Nation of Gas Speculators Condemns Oil Speculators

Everybody looks for people to blame when gas prices go up; how come nobody ever looks for people to thank when they go down? 

Four-dollar-plus-per-gallon gas prices have Americans grousing about oil speculators. Efforts to rein in the speculators have not worked. Masters of economic theory from Sen. Bernie Sanders (I-Vermont) to Rep. Leonard Boswell (D-Iowa) are calling for an end to oil speculation. And in a Zogby poll, a whopping 87 percent of Americans believe speculators are Very Responsible (61 percent) or Somewhat Responsible (26 percent) for current retail gasoline prices. 

Given the disdain for sorcery among all the Abrahamic faiths, it's not surprising to find Americans so hostile to investors who believe they can predict the future prices of a commodity. I'm sure if I ever met any actual oil speculators I'd find them disagreeable too. 

But then what can we make of the new trend in emergency-road-service calls? With AAA of Oregon and Idaho, AAA-Mid-Atlantic and even the Pennsylvania Department of Transportation's Expressway Safety Service Patrol all reporting increases in the number of out-of-gas calls they are receiving from stranded motorists, our media masters have decided this phenomenon can't be explained as the work of roadside Romeos too cheap to get a room. Instead, it's another sorrowful sign of economic distress, as Americans struggle to survive the green-shoots recovery by riding – literally – on fumes. "Rising gas prices have pushed some drivers to gamble with their fuel gauges," The Dallas Morning News intones. "Unfortunately, many of them are losing the bet."

For the sake of argument let's assume the emergency road-service uptick story is not the flaming bag of bogus trend-finding it appears to be. All these people losing the game of eighth-of-a-tank roulette are not assuming their cars will keep going without fuel. They're making the bet that every driver at some point, facing a low gas tank and an endless black ribbon of name-brand service stations, has to make: Do I pull over and get gouged by Shell right now or keep looking for that 10-cents-cheaper Valero of my dreams? 

That may not be smart policy, but it's certainly common. A substantial portion of Americans would take a mild risk and bet on a change in fuel prices (which are among the most volatile and rapidly changing prices of anything you buy on a regular basis) when there is no more at stake than a price difference of 40 cents, a dollar at most. Why are oil speculators, who have much more at stake and who are just as sure to suffer when they guess wrong, any worse than the rest of us?  

Comments

[Almanian]

KOCHTOPUS!!!!

Also, Citizens United has something to do with all these people running out of gas!!! Vaaaaaast right-wing libertarian conspiracy.

That is all.

[the real OO]

traders (speculators) should be required to take physical possession.

[sage]

This statement is further proof that we will never reach Peak Retard.

[heller]

What about the Peak Oil speculators?

[Ken Shultz]

There's nothing quite like the argument that oil is about to become so scarce, that it will no longer be affordable for a lot of Americans...

So we need to ration it. So that a lot of Americans won't be allowed to buy it--even if they can afford it.

Anybody seen Jennifer lately? That's like one of her favorite topics.

[johnl]

People who bought oil stocks haven't done so well. BP investors especially are hurting. I would have been better off buying gold. Last 3 years, BP has fallen 35%, XOM 8%, and SNP 500 only 4%. While gold is up 60%.

[SIV]

Cav is the very best H&R "editor"

One of you cosmos ought to gay-marry him and pay off his mortgage.

[Joshua Corning]

and pay off his mortgage.

HA!!

[Ken Shultz]

"Why are oil speculators, who have much more at stake and who are just as sure to suffer when they guess wrong, any worse than the rest of us?"

Because they're relatively anonymous; they're supposedly rich, and we're coming up on an election year.

This would be an excellent time to revisit the gas crises of the '70s.

It's the small things that bury presidents, and once Jimmy Carter made it so my dad couldn't buy gasoline on even days 'cause his license plate ended in an odd number?

Jimmy Carter had no chance of winning reelection, and I was sure to become a libertarian for life.

Oh, and the best counter-indicator going of what's smart and right and good?

The LA Times Opinion staff is talking about Carter's energy policy like it's where we should be headed!

http://opinion.latimes.com/opi.....ink-o.html

"...I'm asking you for your good and for your nation's security to take no unnecessary trips, to use carpools or public transportation whenever you can, to park your car one extra day per week, to obey the speed limit,..."

And what about the rationing, Jimmy? Opinion LA? What about the rationing?

[Joshua Corning]

"...I'm asking you for your good and for your nation's security to take no unnecessary trips, to use carpools or public transportation whenever you can, to park your car one extra day per week, to obey the speed limit,..."

The problem is that Carter was honest in his stupidity. Obama and his handlers are dishonest in their stupidity.

They want inflation and they want high gas prices and they want people to have a lower standard of living....but you will never catch them admitting it.

[prolefeed]

No, they want people to have a higher standard of living and full employment, while using less gas, and despite enacting policies designed to torpedo any economic recovery or prevent lower unemployment.

Economic stupidity has consequences.

[Tim Cavanaugh]

Jesus Suckin' Zeus! I know from the outside it looks like I've got a hardon against the L.A. Times, but seriously, they have stuff in there every day that I just choose to let go by. Paul Whitefield I generally found to be at least outwardly personable, so I'm gonna zip my lip.

[John]

Honestly, Tim, I know you have to pay the bills. I have worked my share of awful jobs to do the same. But God, I don't know how you did it.

[joshua Corning]

If i recall the spirit of Tim and Matt leaving Reason for the LA times felt like they were going to kick ass and take names and turn the LA times into the new paper of the digital age.

It didn't turn out that way...but i think that spirit is what kept Tim going.

[JW]

But imagine if we'd heeded Carter's advice on energy....To give us energy security, I am asking for the most massive peacetime commitment of funds and resources in our nation's history to develop America's own alternative sources of fuel -- from coal, from oil shale, from plant products for gasohol, from unconventional gas, from the sun?

My god! They're right! Technology has stood still in those 31 years! Why, had we listened to Carter, solar efficiency might be at 17% today! If only we had listened, we might have viable gasohol technology and the Plains wouldn't be the wasteland that it is today! The fools!

BTW, have we ever had a president with uglier suits? Granted, it was the 70's, but still, have some pride man!

[jcalton]

Why are oil speculators, who have much more at stake and who are just as sure to suffer when they guess wrong, any worse than the rest of us?

Because we're not manipulating the fucking market to earn a profit. We're just too poor to afford gas.
There's ZERO comparison here.

[Ken Shultz]

Yeah, nothing discourages oil production like speculators bidding up prices.

Gimmie a break.

[Joshua Corning]

How again is saving money on transportation not trying to make a profit?

Also in real terms as a percentage of income energy costs has been dropping like a stone since the 70s.

We are not too poor to pay for gas. We just don't want to pay it.

[Invisible Finger]

In other words, 3 ounces of silver generally buys a barrel of oil, pretty much just like always.

[Joshua Corning]

manipulating the fucking market

Also this is bullshit.

US currency values have dropped 20%...the price of gas has not gone up, the value of the dollar used to buy it has gone down.

The dollar's drop has ZREO to do with speculators and everything to do with team Obama throwing money out of helicopters.

[CatoTheElder]

You don't understand. The Ben Bernack says that inflation is transitory and Turbo Tax Timmy says the US Treasury has a strong dollar policy. Currency speculators are driving the dollar down and oil speculators are driving oil prices up. Speculators are also driving up all the food commodity prices. Speculators are driving up metals prices also.

This has nothing at all to do with monetary policy because the core inflation rate is very low. The Ben Bernack says so. And it has nothing to do with fiscal policy. Otherwise, Congress in its wisdom would spend less. We should all be thankful for our wise leaders.

[John]

Just because prices are going up doesn't mean there is inflation.

[joshua Corning]

Just because prices are going up doesn't mean there is inflation.

That can be true.

Like when the PS2 was released and Sony did not ship enough units to meet demand. At that point you could buy a PS2 for $2000 on ebay.

That was not caused by inflation.

Today you can look at home prices which despite inflationary pressure are taking a nose dive.

The simple fact is home prices would be dropping even faster and further if Obama had not installed a warp drive on the US mint's printing press. Low demand for housing (and the recession in general) is disguising how bad inflation is right now.

[J]

Yes, and oil speculators are also responsible for earthquakes, malaria, and the death of children.

THE WITCHES MUST BE STOPPED!!!!

[prolefeed]

Because we're not manipulating the fucking market to earn a profit. We're just too poor to afford gas.

Bidding prices up (or DOWN) to the market prices that reflect the most current information and knowledge is not "manipulating" the market -- unless you think the people who bids prices way down recently were "manipulating" the market so they could lose money.

Do you really want gas shortages because the prices didn't reflect supply and demand and people used up the reserves due to lagging price signals?

[JW]

We're just too poor to afford gas.

Well, maybe you are. Time to take a 2nd job, my friend.

[Barack Obama]

Or buy a new car that's more fuel-efficient.

[Draco]

You forgot your other great idea of checking tire pressure more frequently.

[Byron]

Don't forget tuneups!

[crossofcrimson]

"Because we're not manipulating the fucking market to earn a profit."

And they have to make that profit by selling when oil is more expensive. I wonder what effect dumping all that oil on the market when prices are high has on oil-consumers. Probably nothing worth considering I guess....

[chaussures air max]

thank you

[Jim]

Why are oil speculators, who have much more at stake and who are just as sure to suffer when they guess wrong, any worse than the rest of us?

I believe the thinking is, that a person gambling on his gas tank doesn't force the price up significantly for everyone else, where as the speculation does.

People also don't believe that they "suffer" if they're wrong, because it's a bunch of giant hedge funds, and traders working at GS, who seem to never suffer consequences for being wrong.

Finally, people hear about the "security" premium, but are upset by that for two reasons. First, if nothing bad materializes, then the premium was for nothing, and we all just paid through the nose for six months for no appreciable reason. And since the likelihood of some serious new event happening is not probable*, it makes people upset. Secondly, if there IS some event, then the price is still going to skyrocket anyway, so we really didn't gain much by paying the security premium for months before hand (again, except higher prices).

*based on the fact that everytime someone in the Middle East farts, oil spikes a few dollars due to the "risk", but serious supply disruptions are actually pretty rare. They do happen, obviously, as we've seen, but not nearly so often as that excuse is thrown out to justify higher oil bidding.

Not saying I agree with that, but it's what I hear from the more intelligent complainers. What really draws a blank stare is when you ask them why the manipulative speculators suddenly stopped with the conspiracy at the end of 2008, and only now just resumed.

[Tulpa]

Do I pull over and get gouged by Shell right now or keep looking for that 10-cents-cheaper Valero of my dreams?

Neither. Pull over and get a gallon or two at the Shell, just enough so you can make it to the Valero.

[.]

Yup, I would have said the same. But there's a downside to that strategy - have you ever seen the looks and muffled snickers you get when you stop at someplace like Shell and buy only one gallon?

[jasno]

What about the option exercised by most Costco members - spend 30 minutes in the car with the engine running to save a few cents/gallon?

[emerson]

To all those denouncing oil speculators allegedly driving up the price of oil: If you think the price of oil is too high, short it! Haven't done that? Then shut the hell up.

[Ken Shultz]

It should be noted too that the reprieve we had on gas prices was in no small part due to the recession and the crummy economy.

There's no question that rising energy prices can squash a growing economy, but as the economy comes out of a recession and starts to gain strength, why wouldn't we expect to see oil prices rise?

Speculators or no speculators.

Add to that all the uncertainty surrounding the Arab Spring, and the speculators running up the price of oil starts looking pretty rational.

It's the people and politicians who expect the price of oil to stay flat despite it all that are suspect.

[John]

Yeah but supplies should rise in response to higher prices. There should be a natural price of oil and it should be a lot lower than what it is now. But, how much of the "rise" in the price of oil is the result of the loss of value in the dollar? If you don't like your money buying less, don't let the government destroy its value.

[JW]

Yeah but supplies should rise in response to higher prices.

Unless it's a price signal indicating relative scarcity. I'm not saying that is the case here, but at some point, the price will rise due to that reason.

There should be a natural price of oil and it should be a lot lower than what it is now.

What's the natural price of gold?

[John]

"Unless it's a price signal indicating relative scarcity"

True. But consider that there has been massive reserves of oil discovered in the last few years in Brazil and Canada and the fracking technology has opened huge reserves in America. At the same time there has been a world wide recession. This is not a time of relative scarcity.

"What's the natural price of gold?"

A lot less than it is now. When you price things in dollars, their price in dollars is going to go up when the value of the dollar goes down. Further, the price of gold is driven to a large measure by people looking for an inflation hedge. So right now you have two factors driving the price of gold; the loss in the value of the dollar and the general belief that inflation either has or is about to ignite.

The price of gold and oil right now are both being driven by factors other than a rise in demand or fall in supply.

[JW]

John, my point in asking about gold's natural price is that a "natural" price is a myth.

If you had a single commodity, from a single source and the demand and supply never varied, then sure, you could have a natural price expectation.

But to have a commodity, such as oil, that has varying supplies of varying quality and ease of extraction with non-static supply and demand, along with being priced by a fiat currency of falling value and subsidies that mask the true costs, it's impossible to say what the price of it *should* be, absent outside factors.

[John]

It may be impossible to pinpoint the price. But you can certainly say that this or that factor is raising the price even you can't say exactly what the price would be if not for that factor. Is it your claim that the fall in the dollar and the artificial restraints on supply have nothing to do with the rise in the price of oil?

[JW]

Is it your claim that the fall in the dollar and the artificial restraints on supply have nothing to do with the rise in the price of oil?

Of course not. That was part of my point of why it's impossible to say what the price should be.

[joshua Corning]

why wouldn't we expect to see oil prices rise?

There are a lot of balls in the air in regards to oil prices right now. There is no doubt to that.

But all indications are that the major cause of rising oil prices is inflation.

The dollar is down, oil supply is up and demand is low.

No Arab Spring or recovery summer can change those facts.

[CatoTheElder]

To all those denouncing oil speculators allegedly driving up the price of oil: If you think the price of oil is too high, short it! Haven't done that? Then shut the hell up.

Or, if you don't have the balls to play the futures market, then buy a long-dated call option on Chevron. If you haven't done something like that, you're either don't know what your bitching about or don't really believe what you're bitching about. Either way, SFB, STHU.

[American Delight]

Awesome graphs on Carpe Diem today comparing price volatility in the onion market (for which speculation is outlawed) to price fluctuation for oil:

http://mjperry.blogspot.com/20.....t-oil.html

[johnl]

Beautiful.

[John]

You have to have a sense of humor about this stuff. This movie plays over and over decade after decade in place after place. First the government artificially restricts supply of a vital commodity, usually food or fuel and devalues the currency. Then prices for said vital commodity go up and shortages ensue. The government then blames speculators and hoarders. Food in Soviet Russia, Mao's China, and Mugabe's Zimbabwe, gas in 1970s America, the list goes on and on. These people never learn.

[IceTrey]

Printer ink costs $5,000 a gallon retail. Why isn't the Gubmint coming down on HP, Cannon and Lexmark?

[Hugh Akston]

Why do you think they're getting involved in Libya? Vast pigment reserves, and Susan Power has a guaranteed seat on the board of Lexmark after she leaves the White House.

[JW]

It's the CMYK Brotherhood!

[MikeP]

When a company sells the printer at a loss and sells the ink to make the profit, then everyone can afford to print something, but the cost to the consumer becomes proportional to how much the consumer uses the printer.

So the high price of ink relative to the printer effectively democratizes printing.

[Crackpot 1.0]

how come nobody ever looks for people to thank when they [gas prices] go down?

That's it in a nutshell. Americans are woefully ignorant of basic economic principles. Every summer Big Oil takes it on the chin, but by winter Americans are thanking Jesus and Santa for falling prices at the pump.

[me/dwc]

There is a major difference between income and profit. Profit is something people make on top of income. Most Americans do not make anything like a profit and many barely make an income. I have no problem with speculators, but the comparison between speculators trying to profit and mere citizens trying to stretch their income is silly.

[.]

No, profit is that part of income left - if there is anything left - after all costs have been paid.

[P Brooks]

We're just too poor to afford gas.

GET BACK TO WORK

[.]

Hm. All these comments and not a word about big bailed-out banks playing the commodities futures markets to make a quick buck to pay back their interest-free, taxpayer-provided loans - while the rest of us, our children, and grandchildren get to pay off an even larger national debt and get zapped at the gas pump at the same time. But hell, it's just so special that the banks are able to restore their financial health instead of crumbling as they otherwise would have.

[jasno]

At the risk of getting blog-raped by the reason regulars.. ^^THIS^^.

All that money printed by the feds went somewhere. There seems to be a narrative out there gaining traction in which the funny money entered the commodities market and distorted prices. Can someone refute that for this poor econotard?