Just look at these headlines……
UK Gas Prices Rise Despite Mild Weather
Oil Prices Rising Despite Lowest Demand Since 1997
US Spot Gas Rises Today Despite Weak Futures.
Continued growth in shale gas and offshore drilling and production throughout the US.
Wait a minute…. isn’t the price SUPPOSED to go down, when you have too much of an item and fewer people wanting to buy it?
Obviously gas and oil are not in a free market system.
Bloomsberg tells us why……
This is the earliest in a new year that the average price per gallon has breached the $3.50 mark…
“Petrol demand is as low as it’s been since April 1997,” says Tom Kloza, chief oil analyst for the Oil Price Information Service.
Hmmmmmm. On February 17, 1997 gas prices were…. $1.22 a gallon. Why then with demand at the same level are they at $3.57 today?
One reason…. Bain Capital like hedge funds…..
Much of the increase is due to speculative money that’s flowed into gasoline futures contracts since the beginning of the year, mostly from hedge funds and large money managers. “We’ve seen about $11 billion of speculative money come in on the long side of gas futures,” he says. “Each of the last three weeks we’ve seen a record net long position being taken.”
In other words, $11 billion in gasoline futures are secured at very high prices, which means that until the futures come down, that is what we we’ll pay.
We are just the pawns throwing our money away to the 1%… Here, we’ve got tons of it sitting around, have some more……
Can this rigging be fixed?
Absolutely. Ulysses S. Grant showed us how….
Called the Black Friday Gold Panic, in 1869 two financiers tried to corner the price of gold without regard to the nation’s economic welfare….
As the price of gold climbed, industries requiring gold as a catalyst, could not afford to buy… The Federal Treasury released $4,000,000 in gold at the rate prior to the speculative runoff….
Today if translated to gas, the Chief Executive Officer of the United States, could at a time when gas was $4.00 a gallon, release for sale large quantities of the Strategic Petroleum Reserve at prices in the $2.00 range, and those holding futures at $4.00 would be ruined…
Gas would return to market rates, probably around $1.50 a gallon.
Obama would be the hero of the Western World….
A picture of Romney with tears running down his face would the the new face of HOPE for years to come…..
It’s been a while since we’ve had a hero……..
kavips 
6 comments
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February 16, 2012 at 12:43 pm
Duffy
Leaving aside your complete misunderstanding of the futures market, let’s talk about the rest.
You tell us that the problem can be solved by President Obama by simply releasing the SPR. Assuming that is true. Why would he not do so other than to reward his friends on Wall Street?
Funny how you deride Bain capital but seem totally unaware of MF Global.
February 16, 2012 at 4:58 pm
kavips
Don’t even try to defend the futures market as a “way” of stabilizing prices over time….. That is what it was created to do. That is what it is supposed to do. The problem is… that is not what is happening… Anyone can see that….. Unless, of course, they have their self imposed blinders on……
The answer is not to get rid of the futures market. … The appropriate answer is to get rid of the rampant speculation on the futures market…. Limit futures contracts to people who actually buy the product… (Uhhh, like it use to be before Republicans changed the law?…..)
MF Global IS gone…Old History. It no longer gets the same applause meter rating when used as a example, ….. as opposed to a current fund, like Bain Capital…. which is much better known…..
(It makes sense to deride something your audience at least has a remote idea of what you are talking about….).
February 17, 2012 at 11:25 am
Duffy
Don’t even try to defend the futures market as a “way” of stabilizing prices over time….. That is what it was created to do.
Partially. It was created as a way to make money by predicting the future. Stabilization was seen as a ancillary benefit.
That is what it is supposed to do. The problem is… that is not what is happening… Anyone can see that….. Unless, of course, they have their self imposed blinders on……
Do you have any proof or evidence that can directly point to futures markets as the cause of or contribution to, instability? Correlation does not count. Show cause.
“The answer is not to get rid of the futures market. … The appropriate answer is to get rid of the rampant speculation on the futures market….”
Again you show your lack of understanding of the basic purpose of futures market. The very purpose of the futures market is speculation.
“Limit futures contracts to people who actually buy the product… (Uhhh, like it use to be before Republicans changed the law?…..)”
So who would be “allowed” in your world to buy oil futures? Oil companies and? Please further explain how constraining this activity in the United States is going to have any effect whatsoever on global financial markets where these contracts are traded? All you are going to do is drive the business to London and Hong Kong. Congratulations on another job killing, tax revenue killing short sighted proposal.
“MF Global IS gone…Old History. It no longer gets the same applause meter rating when used as a example, ….. as opposed to a current fund, like Bain Capital…. which is much better known…..”
Translate that to “Pay no attention to the man behind the curtain”. The bottom line is that Obama’s #1 economic adviser was the head of a fund that lost a billion dollars of investors money and he has no idea where it went. If there’s ever a better explanation of why we’re in this mess you’d be hard pressed to find it. Bain, on the other hand, is alive and well and has $66bn AUM.
February 17, 2012 at 2:42 pm
kavips
What?
Again you (kavips) show your lack of understanding of the basic purpose of futures market. The very purpose of the futures market IS speculation
No wonder this nation went to hell under the Republican Party.
How clear it is that eliminating all people from any position of power who think thusly, will again propel our nation on its rise to properity……..
The futures market was invented as a way to stabilize prices over the course of a year.. It has been manipulated by speculators and we, the consumer, suffer dearly for the meddling…..
For those who do not know, here is how it works…
You buy airplane fuel…. It is $3.50 a gallon at some points of the year, and $4.50 at other points of the year… with thin profit margins, when it is low, you make money; when it is high, you report a loss… Which means your books are volatile. We’re making money… yeah! We’re losing money….Boo!….
So, you figure out that your average over the past year, was $3.75…. When it was $3.75, you made money….
So you make a deal, that you will pay $3.75 a year for fuel… No matter what the market price runs… When it is high, you are paying less than everyone else… when it is low, you are paying more than everyone else.
Month to month it looks like you are saving or losing. But over the course of an entire year, it holds steady… The gains make up for the losses… What this gives you is stability. You report on your books a consistent cost for fuel, which means you can focus elsewhere on ways to improve your margin making yourself look more profitable…..
The problem occurs when Bain Capital, jumps in and buys a contract at $4.99 a gallon… Your supplier says, “can’t sell it to you this year for $3.75. Price is now at $4.99…..”
Obviously letting Bain Capital interfere with normal everyday business is bad for the economy. It hurts Republicans just as much as it hurts Democrats.
February 21, 2012 at 9:08 am
Duffy
“How clear it is that eliminating all people from any position of power who think thusly, will again propel our nation on its rise to properity……..”
You cannot eliminate speculation without eliminating capital markets. Good luck running an economy without them.
“The futures market was invented as a way to stabilize prices over the course of a year.. It has been manipulated by speculators and we, the consumer, suffer dearly for the meddling…..”
No. The idea of futures was dreamed up by a greek guy over 2000 years ago as a way to make money predicting the coming year’s yield of olives. The stability was built into our market by making it a zero sum game. For every long there is a short.
“The problem occurs when Bain Capital, jumps in and buys a contract at $4.99 a gallon… Your supplier says, “can’t sell it to you this year for $3.75. Price is now at $4.99…..”
Obviously letting Bain Capital interfere with normal everyday business is bad for the economy. It hurts Republicans just as much as it hurts Democrats.”
No. Those futures are contracts which means they are legally binding. If I’m the airline, I’ve purchased a huge amount of fuel for the coming year and locked in a price ($3.75 in your example) to defray the volatility and really for accounting purpose reduce uncertainty. Bain does not get void my contract. My supplier will supply that fuel at that price or they’ll be in court and they will lose.
I have an example of what I think you’re talking about but it’s too long for here. will post at Rhodey.
February 21, 2012 at 8:27 pm
kavips
Ok I’ll check it out there….
For other readers….
http://colossus.mu.nu/ Rhody….
But the answer dodges your question about where we set the price… WE don’t set the price… We control the amount for sale….. Such a rule would limit the amount of oil that Wall Street speculators could trade in the energy futures market, taking control over the oil futures market away from speculators and returning it to those who actually use and supply oil……..
Just for the record… here are two others expressing how much unnecessary speculation increases what we pay at the pump…….
Goldman Sachs suggests that legal speculation may be adding 65-70 cents to the price of a gallon of gasoline.
Exxon CEO Rex Tillerson says supply-and-demand fundamentals suggest the price of oil should be $65-$70 a barrel, about a third less than the current price.
Just sayin’ …. it doesn’t take much to stop it….