Gas prices are high? Enter Enron Loophole

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Tibu

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First a video:

Enron Loophole

Recently in the news, we have all heard about how the CFTC is now investigating trading in the dark market known as commodity futures trading. The Enron loophole exempts speculators from scrutiny on ALL energy trading done electronically. What's funny is that these same futures traders also OWN most of the energy market. That's right, the same people who produce the energy, they are BETTING on what the price of energy will be in the future, and they can also control what the same price will be. A legalized form of insider trading. Experts predict that by closing the Enron loophole, gas prices should fall 25-50%. The CEO of BP Petroleum recently said, “It is the case that the price of oil has gone up while nothing has changed physically.”

Deflating the oil bubble

Ryssdal: Why is it so hard to figure out what's going on in commodities markets -- oil specifically?

Greenberger: Well, the reason it's hard to figure out is about 30 percent of our crude oil energy futures are traded in what is called a dark market -- that is a market that was deregulated in December of 2000 at the behest of Enron. Prior to that legislation..., all energy futures traded in the United States or affecting the United States in a significant fashion were regulated ... under a very careful regime that had been perfected over about 78 years and many observers believe that because those markets are not being policed, malpractices are being committed and traders are able to boost the price virtually at their will.
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Ryssdal: So just to be clear, you do think that we're in a bubble, then?

Greenberger: I believe it and I'm certainly not alone in my belief. If you talk to anybody who trades in these markets on a regular basis, they will tell you that the markets are completely dysfunctional and out of control because of speculative activity.
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Link to Cspan broadcast of U.S. Senate hearing on Energy Market Manipulation:

U.S. Senate hearing on Energy Market Manipulation
 
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and when this bubble pops???

What happens to fuel prices?
What do the speculators go screw up next?
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Hard to say. The barrel price would go down but unhedged refiners who signed to buy those now overpriced contracts would be screwed unless they can reposition, and could disrupt middle market.
 
for those who care there was

a pretty good overview on Kieth Olbermann's program last night about the Enron loophole. Olbermann's indications are the McCain has been involved in a number of votes where he voted to not end the loophole. Now I'm sure some will not ever wnat to except anything that goes against McCain. Perhaps before condoning Olbermann on this one should review the information on the history of the Enron loophole, the attempts to stop the loophole and those did not vote to stop the existence. I will not claim there is 100% proof positive of McCain's actions favoring the oil companies. I'll just say you can not tell without checking out the information.

IMHO McCain is into supporting the loophole.
 
The things that Olbermann doesn't tell you.... The media is great about making drama and enciting the lynch mob mentality. Not reporting the news.

If you're wondering why driving to work has gotten so expensive, you might want to peruse your pension fund's investments. That's because speculation by institutional investors pouring money into the commodities market may be largely to blame for spiking oil prices,
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Have a pension plan? Does the plan have investments in energy commodities?
Shame on you for making money on the misery of others. You are greedy heartless people. lol You should fall down at Chuckie Schumers feet and beg forgivness.

http://www.businessweek.com/bwdaily/dnflash/content/may2008/db20080520_524455.htm

I think the Texas pension plan system has about 4 billion invested in enegey commodities trading. I wonder how much other workers plans have invested.
 
So you blindly follow what a guy like Olbermann says? I learned a long time ago the media is about ratings and $$$.
 
So you blindly follow what a guy like Olbermann says?
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Ok, please debunk the Enron loophole and oil price fixing, and the involvement of McCain's advisers. Also notice that I provided a second link. Would you be more comfortable if it was Bill O'Reilly reporting it? If so please substitute Keith's name with Bill's.
 
I trust Olberman and OReilly equal...about as far as I can chunk em. I learned a long time ago to do my own thinking and not be led around by the nose by these hot air merchants. They are selling drama not news.
 
Again; please review the other links provided and the link I provided of the CSpan US senate hearings on the matter.
 
Ok, please debunk the Enron loophole and oil price fixing...
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I dont debunk oil price fixing....OPEC controls 80% of the worlds oil supplies. They have us by the short and curlies. What you should be doing is writing your reresenative now..... Last time I looked the oil companies had to buy oil on the spot market, commodities market or the rolling commodities market. We use 20 million barrels a day in the U.S. so you cant just call up and say hey I need oil in three days.
 
link I provided of the CSpan US senate hearings on the matter.
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I trust the US Senate and the President equal...about as far as I can chunk em. I learned a long time ago to do my own thinking and not be led around by the nose by these hot air merchants. They are selling drama not news.
 
Thanks Tibu, very informative.
Honestly don't know that much about it, but have read like everyone else that speculation is the root cause of our troubles, not supply.
If true, time for some regulation to stop this crap. You let speculators run unregulated, whether oil or real estate or mortgages and it's trouble. You cannot have commodities trading without regulation, same as the rest of the market.
Time for this bubble to pop.
 
Is Congress going to hold investigations on the billions of dollars the federal and state governments have taken in on revenues from gasoline sales that make the oil companies profits look like chump change?
 
Bubbles burst.

Always.

And everyone who calls a bubble a bubble early is laughed at. The longer it takes the bubble to burst, the louder the laughter. "You've been calling a bubble since X, and it keeps going up!" As if a bubble isn't a bubble until it pops.

Has there been a serious change in the real-world economics of oil in the last two years?

No, there hasn't, but the price has doubled. Rapidly rising prices decoupled from fundamental supply/demand = speculative bubble, by definition.

Did deregulation assist in the formation of the commodities bubble? Of course it did... it always does. How much? Nobody knows. Will oil prices crash? Yes. It's only a matter of time.

Bubbles burst. Always.

--Shannon
 
No, there hasn't, but the price has doubled. Rapidly rising prices decoupled from fundamental supply/demand = speculative bubble, by definition.
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Has that happened? Looking at the EIA supply/demand spreadsheet, you have to go back to third quarter 2006 to find a quarter where world demand for oil did not exceed world supply. I am thinking five quarters running where demand outstrips supply is going to cause some price increases.

Some more interesting stuff, production between that third quarter 2006 and the most recent 2007 is only increased 0.28 million bbl/day, even though demand increased 1.5 million bbl/day. It looks to me like the supply side is incapable of catching up with the demand side currently.
 
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