In a letter signed by 12 CEOs, the US air travel industry has called upon you, their customers, to help them lobby congress. What’s the problem that they need help solving? Oil speculation. Read the letter inside.
An Open letter to All Airline Customers:
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
The nation needs to pull together to reform the oil markets and solve this growing problem.
We need your help. Get more information and contact Congress by visiting http://www.StopOilSpeculationNow.com.
They’ve sent you an EECB… how will you respond?
Airlines: Curb oil speculation [CNN]
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From;
[www.howstuffworks.com]
“A plane like a Boeing 747 uses approximately 1 gallon of fuel (about 4 liters) every second. Over the course of a 10-hour flight, it might burn 36,000 gallons (150,000 liters). According to Boeing’s Web site, the 747 burns approximately 5 gallons of fuel per mile (12 liters per kilometer).
This sounds like a tremendously poor miles-per-gallon rating! But consider that a 747 can carry as many as 568 people. Let’s call it 500 people to take into account the fact that not all seats on most flights are occupied. A 747 is transporting 500 people 1 mile using 5 gallons of fuel. That means the plane is burning 0.01 gallons per person per mile. In other words, the plane is getting 100 miles per gallon per person! The typical car gets about 25 miles per gallon, so the 747 is much better than a car carrying one person, and compares favorably even if there are four people in the car. Not bad when you consider that the 747 is flying at 550 miles per hour (900 km/h)!
“
Perhaps for the first time, I am in full agreement with the airlines. Although, it’s not JUST about speculation, it’s also about investment banks being the speculators. It’s set up so investment banks own tons of oi futures, then they speculate that the prices will go up. Nice set up.
If we help them and get it passed can we get free movies back??????
We will get a bill for reading that letter though.
@AngryEddy, @Phillip M. Vector: Inevitably well-played.
@Nepkarel: Oil is expensive because demand is higher. That is what a free market does. I am surprised all those free marketeers now suddenly don’t like the free market anymore.
I’m not.
@AngryEddy: That really made me laugh, thanks.
The airline industry has concocted an argument most of America will want to support because the average citizen doesn’t partake in commodity trading, and doesn’t go to the effort to understand it. Instead of explaining how the system is supposedly flawed, the airlines’ letter is well-designed to bring back scary memories of the fraudulent electricity trades that caused blackouts in California, and led to numerous charges against the alleged trader/culprits. The letter doesn’t actually say anything at all. It gives no details as to what is supposedly blocking transparency and disclosure in the market. Oil commodities trading is not skewed or unfair. In fact, it has greater flexibility than some other traded commodities, due to the many options for storing and delivering the product, as opposed to being tied to the capacity and delivery points on a grid or pipeline system. There are few barriers or constraints to the oil commodities market. Oil speculation has increased because the market is good right now, i.e., demand simply exceeds supply at the moment. It’s a “hot commodity.” In the last two decades we’ve seen several cycles where oil or gas prices tanked, sometimes catastrophically for the oil and gas companies. I remember just a few years ago, when natural gas companies were trying to get out of long term contracts for $2.50/mcf. The market will cycle again; I just don’t know when or to what degree.
I’m another fed up airline customer who now looks for other means of transportation before resorting to air travel. I remember when American (I think) negotiated salary reductions with its flight attendants to supposedly save the company. As soon as the airline succeeded in getting those salaries reduced, it announced giant bonuses for the executives. This is a popularity contest between the airlines and the oil industry. When the airlines say “feel sorry for us; we need your help,” I’m not inclined to be supportive.
@smartperson: That’s exactly right. Price controls the supply of everything. Speculators help ensure there is enough oil in the future. If they’re regulated out, and there really is a small supply of oil in the future, we’re going to have a shortage and then an even bigger price spike in the future.
If the speculators are wrong though, they’re going to get burned big time. And if they do get burned that might convince a lot of people not to get involved in “paper speculation” for quite some time.
Everyone needs to listen to the npr bit that RCarl has above. It’s not so simple as, oil speculators are driving the price of oil up. The price of oil will be dependent on what the market is willing to bear. If you don’t like how much the price of oil is, consume less. As demand drops, so will prices, and ‘speculators who wagered that prices are going up will lose money. They will in turn drop out of the speculative market.
There was a column in the New Yorker a few weeks back, stating that blaming the speculators was overblown:
[www.newyorker.com]
The writer says the problem is that world demand has grown, and that “shortage psychology” at work.
@vladthepaler: so speculators assume a lot of risk in the market by buying when someone wants to sell and vice versa. If we did not have anyone speculating then there would be much less liquidity, which could have the affect of having huge swings in the price–I want to sell at $5 but there is only 1 person who wants to buy and they want it at $1.
The airlines should have planned better by hedging against the price oil by buying futures contracts a year ago. It is possible to lock in exactly the price oil a company will pay for a long period of time. The high price of oil is just an excuse for poor management.
@ nataku83: The problem for the free marketeers is that they are used to the US being the power that can influence things. Problem is that currently the immens power of 300 million rich Americans is being dwarfed by 2,5 Billion Chinese and Indians.
@ Bladefist: That would be a hypocritical of you. You can’t have it both ways. Either you are a free marketeer, and you fill up your car smiling because you have oil-stock in your back pocket, or you admit that free markets aren’t always the best.
BTW: I am not denying that speculation has a bit of influence on the oil price, but if you really want to bust some speculative ass, please go after those folks that speculated on houses by buying them with interest-only mortgages, and the folks that traded in those mortgages. *They* really created the current financial mayhem, including a good chunk of the crappy $
From that New Yorker article:
Congress is . . . taking aim at perfectly legal speculation, namely the buying and selling of futures contracts, which are effectively bets that oil prices will go up (or down). Futures contracts can be used by oil sellers (like OPEC ) or oil buyers (like the airlines) to hedge their risks by agreeing to sell or buy oil in the future at a set price. Speculators, by contrast, mostly use futures contracts to gamble on oil prices, and have no interest in buying or selling real barrels of oil. These gambles can be tremendously lucrative, but they don’t directly determine the real (or “spot”) price of oil. That’s set by the people who are buying and selling actual barrels of petroleum. Although speculators could directly distort oil prices by turning their futures contracts into oil and then taking it off the market to drive up prices, a look at oil inventories shows no sign that this is happening.
@Nepkarel: I’m not hypocritical. My mind changes when the facts change. Contrary to popular belief, being a conservative republican has nothing to do with being totally against some forms of regulation. In terms of national commodities, I lean towards the center. I don’t want to the government to take over oil, but maybe make some decisions on speculation. *Shrug*
I’m going to get on the phone to my congressman alright -Just as soon as I finish typing this.
When I call, I’m going to lobby him (or her) to rein in high prices for airline tickets. Im going to demand that these assholes and their shit excuse for transportation give us back the space that they have been stealing from us by adding more seats to already overcrowded planes. I’m going to insist that rude flight attendants have their disrespectful ass spanked right in full view of the coach section. I’m going to insist that phone tree be made a capital crime. I will demand that any dumbshit airline exec that allows passengers to be trapped on an airport runway for 8 hours while he pretends to give a shit be forced to do the same time hour for hour in one of his company’s planes. I will tell my congressman that I will “contribute” dump trucks full of money to his campaign if he will stop sending trainloads of money to the airlines every time they fuck up.Finally, I will demand that the CO’s of American, Delta, United, continental and US Airways be forced to attend debt management classes.
There- Isn’t democracy wonderful
This is one of those things, I would help and encourage others to lobby Congress for as well.
Huh? Speculation isn’t the problem. Or rather, it’s not a problem that the airlines themselves can’t fix by buying futures themselves (see Southwest hedging). They’re all upset that their crystal balls weren’t properly tuned to see the current situation, so they’re backlashing at the speculators. Boo hoo. If it were only airlines in the game, the situation would still be exactly the same, though we might have cheaper flights and less airlines in jeopardy. Oil prices wouldn’t be any lower for the rest of us, the people that they’re begging for help.
What’s the fix, nixing the commodities market? Forcing trade? Setting aside so many barrels for spot trading? How do you decide the constraints and whose crystal ball do you get to use?
How about: all commodities trade must involve a physical transfer of goods before it can be retraded. Not a perfect solution, but it at least keeps people from getting rich by stockpiling papers instead of barrels.
sorry…. can’t formulate a full thought right now… too busy laughing my ass off…. ok (Wipes tears… catches breath)
They’ve sent you an EECB… how will you respond?
Do unto others…
————————-
Dear Sirs;
Thank you for your recent letter on OIL SPECULATION. I would like to personally assure you that my dog and I are taking the matter very seriously. At this time, we do not have a firm policy in place regarding OIL SPECULATION but I will personally pass your letter on to the houseplants, who are the specialists that have authority in this matter. Enclosed you will find a free coupon. Please use it with our compliments.
Once again, we’d like to thank you for voicing your concerns about OIL SPECULATION, and for being a valued customer. We look forward to your continued patronage in the future.
Sincerely,
Mercurypdx, Inc.
ATT: Free coupon brought to you by Imageshack
CC: Dog, Houseplants
This is simple economics people.
Demand is down.
Supplies are up.
Prices should be going…which direction? anybody?
If you aren’t reading Ed Wallace you need to be. He is the most well verse expert on the subject.
[www.businessweek.com]
@razremytuxbuddy: If “demand simply exceeds supply”, then where are the shortages? India and China have been developing for a decade. It’s not like last year they said, “Hey, let’s start buying oil!” But, prices have nearly tripled in a year.
@chrisjames: I think your solution about delivery is actually the solution that everyone wants. Personally, I don’t want to eliminate the market. I just don’t want the various state pensions and fund managers cornering it.
@Karkus: exactly.
airlines – buy your gas, set your fares accordingly.
people – fly less.
airlines – spend less on oil, since people are flying less.
not rocket science. supply and demand.
@xphilter:
Southwest did just that, hence why they have not had to raise fees. However, notice they have signed the letter as well. I think that since prices have gone up and stayed up, it means any new contracts for Southwest (and others) will end up being more expensive, so I foresee Southwest will have to break down and start charging extra fees as well.
@MercuryPDX: Great letter. Now I’m laughing my a** off!
@Mr_Human:
But man, I need to blame somebody! The tricky part is deciding what villain is responsible. Oil companies, speculators, OPEC, the Bush administration, SUV owners, or some combination thereof? I guess I’ll select the one I’m already inclined towards, then read some articles that support my decision. Then it’s time to express my anger, preferably in some way that isn’t too inconvenient.
Im surprised everyone is jumping on board without reading the ‘fine print’
“We believe that restoring and enforcing these limits, along with several other modest measures, “
They dont say what the other modest measures are.
Its these little clauses that industry ahs been dropping into proposed legislation that has really gotton us into this mess to begin with.
Cutting out speculation, fine, adding several other undisclosed modest measures = not fine.
This should be the #1 question everyone asks: If oil speculation (or speculation in general considering how law works) ends, who gets to make the money that was formerly made by speculators?
Is it the airline industry? Someone is making that money. While I want to help in this energy crisis, I need to know more about where this money is going before I accidentally find myself a corporate airline lobbyist working for free.
Personally, I’m just fine with paying higher prices. I know not everyone has the financial security to say that, but I’d rather just keep the same amount of service- as if some airlines could actually get worse- and pay more. As a savvy, yet understanding consumer, I’m ok with paying more if a company can show me legitimate reasons (like rising oil prices) why costs have to increase. Companies would be surprised by the amount of people who would just nod in agreement if they came out and said, “Sorry, our costs have gone way up. We’re going through some investor cash right now, but we need to raise prices to keep our current staff and maintain profitability.” Honesty goes a long way, but I don’t know if the average world citizen is reasonable enough to accept the honesty and not have some knee-jerk reaction to it.
@theblackdog: true, but even Southwest should have had a plan of “oh my god! $100 oil!” I have a hard time believing none of these companies have thought about the current situation. Did they think when prices rose more people would fly? Just like everyone else in America, they are now paying for their years of relatively ‘good times’.
@mercurypdx
YOU TOTALLY JUST MADE MY DAY! Thanks for the laugh.
I think there was some good comments both ways on this and I actually enjoyed reading, while learning a little and getting a good laugh.
@razremytuxbuddy &Jenng: Had to be done. Hopefully I captured the “Eau de Form Letter” format accurately.
I’ve never understood how we allowed speculation to push oil prices up as high as they are now, oil is not something we are going to run out of in any of our lifetimes there is enough on this planet to last thousands of years. I’m behind this because if oil had not gone so high skybus would still be around and I really enjoyed 10 dollar tickets.
So in an asides to this oil speculation issue, those of you who are pro-regulation in the airline industry, how many of you have looked into the period of time when they were regulated? They fought hard to keep from being deregulated because it meant that they would have to start competing and lowering prices to get your business. Before the deregulation you had to pay something around the equivalent of 5 grand to fly LA to New York, thats what a couple hundred now? Is that extra 4 grand worth it for the nice meal and slight increase in leg room you got? This isn’t to mention the millions of tax payer money used to enforce laws that dictated the quality of food served in airline meals among many other things.
Additionally to this issue things like bag surcharges and the like are there to keep you from having to pay a higher ticket cost. Yeah I liked that all inclusive price too, but when you’re flying with just a 20 pound carry-on do you really think you should be paying the same as the guy who brought 150 pounds of luggage between his two checked bags and the one that he is using to overload the storage bin above your head? No, its the same principal as a toll road. You pay for what you use, its way better than everyone paying for everyone else.
Another thing, if you have the government regulate the airlines then you end up with the poor or less mobile paying tax dollars to subsidize the travel methods of the rich.
On the terms of the speculation its messed up and sucks, but hey, if you want freedom then you have to deal with the downsides. If you want to keep your right to resale your old dvds on craigslist then you have to support someones right to resale the barrel of oil they just bought. Its the same principal just on a different scale. Yeah free market capitalism has some downsides, no one said it didn’t, but its sure a lot more fun and efficient than any of the alternatives.
@CarlR: Thanks for the great link everyone blaming the speculators and making them into boogeymen need to listen to it.
I will also post an oped from Tuesday’s Wall Street Journal (A-20)
——————
The Onion Ringer
July 8, 2008; Page A20
Congress is back in session and oil prices are still through the roof, so pointless or destructive energy legislation is all but guaranteed. Most likely is stiffer regulation of the futures market, since Democrats and even many Republicans have so much invested in blaming “speculators” for $4 gas.
Congress always needs a political villain, but few are more undeserving. Futures trading merely allows market participants to determine the best estimate – based on available information like supply and demand and the rate of inflation – of what the real price of oil will be on the delivery date of the contracts. Such a basic price discovery mechanism lets major energy consumers hedge against volatility. Still, “speculators” always end up tied to the whipping post when people get upset about price swings.
As it happens, though, there’s a useful case-study in the relationship between futures markets and commodity prices: onions. Congress might want to brush up on the results of its prior antispeculation mania before it causes more trouble.
In 1958, Congress officially banned all futures trading in the fresh onion market. Growers blamed “moneyed interests” at the Chicago Mercantile Exchange for major price movements, which could sink so low that the sack would be worth more than the onions inside, then drive back up during other seasons or even month to month. Championed by a rookie Republican Congressman named Gerald Ford, the Onion Futures Act was the first (and only) time that futures trading in a specific commodity was prohibited, and the law is still on the books.
But even after the nefarious middlemen had been curbed, cash onion prices remained highly volatile. In a classic 1963 paper, Stanford economics professor Roger Gray examined the historical behavior of onion prices before and after the ban and showed how the futures market had actually served to stabilize prices.
The fresh onion market is highly seasonal. This leads to natural and sometimes large adjustments in prices as the harvest draws near and existing inventories are updated. Speculators became the fall guys for these market forces. But in reality, the Chicago futures exchange made it possible to mitigate the effects of the harvest surplus and other shifts in supply and demand.
To this day, fresh onion prices still cycle through extreme peaks and troughs. According to the USDA, the hundredweight price stood at $10.40 in October 2006 and climbed to $55.20 by April, as bad weather reduced crop yields. Then it crashed due to overproduction, falling to $4.22 by October 2007. In April of this year, it rebounded to $13.30.
Futures trading can’t drive up spot prices because the value of futures contracts agreed to by sellers expecting prices to fall must equal the value of contracts agreed to by buyers expecting prices to rise. Again, it merely offers commodity producers and consumers the opportunity to lock in the future price of goods, helping to protect against the risks of future price movements.
Tellingly, the absence of that option for onions now has some growers asking Congress to lift the ban. But instead of learning from its onion mistakes, the political class seems eager to repeat them.
@Mr_Human: We have a winner! Yes, the futures market and the spot market, while somewhat inter-related, are entirely separate markets.
For those of you jumping on the blame the speculators bandwagon: the spot market involves physical delivery of real oil, not trading pieces of paper. Oil is rarely actually delivered under a futures contract. Likewise, most contract arrangements reflect the spot market. Go to Bloomberg.com or some other financial site that tracks both future and spot commodity prices. You will see that crude oil spot prices are trailing the futures by less than $1 per barrel!
Sorry, but $140/bbl is the real price, not some false-feedback-distorted-by-speculators price. If the spot price is $140 that means real people are paying 140 US dollars for a real barrel of oil. You don’t get a much clearer picture of basic supply and demand than in the spot market.
As tough as it may be, $140/bbl is a clear reflection of current market fundamentals. Think about it: For a couple of years now oil prices have strongly trended upward. That’s a market signal that there is not enough supply.
Even though net supplies have increased during that time, new demand has outstripped even that. Consider that the Chinese alone use 1 million barrels of oil more today than they did just three years ago.
$140/bbl isn’t good for anyone. Everybody would be happy if oil were just being sold ad infinitum for about $65/bbl. Sure, suppliers benefit in the short term but they will take a big hit if an economic downturn leads to a drastic reduction in demand, or if high prices push people to pursue alternative fuels. The main reason we enjoyed such low prices in the late ’90s was the deep Asian recession.
Altogether, what I think you can infer from an ongoing situation of high demand, high prices, and inadequate supply is that more supply just. isn’t. there.
Sure, I’ll do this. The airlines just need to send me $15 for my first e-mail to Congress, plus an additional $15 for any other calls or e-mails.
It seems the airline execs are confusing “speculators” with “middlemen”. Saying that speculators push the price up with each trade is disingenuous at best. The reason they’re “speculators” is that the price can certainly go down, in which case they lose money.
@arcman001: I’m for regulating the speculation, but also raising fuel taxes to help support new technologies and greatly increasing fuel economy standards to reduce our dependence and our carbon-footprint.
A picture of these guys should be next to the word “hypocrite” in the dictionary.
Airlines are good, do not regulate us!
Oil companies are bad, regulate them!
Oil is up because:
a) China (consumption, African Oil deal, export/manufacturing)
b) war (fleets, armor, planes, all need fuel)
c) imports (freighters run on…diesel!)
d) speculators (by far the worst and most responsible as they moved from the risky hedgefunds of mortgages to oil futures)
e) Oil companies don’t want to spend profits on expensive refinery construction (they need to add 10 more refineries as the oil is there), they want the governments to finance their offshore and recreations drilling (they’ve already had clearance in certain oil fields and have never touched a drop).
f) threats from countries like Iran, unrest in places like Nigeria, …
We can conserve. We can move to other forms of energy. Stop buying cheap goods, or supporting companies that would offshore manufacturing rather than local (how much to ship?) We should drop the speed limit to 60 instead of 65 (please, there are still asshats that drive like it’s NASCAR). But we can’t rule out oil. It’s on the roads (tar), in your smelly candles (parafin), your petrochems of your New car plastic interiors, in chemicals for your tires, paints, …
Rant over. Peace.
If speculation is indeed the driver, then it’s global speculation – just like global demand. Not just American speculation. Not just American demand.
IF the American government intervenes and inhibits speculative trading of oil futures by American traders, the rest of the world will simply close ranks and keep on trading without American participation.
And the price will still not come down. Unfortunately, this has to run itself out on its own.
Go to hell. Check my website for company policy.
@smartperson: Would going from $50/barrel to $200/barrel in a week be better for the economy?
Ding Ding Ding. This man knows what he is talking about. The future market smooths out shifts in price and is very important, especially for something as important as oil.
I am going to take another, completely different tack.
For everyone complaining about speculation, if the speculation was doing the opposite of what you say it is doing, and drove the price down far more than “what it should be”, (speculation can go both ways)would you be saying anything and trying to get the oil companies the price they deserve? Or would you just happily profit from the “speculation”?
@sleze69: See these comments @Tmoney02: @smartperson: @Tmoney02:
@ehrgeiz: FYI, I don’t think you would find anyone in the oil business who would agree with this:
In one sense, I suppose you’re right that we will never “run out.” I suspect there will be a barrel of oil in the ground somewhere for time immemorial. That said, when it costs more to get a barrel of oil out of the ground than it’s worth then we are effectively out of oil. The concept is EROEI: Energy Return on Energy Invested.
As for thousands of years of oil, that’s right up there with believing in unicorns. Plenty of energy experts believe that global production plateaued sometime between 2005 and the present. Plenty of industry insiders, like the Chief Technology Officer of Chevron, think global production will peak by 2020. The most optimistic, and totally unverifiable and self-interested, claim I have heard is by the head of Saudi ARAMCO, who says there’s enough to go around for another 100 years.
@Tmoney02: Speculators have never driven the price down…Think about it, if there are 20 transactions that make up the final price of oil until it hits a gas station…I don’t think all 20 are shorts on oil…people are making money, up or down. But more on the upside.
I still think that if you want to buy a commodity you should have to have the ability to take the order.If people want to start playing options with oil, that would be okay, because it would be based on REAL trades.
Here’s my modified letter:
Dear Senator So-and-so:
High prices for energy are hurting me and my family and I strongly urge Congress to act immediately to lower costs for all Americans. Over the past 8 years, my annual automobile fuel costs have gone from $519.65 to $1376.56. Why, just over the past 12 months I have seen a $591.92 increase in my gasoline spending.
Rampant speculation in the commodities futures market is driving up prices out of proportion to marketplace demands. The problem is speculators are increasingly buying and selling commodities such as oil even though they have no intention of using the product. The unregulated speculators are pocketing billions of dollars at my expense.
To lower oil prices for all Americans we need to increase domestic supply, exploration, alternative energy sources and conservation. On the national front, ANWR will provide oil for Americans a decade down the road. The Bakken formation in North Dakota and Montana can provide Americans with oil now. Shale oil deposits in Colorado have the potential to make America energy independent, if they are developed properly. You have only to look north to Canada, and witness their exploration of tar sands to understand that exploring known oil reserves here is cheaper and faster than off shore drilling or prospecting ANWR.
Domestic coal burning plants and wind energy are both plentiful in our state, and helping Iowans to divert away from petroleum products and towards electric transportation is good for Iowa. This will lower gasoline/oil prices for other industries and help to protect the environment. Convincing and helping farmers to switch over to electric farm equipment will also improve the energy balance of using corn or cellulosic ethanol for an alternative fuel. If you look to the coal mines as an example, the majority of their heavy equipment is electric.
Then there is the problem with excessive speculation; the price of gasoline and heating oil is almost becoming prohibitive. The price of food and other essential goods are also inflated, partly due to speculative contracts on corn, wheat, cotton and oil. Congress should promptly take action. I suggest that we re establish strict position limits on all commodities. This includes food commodities as well as energy commodities. We should also be sure to control foreign futures exchanges trading as strictly (if not more strictly) as US trading. We need to place strict position limits on “swaps trades” or over the counter trading, as well. Finally, we need to regulate exempt commercial markets the same as designated commercial markets and bring more transparency to energy trading, working through the Commodity Futures Trading Commission.
Thank you for listening to my concerns. If you strive to bring change in the commodities market in order to reduce both food and fuel prices, you can expect my vote come re election time.
Today’s Headline (from CNN): Oil zooms up $5-plus on Iran fears
Did the demand go up today enough to justify an additional $5 price increase? Nope. There is speculation that we could lose Iran’s supply, causing the price jump.
How do the non-us airlines stay in business when they’re paying double what we do for refined fuels?
Oil prices are high to some extent because of speculators and to a large extent because big institutional investors have few safe alternatives: 1) stocks and bonds are in bad shape 2) Treasuries are being collateralized with garbage paper thanks to Easy-Loan Ben Bernanke, so there’s increase in perceived risk (US Treasury bonds and notes used to be the safest investment on the planet), and 3) other commodities do not have the same demand. There will ALWAYS be a buyer for that barrel of oil. the other stuff? maybe. maybe not.
Big jumps in commodity prices are largely, aside from obvious supply destruction like a huge crop failure, a signal of flight to safety, not the machinations of evil oogity-boogity speculators.