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The lack of transparency in oil futures trading has been a concern for many, not just trading in itself. See http://levin.senate.gov/newsroom/release.cfm?id=25

by weiser 18y ago

The lack of transparency in oil futures trading has been a concern for many, not just trading in itself. See http://levin.senate.gov/newsroom/release.cfm?id=257862 http://levin.senate.gov/newsroom/release.cfm?id=257862

incomethax 18y ago
High oil prices weren't a problem during the stock bubble of 2001, or even the housing bubble of 2004. The reason that oil prices are skyrocketing, is simply that traders (mostly hedge funds) are putting all their money into commodities instead of, stocks, real estate or bonds. All that regulation will accomplish is forcing the collapse of the commodities bubble, and we'll end up with a bubble elsewhere.
- swombat 18y ago
  With so many bubbles all the time, I'm starting to feel like the world economy has become some sort of fizzy drink.
- wallflower 18y ago
  http://www.businessweek.com/lifestyle/content/jul2008/bw2008078_706271.htm?chan=top+news_top+news+index_top+story http://www.businessweek.com/lifestyle/content/jul2008/bw2008...
- gills 18y ago
  If the Fed would actually do it's job and drain the swamp (remove excess credit from the system), it would help calm the bubbles.
  - bayareaguy 18y ago
    If you agree with this line of thinking: The Great Moderation - http://www.winterspeak.com/2008_07_01_archive.html#1502659962533085800 http://www.winterspeak.com/2008_07_01_archive.html#150265996... then the real issue is relative rates of consumption.
  - steveplace 18y ago
    How can they remove excess credit? If they do, it would collapse the financial industry. That's why they had to bail out BSC.
    - gills 18y ago
      It wouldn't collapse [all of] the financial industry. Any banks which may already be insolvent without FRB loans would have to declare bankruptcy. There are probably a couple solvent banks out there. Failure seems to be a fair and natural outcome for businesses that are poorly managed or choose unsustainable business models. The FRB can remove the slosh by not rolling over loans to primaries when they come due, and by putting back the trash securities they took as collateral through the TAF and TSLF.
- steveplace 18y ago
  There weren't high oil prices in 2000 because there wasn't global demand for oil. Oil is skyrocketing because we are consuming more oil than producing. On a daily basis. I won't deny that there's a commodities bubble going on right now. But it's not just hedge funds. You have new ETFs opening up for individual investors that grant exposure to other asset classes, which isn't necessarily a bad thing but it's giving the smart money the opportunity to bail before the pop. Bubbles happen. It's part of the market. Regulation or not, they will still occur.
  - timr 18y ago
    "Oil is skyrocketing because we are consuming more oil than producing. On a daily basis." Oil has been fluctuating by as much as 10% per barrel in a single day. That's not due to changing global demand. Global demand for oil can't even be measured that precisely. Right now, the oil futures market is overreacting to everything -- up to and including speculation that the market might overreact next week. The overall trend is correct, but there's no rational argument for the ~$50 gain per barrel we've seen since the beginning of the year.
    - steveplace 18y ago
      That increase in volatility usually precedes a correction.
      - timr 18y ago
        Yeah, I know. I was commenting on your assertion that the current price of oil is due to supply problems.
- MaysonL 18y ago
  If speculation is pushing up the price, why are futures prices less than spot, and why is there no inventory buildup? And why are iron ore prices, for which there aren't futures, up so much?
culley 18y ago
Check out The New Yorker's take... http://news.ycombinator.com/item?id=241284 http://news.ycombinator.com/item?id=241284 makes sense to me.
steveplace 18y ago
Amen. They need to stop OTC trading by big firms. One of the main perpetraders (get it?) is InterContinentalExchange. There's nothing wrong with having a market. But the market has to be open for everyone.
- anamax 18y ago
  How can the market "be open for everyone" if they stop trading by big firms?

by weiser 18y ago

incomethax 18y ago

High oil prices weren't a problem during the stock bubble of 2001, or even the housing bubble of 2004. The reason that oil prices are skyrocketing, is simply that traders (mostly hedge funds) are putting all their money into commodities instead of, stocks, real estate or bonds. All that regulation will accomplish is forcing the collapse of the commodities bubble, and we'll end up with a bubble elsewhere.

swombat 18y ago
With so many bubbles all the time, I'm starting to feel like the world economy has become some sort of fizzy drink.
wallflower 18y ago
http://www.businessweek.com/lifestyle/content/jul2008/bw2008078_706271.htm?chan=top+news_top+news+index_top+story http://www.businessweek.com/lifestyle/content/jul2008/bw2008...
gills 18y ago
If the Fed would actually do it's job and drain the swamp (remove excess credit from the system), it would help calm the bubbles.
- bayareaguy 18y ago
  If you agree with this line of thinking: The Great Moderation - http://www.winterspeak.com/2008_07_01_archive.html#1502659962533085800 http://www.winterspeak.com/2008_07_01_archive.html#150265996... then the real issue is relative rates of consumption.
- steveplace 18y ago
  How can they remove excess credit? If they do, it would collapse the financial industry. That's why they had to bail out BSC.
  - gills 18y ago
    It wouldn't collapse [all of] the financial industry. Any banks which may already be insolvent without FRB loans would have to declare bankruptcy. There are probably a couple solvent banks out there. Failure seems to be a fair and natural outcome for businesses that are poorly managed or choose unsustainable business models. The FRB can remove the slosh by not rolling over loans to primaries when they come due, and by putting back the trash securities they took as collateral through the TAF and TSLF.
steveplace 18y ago
There weren't high oil prices in 2000 because there wasn't global demand for oil. Oil is skyrocketing because we are consuming more oil than producing. On a daily basis. I won't deny that there's a commodities bubble going on right now. But it's not just hedge funds. You have new ETFs opening up for individual investors that grant exposure to other asset classes, which isn't necessarily a bad thing but it's giving the smart money the opportunity to bail before the pop. Bubbles happen. It's part of the market. Regulation or not, they will still occur.
- timr 18y ago
  "Oil is skyrocketing because we are consuming more oil than producing. On a daily basis." Oil has been fluctuating by as much as 10% per barrel in a single day. That's not due to changing global demand. Global demand for oil can't even be measured that precisely. Right now, the oil futures market is overreacting to everything -- up to and including speculation that the market might overreact next week. The overall trend is correct, but there's no rational argument for the ~$50 gain per barrel we've seen since the beginning of the year.
  - steveplace 18y ago
    That increase in volatility usually precedes a correction.
    - timr 18y ago
      Yeah, I know. I was commenting on your assertion that the current price of oil is due to supply problems.
MaysonL 18y ago
If speculation is pushing up the price, why are futures prices less than spot, and why is there no inventory buildup? And why are iron ore prices, for which there aren't futures, up so much?

culley 18y ago

Check out The New Yorker's take... http://news.ycombinator.com/item?id=241284 http://news.ycombinator.com/item?id=241284 makes sense to me.

steveplace 18y ago

Amen. They need to stop OTC trading by big firms. One of the main perpetraders (get it?) is InterContinentalExchange. There's nothing wrong with having a market. But the market has to be open for everyone.

anamax 18y ago
How can the market "be open for everyone" if they stop trading by big firms?