegas?) have defined this administration. Such hope and promise......what a waste.

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The problem isn't illegal trading it's LEGAL trading. Years ago hedge and even pension funds were limited in how much they could invest in commodities. The rules were relaxed and you see see the results. Airlines, farmers etc, the end users who had a financial interest in hedging were 80% of the market, speculators 20%. Now? It's reversed with speculators at 80% and end users at 20%. Not a good thing.

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Goldman Sachs figures speculation inflates oil about 20% at the moment.

http://www.cbsnews.com/8301-505123_162-43552722/when-goldman-sachs-warns-that-speculation-drives-oil-prices-listen-up/

Obama faces two problems: the Republicans will never act to restrain profits in the financial sector; and the Republicans will never act to achieve a goal which would benefit the Obama presidency, no matter how it would also benefit the country at large.

Good luck achieving that 60% super-majority in the Senate; it'll go down on party lines. Again.

3 ( +3 / -0 )

Obama faces two problems: the Republicans will never act to restrain profits in the financial sector

Wall Street, in blue New York, is part of his power base.

0 ( +1 / -1 )

Nessie, Wall Street has their fingers in every pot. That they contribute to the Democrats may explain tepid Democrat-introduced legislation. How does it explain Republican opposition when the Democrats do try to rein in excesses?

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Obama, a politician speculating on the speculation of market speculators... love it. Anyways, his proposal if implemented mean high regulations which means higher cost. Which then translates to higher energy cost. Of course its wrong for politicians like Obama when normal market forces determine commodity prices. How ever when these same politicians manipulate the market via monetary inflation, subsidies and regulations then hey! what could possibly go wrong!.

“We can’t afford a situation where speculators artificially manipulate markets by buying up oil, creating the perception of a shortage, and driving prices higher, only to flip the oil for a quick profit,”

No Obama. when the market determines prices, then it's price is normal and what it should be. But when Govt wants a say in pricing ONLY then ca it be considered artificial.

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Gas sounds cheap compared to Japan.

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No Obama. when the market determines prices, then it's price is normal and what it should be.

Let us think about various commodities and their differences.

Foodstuffs are very flexible in supply, and the speculation market works well here as an early-warning system: higher prices payed to producers are rapidly translated into increased output, which brings prices down to historical norms. Good job.

Precious metals are fairly fixed in amount and at any rate do not exert much influence on product pricing. The wedding ring you may be wearing may have had a previous history as gilt on a scabbard or in a circuit board. Speculation in this area does not effect the economy at large to any great extent.

Oil is a consumable, and the ability to increase its production is very limited. This is what makes it attractive to speculators, an this is why it is different from other commodities. The "natural price" of energy is what the market demands + the influence speculators exert - and this influence is, by the nature of energy, much greater than other commodities.

Most economists have recognized this; many laws have previously been passed to rectify the damage caused by speculators - but speculators being what they are, they continuously look for or try to create an advantage. As such, prudent regulators will always be on guard in this area.

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Let's look at it from another perspective. Say OPEC (or some other organization) were to constrict supply so as to drive up the price 20% - Republicans would be outraged! But when the financial industry bids up the price for essentially the same reason - to make more money off of a limited amount of product - Republicans are oh-so sanguine.

0 ( +1 / -1 )

While the price of gasoline looks high, it's actually not. The real problem is the devaluation of the dollar. That's the result of currency inflation. In 1963, a gallon of gas was 30 cents, a gallon of milk was 55 cents, and the quarter dollar coin was .925 grade silver(one ounce). Today an ounce of silver is over $30. Look at gold/silver charts over the last few years and you'll see the result of QE.

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Herve Nmn L'Eisa, currency inflation in respect to some arbitrary fixed material such as precious metals is not only predictable - it is desirable. One would think a person versed in recent Japanese history would understand the far worse perils of deflation. This is also not a uniquely American phenomenon; show me any country where a fixed commodity is the same price now as it was 50 years ago.

At any rate, specifically, oil is priced in dollars globally, so the dollar exchange rate is not relevant for this particular commodity.

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Most economists have recognized this; many laws have previously been passed to rectify the damage caused by speculators

Speculators have never done any damage what so ever. Laws/regulations that target speculators are only methods of shooting the messenger instead of those whom are responsible. If a law is passed then that meas Govt did something wrong/stupid and wants to shut down the messenger in such case the speculator. http://mises.org/daily/4460 http://mises.org/daily/4466

Precious metals are fairly fixed in amount and at any rate do not exert much influence on product pricing.

Your half right on this one. Precious metals, such as Gold and Silver especially do have fixed prices. And that is because of market scarcity. However your wrong on the assertion that they do not influence product pricing. Gold and Silver, especially Gold is the only universal accepted currency to which not even the $ compares to. The $ is a fiat currency and also a product commodity with a value of it's own. Gold is a way of measuring the value of this product which is why central bankers don't like Gold and do what ever it takes to manipulate it's market. A Oz of Gold in terms of $'s back in 2001 was around $250, today it's hovering somewhere around the $1,700 mark per Oz. But the amount of Au in the market is consistent and extremely stable. Interestingly enough India and Iran are agreeing to trade Oil for Gold recently http://www.forexcrunch.com/gold-for-oil-india-and-iran-ditch-dollar-report/

currency inflation in respect to some arbitrary fixed material such as precious metals is not only predictable - it is desirable. One would think a person versed in recent Japanese history would understand the far worse perils of deflation. This is also not a uniquely American phenomenon; show me any country where a fixed commodity is the same price now as it was 50 years ago.

Currency inflation leads to devalued debauched money with less value lowering the standards of living for all. It is the most egregious form of taxation possible. It is not desirable in any way to have inflation, none. Also there are commodities that still have the same price today as they did 50 yrs ago, even 5000 yrs ago. A Oz of Gold today would have purchased 350 loathes of bread 5000 yrs ago and today would still buy the same amount. A Silver dime today would purchase you 3 gallons of gas as it would have 50 yrs ago. Meanwhile it now take around $3.94-$4.04 for a gallon of gas and still rising.< http://www.lewrockwell.com/paul/paul319.html>

-1 ( +0 / -1 )

i find this ironic when one of his financial advisors actually wants the prices to raise to the same price as that in Europe which is i believe more than double what it is in some states currently

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Goldbugs are cute. Their misunderstanding of the role and function of currencies cause them to make such incredible statements. In fact, considering inflation, I'm sure most goldbugs would have preferred to live a hundred years ago, before that scourge of fiat became the law of the land - my! how living standards have plunged since then!

But the topic at hand is about oil and the influence speculative money has regarding its pricing. Certainly, in the abstract, speculators "have never done any damage what so ever" - value does not disappear; it just goes into different pockets. Economic damage is all relative, after all. Just ask Romney.

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It's not very likely that the new rules would do much to lower the price of oil anyway. With India and China both growing, along with most of Latin America, the consumption of oil is beginning to stretch supply. Obama can't force other countries to stop using oil so the US can use a lot. The price is going to go up. Basic economics 101. In fact I find the notion that the president has control of the economy mildly amusing. Short of taxes there is very little a president can do to affect the economy. Rules on speculation might even out price spikes but the price is going to go up.

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Wait, isn't watching over speculators and preventing volitility supposed to be the SEC's job? Oh wait, its the SEC, silly me. I should have known better than to expect a government oversight agency to actually do their jobs.

Most reactionary legislation is pointless at inception and the fine documents that Washington has been churning out lately have been particularly entertaining.

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Laguna, yes, you're right that goldbugs are cute, as are silverbugs. Let me ask you a simple question; If you had a bag with ten pre-1964 quarters, would you exchange them for ten shiny, new 2012 ones? Why not? They have the same face value, don't they? A barrel of crude oil today is the same as forty years ago, isn't it? Not in dollars, or any other fiat currency. Fiat currencies are simply a way of robbing the people, just like clipping coins. I have a bag full of dimes and quarters(halves and wholes, too) from before the devaluation by LBJ that I saved from my paper route as a kid in one year. That's a bag of real money, kiddo.

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A decade ago Dems once again blocked any drilling in ANWAR. After all, they told the nation, it 'll take ten years to bring any of what we extract to market.

Idiots.

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