Obama calls for closing the "Enron loophole"

[Pangloss]

I'm not sure I understand where exactly you guys disagree.

[Aardvark]

I'm not sure I understand where exactly you guys disagree.

 

Bascule appears to believe that oil traders are working in collusion to deliberately withhold supplies of oil and drive prices up.

 

I have pointed out why i consider that to be such a nonsensical idea as to be almost insane.

[Pangloss]

I see, thank you.

[iNow]

Bascule appears to believe that oil traders are working in collusion to deliberately withhold supplies of oil and drive prices up.

 

I have pointed out why i consider that to be such a nonsensical idea as to be almost insane.

 

You can't truly be serious? They've been doing exactly that for years.

 

 

http://www.newsweek.com/id/119895/output/print

 

Look no further than last week's OPEC meeting in Vienna. Oil ministers declined to increase production despite a fairly obvious case for doing so. Not only were oil prices fluttering just above $100 a barrel, but the United States is either in or near a reces*sion and much of the rest of the world faces a noticeable econom*ic slowdown. The OPEC ministers were unmoved. Indeed, they indicated that they might actually reduce production if weak de*mand-presumably reflecting weak economies-threatens to de*press prices. Not good.

Go back to late 2006. Crude prices were slipping from about $70 a barrel in August toward $50 a barrel (a level that, a few years earlier, seemed astronomi*cal). A true cartel would cut production to prop up prices. That's what OPEC did. In two steps, it reduced oil output by about 800,000 barrels a day, notes economist Larry Goldstein of EPRINC. "By July, 125 million barrels of oil inventory had been wiped out," he says. At the end of 2007, inventories (measured by days of supply) were at their lowest point in three years. Prices rose. Without OPEC's supply cuts, they wouldn't now be at $100 a barrel.

More have spare capacity; more are tempted to increase production to raise revenues. Controlling supply today is easier because most producers are operating near their potential. The surplus is concentrated in a few countries, especially Saudi Ara*bia, which can adjust production to influence prices.

 

 

 

That's just one quick source, there are scores of others, including the fact that the US Congress sought to sue OPEC for EXACTLY that.

 

 

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article3972387.ece

Washington overcame a significant obstacle yesterday in its attempt to sue Opec for behaving as an oil cartel and keeping the price of fuel artificially high.

 

The House of Representatives overwhelmingly approved legislation to bring a lawsuit against Opec members because they have collectively set the price of oil and limited oil supplies.

Oil ministries from each of the oil- producing countries meet regularly to discuss global demand and whether to boost supply to control the oil price. Recently, Opec has refused to increase production even though the oil price has hit a record level.

 

 

 

http://www.govtrack.us/congress/bill.xpd?bill=h110-6074

[Aardvark]

iNow. You do understand that OPEC and market traders (speculators) are completely different groups don't you?

 

OPEC attempting to limit oil supplies has absolutely nothing whatsoever with oil traders or any putative 'Enron loophole'.

[iNow]

I see where we got our signals crossed. It was not an intentional miscommunication, I promise.

 

Are you suggesting, then, that market traders would have no interest in driving up costs, and that a limit on supply is not an effective way to do that?

[Aardvark]

Are you suggesting, then, that market traders would have no interest in driving up costs, and that a limit on supply is not an effective way to do that?

 

At anyone time, half of all oil traders would like to see oil prices rise and half would like to see them fall. Whichever way the traders would like to see the oil price go, they don't have the option of limiting supply. OPEC could conceiveably do that, but not uncountable numbers of traders dispersed all over the world.

[iNow]

Okay. It sounds like we share a pretty close understanding of the topic then. Thanks for taking the time help get us on the same page.

[Aardvark]

Always good to find some common ground in one of these discussions.

[bascule]

Bascule appears to believe that oil traders are working in collusion to deliberately withhold supplies of oil and drive prices up.

 

That's a terrible strawman. Can you please go back and reread my posts while employing a higher degree of reading comprehension, rather than making up fantasy viewpoints in your head then attributing them to me? Thanks.

 

No, it has been clearly demonstrated that Americans will pay whatever the going price is. If the price set is $50 a barrel the Americans pay, if the price is $100 a barrel the Americans still pay it. When the price is heading toward $150 a barrel the Americans STILL pay it!

 

What if the remaining 3/4 of the world will pay $150 a barrel, and Americans pay $200? Wouldn't America drive the price of oil up?

 

Now, what if the rest of the world begrudgingly plays a price America has inflated, and the price America is willing to pay goes down.

 

You seem to have a hard time understanding this supply and demand stuff. The global price of oil and what America is willing to pay are highly interdependent. You seem to be treating them as two separate entities.

[Aardvark]

That's a terrible strawman. Can you please go back and reread my posts while employing a higher degree of reading comprehension, rather than making up fantasy viewpoints in your head then attributing them to me? Thanks.

 

Do you even bother to read your own quotes? Here you are again, your quote from Greenberger. You seem to be displaying a complete lack of intelligent comprehension of your own posts, let alone anyone elses.

 

''speculators who are using what are called dark markets, markets that can't be watched by the public or regulators, to manipulate the price of crude oil and, therefore, gasoline and heating oil in an upward direction.''

 

That's pretty much the definition of a conspiracy. And completely bonkers as well.

 

What if the remaining 3/4 of the world will pay $150 a barrel, and Americans pay $200? Wouldn't America drive the price of oil up?

 

Now, what if the rest of the world begrudgingly plays a price America has inflated, and the price America is willing to pay goes down.

 

Oil is a fungible commodity. Go get a dictionary and look it up, you might learn something.

 

You seem to have a hard time understanding this supply and demand stuff. The global price of oil and what America is willing to pay are highly interdependent. You seem to be treating them as two separate entities.

 

 

Your ignorance and lack of any sort of understanding of basic economics and the functioning of the markets is quite remarkable.

 

Just to repeat (maybe you'll get it this time).

 

1) Oil is a fungible commodity.

2) The price of oil is set globally.

 

Therefore trying to regulate oil market trading in the USA will have no impact on the price of oil. If you wanted to you could have all the evil speculators in New York taken out and shot. It wouldn't cut the price of oil. It wouldn't stop oil trading. It would however be another blow to the financial services industry in the USA, London and Dubai and Singapore and Shanghai and Bern would be most grateful.

[bascule]

*yawn*

 

The day that President Bush announced the end of the Presidential ban on off shore oil drilling the price of oil dropped. The price dropped immediately he made the speech.

 

Changes in American policy resulted in a drop in the price of oil? SAY IT AIN'T SO.

[Aardvark]

Changes in American policy resulted in a drop in the price of oil? SAY IT AIN'T SO.

 

Of COURSE!!!!!!

 

 

As i've repeatedly pointed out, the only way America can affect the price of oil is by producing more or consuming less. The President changes policy so as to produce more and the price falls.........Proving my point.

 

(You really don't seem to be able to grasp this whole Supply and Demand thing at all)

[bascule]

As i've repeatedly pointed out, the only way America can affect the price of oil is by producing more or consuming less.

The President changes policy so as to produce more and the price falls.........Proving my point.

 

America can also affect the price of oil by paying more or paying less, the point you seem to be missing.

 

(You really don't seem to be able to grasp this whole Supply and Demand thing at all)

 

Pot... kettle...

 

You know, it'd really help if you'd actually cite some sources to back up your points. So far you haven't done that whatsoever, and instead just slander my sources without actually rebutting them.

[Pangloss]

Bascule, how would you describe your difference of opinion with Aardvark? I'm not convinced you're not just picking a fight over semantics here.

[Aardvark]

America can also affect the price of oil by paying more or paying less, the point you seem to be missing.

 

America pays whatever the price is. As the price has risen, America has just kept on buying the oil at the higher prices. If America was to reduce consumption due to the higher prices that would have an effect. As i've REPEATEDLY pointed out. Lower consumption or higher production would reduce the price.

 

As it is, American demand for oil is inelastic, so there simply isn't an option of 'paying more, or paying less'

 

You know, it'd really help if you'd actually cite some sources to back up your points. So far you haven't done that whatsoever, and instead just slander my sources without actually rebutting them.

 

So sorry that logic and reason aren't good enough for you.

 

As for your 'sources'. Having a quotation from Greenberger stating that there is a conspiracy to drive up the price of oil just shows that you are basing your argument on someone without a firm grasp on reality. Here's a rebuttal for you, it would be physically impossible and make no financial sense at all for oil traders to engage in such a conspiracy.

[bascule]

Bascule, how would you describe your difference of opinion with Aardvark? I'm not convinced you're not just picking a fight over semantics here.

 

Bottom line: Aardvark seems to be insisting that unregulated overseas trading of U.S. oil commodities has no effect on the price internationally (and as far as I can tell, domestically) and that requiring all U.S commodities be traded on U.S. regulated exchanges would have no effect on the price of oil.

 

I disagree, and have cited sources which claim the contrary.

 

For starters, Aardvark, do you think that requiring trades of U.S. oil commodities occur on regulated exchanges would have an effect on the domestic price of oil in the U.S.?

 

This is a fun juxtaposition:

 

So sorry that logic and reason aren't good enough for you.

 

As for your 'sources'. Having a quotation from Greenberger stating that there is a conspiracy to drive up the price of oil just shows that you are basing your argument on someone without a firm grasp on reality.

 

Ad hominem. You haven't said why Greenberger's argument is wrong, you're simply saying it's wrong because he lacks a "firm grasp on reality".

 

That's pretty much bottom of the barrel fallacious reasoning.

Edited July 21, 2008 by bascule
multiple post merged

[Pangloss]

The thing I've never been able to figure out is what happens in the case of completely vertical companies, which drill, ship, refine and market. It would be rather odd for them to pay themselves market price for oil they drilled themselves. There's a lot about the manufacturing chain for big oil that I don't understand.

[Aardvark]

Bottom line: Aardvark seems to be insisting that unregulated overseas trading of U.S. oil commodities has no effect on the price internationally (and as far as I can tell, domestically) and that requiring all U.S commodities be traded on U.S. regulated exchanges would have no effect on the price of oil.

 

No. That's not what i have stated at all.

 

I'll recap for you.

 

Oil is traded internationally. Therefore it is not possible to 'require' that oil be traded on 'U.S. regulated exchanges'. America IMPORTS the bulk of her oil, remember?

 

Therefore, increasing regulation of the New York markets isn't going to effect oil prices.

 

 

I disagree, and have cited sources which claim the contrary.

 

For starters, Aardvark, do you think that requiring trades of U.S. oil commodities occur on regulated exchanges would have an effect on the domestic price of oil in the U.S.?

 

Hahaha! I think that 'requiring' that would be hilarious. :D:D

 

America IMPORTS oil. That means the oil comes from places that the US can NOT regulate. America has to pay the prices set on international markets. US regulations do not come into it and trying to impose US regulations on other countries would be very funny and very pointless.

 

 

Ad hominem. You haven't said why Greenberger's argument is wrong, you're simply saying it's wrong because he lacks a "firm grasp on reality".

 

That's pretty much bottom of the barrel fallacious reasoning.

 

Actually, i've just pointed out how his argument is wrong because it is not physically possible. It would require every oil trader across the globe to simultaneously engage in coordinated oil hoarding. It would require every oil trader to ignore their own financial interests and it would require every oil trader to keep the whole conspiracy secret.

 

But if you think that just because something is impossible doesn't mean that it's been discredited then fine, you go in thinking that:-p

 

The thing I've never been able to figure out is what happens in the case of completely vertical companies, which drill, ship, refine and market. It would be rather odd for them to pay themselves market price for oil they drilled themselves. There's a lot about the manufacturing chain for big oil that I don't understand.

 

Why wouldn't they charge themselves the full market price all along the chain? It makes financial sense. If a process along the chain needs cheaper oil than the market price then you can get more profit from selling the oil to someone else rather than performing that part of the manufacturing chain. There's absolutely no point in cross subsidising any part of your company.

[bascule]

Well, I'm about done arguing with Aardvark as he only seems to want to deal in strawmen and not arguments of substance. And I'm not sure how to argue about the U.S. oil futures market with someone who thinks it doesn't exist...

 

Here's a rundown for the casually interested observer:

 

And as for Michael Greenberger, if he truly believes that speculators are deliberately 'manipulating' the price of oil in 'dark markets' then he is a fool. That would require a concerted conspiracy on the part of huge numbers of oil traders, all working together, in concert to try and corner the worlds oil supply. A palpable nonsense.

 

Aardvark insists that speculators can only manipulate the markets through a CONSPIRACY!!! I insist this isn't the case:

 

Nobody's arguing a conspiracy here, just that unregulated oil speculation is driving up the price. Why does it have to be a conspiracy instead of a collective effect? That's a bit of a strawman.

 

But even after trying to make myself clear, this isn't a conspiracy, it's a collective effect, Aardvark once again goes for CONSPIRACY, strawmanning me in the process.

 

Bascule appears to believe that oil traders are working in collusion to deliberately withhold supplies of oil and drive prices up.

 

First, I said nothing about supplies. And here's someone who agrees with me that the collective effect of speculation is driving up the price of oil in the U.S.:

 

http://articles.latimes.com/2008/may/30/business/fi-oilprice30

 

In testimony to Congress this month, Michael Masters, a hedge fund portfolio manager, said the sheer number of investor dollars flowing into the commodities markets had skewed the relationship between oil supply and demand. He said that only $13 billion traded in commodities indexes in 2003, compared with $260 billion in March 2008.

 

“Index speculators provide no benefit to the futures markets and they inflict a tremendous cost upon society,” Masters said, according to a copy of his testimony.

 

“Individually, these participants are not acting with malicious intent. Collectively, however, their impact reaches into the wallets of every American consumer.”

[Pangloss]

The thing I've never been able to figure out is what happens in the case of completely vertical companies, which drill, ship, refine and market. It would be rather odd for them to pay themselves market price for oil they drilled themselves. There's a lot about the manufacturing chain for big oil that I don't understand.

Why wouldn't they charge themselves the full market price all along the chain? It makes financial sense. If a process along the chain needs cheaper oil than the market price then you can get more profit from selling the oil to someone else rather than performing that part of the manufacturing chain. There's absolutely no point in cross subsidising any part of your company.

 

Then why did it take so many decades to arrive at (or near) $150/barrel? They could have "paid themselves" more than the market rate all along.

[Aardvark]

Well, I'm about done arguing with Aardvark as he only seems to want to deal in strawmen and not arguments of substance. And I'm not sure how to argue about the U.S. oil futures market with someone who thinks it doesn't exist...

 

It's a shame that you apparently don't even understand your own argument, let alone anyone elses.

 

 

 

 

Aardvark insists that speculators can only manipulate the markets through a CONSPIRACY!!! I insist this isn't the case:.

 

Wrong.

 

You are the one who uses a quote from Greenberger calling for regulation because of a conspiracy. I have pointed out that no such conspiracy does or can exist.

 

Your conspiracy theory is insane.

 

 

But even after trying to make myself clear, this isn't a conspiracy, it's a collective effect, Aardvark once again goes for CONSPIRACY, strawmanning me in the process.

 

Wrong again, it's odd how you don't appear to even read your own posts.

 

You claim that all the oil traders are collectively working together to deliberately withhold oil supplies to drive up the price.

 

That is a good definition of a conspiracy. And also practically and financially impossible.

 

 

First, I said nothing about supplies. And here's someone who agrees with me that the collective effect of speculation is driving up the price of oil in the U.S.:

 

You did refer to oil supplies, that's is what this entire thread is about:rolleyes:

 

And it's easy enough to find random quotes from people, that doesn't count as proof or data. Each of us could post hundreds of quotes from people who think that regulating speculation in the USA will reduce prices or who think that is a stupid and ineffective idea. It doesn't prove a thing.

 

 

 

I note that you haven't bothered to try and counter my points that it is impossible for American to regulate the oil trading markets, that the only way for America to affect the oil price is to consume less or produce more or that it is physically impossible for all the oil traders on the planet to collectively act (conspire) to deliberately withhold oil supplies to boost prices.

 

Still, never mind, it's pretty clear that you have no understanding at all of the way markets work.

 

Then why did it take so many decades to arrive at (or near) $150/barrel? They could have "paid themselves" more than the market rate all along.

 

 

The only amount that makes sense for a company to pay itself is the exact market rate. If they pay themselves more, then all they are doing is taking money out of one of their pockets and putting it into another pocket. It doesn't make them any extra profit, why would they want to do that?

[Pangloss]

Aardvark, chill out. There is no reason for you to be so insulting, and it is not conducive to good discussion. If you keep posting like that you're going to start eating infraction points and seeing your posts removed again.

 

Knock it off.