Bailing Out The Oil Speculators Responsible For High Gas Prices
Your congressional leaders want yo to keep paying off their oil buddies.
No Bailout=Lower Gas Prices
Bailing Out The Oil Market
By William Pentland
"Forbes" -- - 09.23.08 -- While everyone knows the U.S. government is looking to bail Wall Street banks, few people realize that it's also bailing out speculative oil and commodities traders in the process, fueling a sharp rise in energy prices. Lehman Brothers and AIG held enormous trading positions in commodities markets. If those positions had been liquidated suddenly, the price of everything from wheat to oil would have collapsed. The Commodity Futures Trading Commission, the main regulator of U.S. commodity markets, allowed Wall Street's investment banks and trading companies to take control of massive positions in commodities markets called swaps held by Lehman Brothers and AIG.
The result: Oil prices spiked by a whopping $16 per barrel on Monday, the largest single-day rise in oil prices ever.
"If speculators were forced to liquidate their positions, oil would easily be $65 to $75 per barrel by the time the liquidation was complete," said Michael Masters, the founder of Atlanta-based hedge fund Masters Capital Management. Tuesday, oil was trading at $108.74 in midday trading in New York.
For all the talk of OPEC, the biggest threat to high oil prices in the short term might be the implosion of Morgan Stanley or Goldman Sachs , which would trigger a massive number of low-priced oil-futures contracts to flood the market all at once in search of buyers to liquidate those contracts.
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No Bailout=Lower Gas Prices
Bailing Out The Oil Market
By William Pentland
"Forbes" -- - 09.23.08 -- While everyone knows the U.S. government is looking to bail Wall Street banks, few people realize that it's also bailing out speculative oil and commodities traders in the process, fueling a sharp rise in energy prices. Lehman Brothers and AIG held enormous trading positions in commodities markets. If those positions had been liquidated suddenly, the price of everything from wheat to oil would have collapsed. The Commodity Futures Trading Commission, the main regulator of U.S. commodity markets, allowed Wall Street's investment banks and trading companies to take control of massive positions in commodities markets called swaps held by Lehman Brothers and AIG.
The result: Oil prices spiked by a whopping $16 per barrel on Monday, the largest single-day rise in oil prices ever.
"If speculators were forced to liquidate their positions, oil would easily be $65 to $75 per barrel by the time the liquidation was complete," said Michael Masters, the founder of Atlanta-based hedge fund Masters Capital Management. Tuesday, oil was trading at $108.74 in midday trading in New York.
For all the talk of OPEC, the biggest threat to high oil prices in the short term might be the implosion of Morgan Stanley or Goldman Sachs , which would trigger a massive number of low-priced oil-futures contracts to flood the market all at once in search of buyers to liquidate those contracts.
--MORE--