Hopefully this Asia Times article is right and the “speculation” bubble on oil is about ready to burst. Make sure to read the entire article as it provides a lot facts that you can use the next time your liberal friends start to blame the oil companies.
As business and consumers consider the implications for them of crude oil selling at US$130-plus per barrel, they should bear in mind that, at a conservative calculation, at least 60% of that price comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York Nymex futures exchanges and uncontrolled inter-bank or over-the-counter trading to avoid scrutiny (see Speculators knock OPEC off oil-price perch, Asia Times Online, May 6, 2008).
US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex by paying only 6% of the value of the contract. At the present price of around $130 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120.This extreme “leverage” of 16 to one helps drive prices to wildly unrealistic levels and offset bank losses in subprime and other disasters at the expense of the overall population….
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Tags: Oil, speculation
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