Rep. Bart Stupak is seeking to end excessive oil speculation

Darren said: "Bart Stupad, D-Michigan, has introduced his [url=http://www.superiorinvestor.net/blog/2008/06/23/pump-act-commodities-speculation/]Pump Act[/url] in an attempt to curtail excessive speculation in commodities, especially crude oil. It's interesting to listen to some of his facts concerning the problem. Especially interesting is the fact that the commodities trade for oil futures is now up to 22 times the entire physical market! I guess this really could be why our gas prices are so high."

StockHunter said: "The are only speculating because oil supplies/demand are forcasted to be lower/higer. People aren't just buying oil for no reason! Would you buy a stock for no reason? Or would you pick something that has reasons to go up? Try coming up with something like alternative fuels, and not messing with a free market! Just my $.02 on the subject :D"

Darren said: "Stupak said his research showed that speculators are following price action only. That means they keep buying because the price keeps going up. I agree that oil is also going up because of the peak oil worries, I can see how bad the speculation market is getting too. Commodity prices are very high these days."

StockHunter said: "His research is wrong/scewed then (:stoner:), who buys something just because the price is going up? Only newbies do this, and 99% of all your futures traders aren't newbies, therefore they look for a reason to buy. If you got the link to how he did his research that would be awsome, I'd like to read it. :whacky011:"

AlfredSokol said: "This bit is interesting [url=http://www.airlines.org/government/letters/Broad+Coalition+Supports+Stupak+PUMP+Act+-+Urge+Congress+to+Close+Commodity+Trading+Loopholes.htm]to me[/url]. [quote] In early June, speculators traded more than 1.9 billion barrels of crude oil – 22 times the size of the physical oil market, including $150 billion traded on the New York Mercantile Exchange alone. Sophisticated “paper” speculators who never intend to use oil are driving up costs for consumers and making huge profits with little to no risk.[/quote] It seems to me making some sort of regulation is definitely in order. Commodities were originally meant to be held by buyers. Now its all electronic and the speculators are trading more oil than exists by 2,200%."

Darren said: "[quote=StockHunter;70505]His research is wrong/scewed then (:stoner:), who buys something just because the price is going up? Only newbies do this, and 99% of all your futures traders aren't newbies, therefore they look for a reason to buy. If you got the link to how he did his research that would be awsome, I'd like to read it. :whacky011:[/quote] I take it you didn't actually watch the video :) He outlines literally tons of proof. Crude oil prices are up 427% in the last three years and it perfectly tracks the increase in speculation from the same time period. Traders buy something just because the price goes up. Why? So they can turn around and sell it at a higher price to someone else who is buying because the prices goes up. This is what happens in all bubbles. They are talking $30+ per barrel or more that oil is away from its intrinsic value. Worldwide that's costing people trillions in transportation costs."

ratAphooey said: "The [url=http://www.house.gov/list/speech/mi01_stupak/PUMPAct011907.html]PUMP Act[/url] takes aim at commodity trading. [quote] There are currently two types of oil futures trading. Market trading takes place through the New York Mercantile Exchange (NYMEX) and is overseen through the Commodity Futures Trading Commission (CFTC). However, most oil futures trading occurs “over-the-counter.” This trading is conducted off of the market, without any regulation or oversight by the CFTC. According to some economists, 250 million barrels of oil are traded daily on NYMEX and at least that amount is also traded daily, “over-the-counter,” without any regulation or oversight. “Oil price increases are based on speculation and fear, which fuels greed, and higher prices at the pump,” Stupak continued. “Because these over-the-counter trades are unregulated, the exact volume of trading is unknown. While it is almost impossible to determine the true impact speculators have on oil, gasoline and natural gas prices, some economists estimate that transparency in the oil futures market could reduce the price of crude oil by as much as $20 a barrel.” Stupak’s bill, the Prevent Unfair Manipulation of Prices or PUMP Act, would require over-the-counter traders to report to the Commodity Futures Trading Commission, just as on-market traders already do. This increased oversight would improve confidence in the market and help eliminate the unreasonable inflation of crude oil and other energy prices. The legislation would also increase penalties for speculators found to be unfairly manipulating the oil futures market. [/quote] I assume even the fact this legislation is being introduced should have a negative affect on futures trading."

ggrider said: "Anyone who speculates in the futures market by buying futures, must sell that contract before it turns into a cash contract and they are forced to take delivery of the product. Yes, excessive buying can push up the price short term, but these buys must be be sold as well. Selling puts downard pressure on the market. You never hear the people in congress saying anything about the need to sell these contracts. They act as though specualtors only buy futures, which is not true. Look at the cash market, the trading in the commodity that takes delivery in less than a month and you will see the real measure of supply and demand. The problem for oil is we are at the peak in supply and demand keeps rising. In China there are 25,000 new cars on the road each day, 750,000 in a month. These cars are causing the demand for oil to expand. There is excess oil available but it is what is called sour/heavy. There are not enough refineries to process this type of oil, as they are more expenive to build and face more regulatory restrictions. The Saudis are making more of this type of oil available to the market, but no one wants to buy it, sicne they cannot refine it. That is why the Saudis say there is plenty of oil available. This problem is an economic one. If governemnt interferes they will cause distoration to the market and we either will face shortages, even higher prices or some other problem."

StockHunter said: "[QUOTE=Darren;70522]I take it you didn't actually watch the video :) He outlines literally tons of proof. Crude oil prices are up 427% in the last three years and it perfectly tracks the increase in speculation from the same time period. Traders buy something just because the price goes up. Why? So they can turn around and sell it at a higher price to someone else who is buying because the prices goes up. This is what happens in all bubbles. They are talking $30+ per barrel or more that oil is away from its intrinsic value. Worldwide that's costing people trillions in transportation costs.[/QUOTE] I admit I didn't watch it :P lol. If what he (Rep. Bart Stupak) and others are saying is true, then all markets (futures, and stocks) would always go up no matter what. We all know that markets don't go up forever."

AlfredSokol said: "The market won't go up forever. But if this type of pressure continues on necessary commodities like gas and food many economies in the world will collapse. I'm at least glad they're looking into action. But I hope they don't overdo the regulations."

StockHunter said: "Notice, people only care about the price of oil, but ignore the price of corn/weat/etc. Why is this? Is it because the oil companies are "evil", and agricultural companies are not? If you look agricultural commodities they have had practly just as big of a run up as oil has, but you don't see anyone whining over them."