But of course there’s never a consensus on anything, as the Journal is good to note:
These decision makers don’t present a united front. The U.K.’s Financial Services Authority has found no evidence that speculators are behind big oil-price swings, people familiar with the matter said Friday. This view, made by the overseer of one of the world’s biggest financial markets, contrasts with an opinion piece published in The Wall Street Journal two weeks ago, by French President Nicolas Sarkozy and U.K. Prime Minister Gordon Brown, who said governments need to act to curb “dangerously volatile” oil prices.
The paper reports that the CFTC will hold hearings next week on whether to limit commodities speculation.
And this is good context:
The debate over speculators underscores the shifting nature of commodities trading in recent years. Before the mid-1990s, these markets were dominated by entities that had physical dealings with the underlying commodity, and “speculators” who often took the opposite position, providing liquidity to markets.
But a new group of investors has emerged in recent years. Those who want to bet on commodities prices have increasingly put their money in indexes that track the value of futures contracts, in which investors promise to pay a certain amount in the future for oil and other commodities. As of July 2008, financial investors had about $300 billion riding on these indexes, roughly four times the level in January 2006, according to the International Energy Agency, a Paris-based watchdog.
Watch out for this story. It could get nasty.
Dean Baker offered a solution to this suspicion last year.
http://www.guardian.co.uk/commentisfree/2008/aug/11/oil.commodities
For those who actually want to crack down on speculators in a meaningful way, there is a much more practical solution: tax it. A modest tax on all financial transactions will impose a serious cost on those who actively speculate in oil futures, or any other commodity, while having almost no impact on those who use these markets for hedging. It can also raise an enormous amount of money.
A 0.02% tax on the sale or purchase of commodity futures, and a comparably sized tax on options and other derivatives, the tax could easily raise more than $10bn a year, even assuming large declines in trading. If a comparably small tax were applied to all financial transactions, including stock and bond trades, the revenue could exceed $150bn a year, a take that is equivalent to 10% of the federal income tax.
And hey, that could fund Health Care Reform. Win-win-win!
#1 Posted by End The Echo, CJR on Tue 28 Jul 2009 at 10:48 AM
Keep in mind Exxon-mobile among many had record year after record year in profits. A glance back into the 90s and we see a good year was 7 Billion in income. In the final climax, 2008, they earned 46.7 Billion. Essentially they were averaging a half decade or more in profits iyear after year starting in 2003 and ending in 2008.
I don't think a tax that raises 10 billion a year is going to even make a blimp on the the trillions that have been lost with the rising cost to service the debt of the country because of the social costs arising from the economic disaster that it caused. As far as the 150 Billion in trading revenue?
At the end of 2008, Battered, beaten, bruised, and cut, the American middle class finished the year in more debt with huge losses in their savings and their home values while Exxon Mobile earned 45 Billion and the Taxpayers bailed out Citibank for 45 Billion. By Jan 2009 jobs were being eaten alive. How does 150 billion touch that? We have a long way to go to get back to when things were just bad. If we ever get there.
#2 Posted by Don Burnstein, CJR on Wed 29 Jul 2009 at 07:10 PM
if the people would do some research as the crude market was at its highest level last july at 14700 a barrel the net position for big traders was a short position meaning they were selling the market not buying it and it was their highest net short position in more than a year so how can you blame some traders for high prices they were actually short
#3 Posted by foot, CJR on Thu 30 Jul 2009 at 09:48 AM