Report: Wall Street Speculators Drive Up Oil Prices

Categories: Bidness, News
The view from Wall Street these days.
Tired of paying nearly $4 per gallon to fuel up your car? Wondering who's making a fat profit off your daily commute?

A new investigative report puts the blame on Wall Street, specifically hedge funds and investment banks that today are involved in the lion's share of oil trading that's run up the price of gasoline to record highs in recent years. In an article Friday, McClatchy Newspapers documents how these speculators are now involved in 68 percent of all domestic oil trades. That's up from around 30 percent in the decades leading up to the 1990s.
But from 1991 forward, the big financial players such as Goldman Sachs and J.P. Morgan Chase won exemptions that freed them from limits on how much they could speculate in futures markets. They became classified as commercial traders, as if they were an airline hedging price risks in jet fuel. The big banks needed to invest in futures contracts to hedge bets they made in the unregulated swaps market. And the government, in the tenth year of Reagan Republicanism, was happy to reduce regulations on markets. Oil "swaps" increased from $13 billion in the 1990s to more than $313 billion in July 2008 at oil's peak price
And while oil executives are reluctant to admit the role of speculators in manipulating the market, the hedge funds and investment banks are the only explanation for the rising prices. Why? Demand for oil in the U.S. has actually dropped over the past five years and global demand is expected to remain flat in 2011. Meanwhile, there's plenty of supply of oil with refineries operating far below capacity.

Comments one Wall Street insider: "It's harder and harder for any reasonable observer to dismiss the role of excessive speculation in this market."

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And we don't tax speculators why? 


 This may have have happened while Reagan was president, but it had to get aprroval from congress first, and considering congress was controlled by the demoncrats at the time, they should take there fair share of the blame as well.


Because making money from wealth is held in higher esteem than working for a living.   If you make your money as 'capital gains' 15% is the max rate you'll pay.   If you actually work for income...  35% is your max rate.

I vote for taxing Capital gains the same as income and returning to rates under Nixon-R (74%) or Eisenhower-R (91%).  Oh yeah, fortifying the estate tax, rasing it to at least 55-65% and exempting say the first  5-10 million and tying that number to inflation...

Do that for income taxes, remove the $107K/year cap on the Social Security taxes pass medicare for all and get out of the NAFTA style/WTO/free-trade stupidity and you pretty much can solve all the budgetary problems without cuts in services for perpetuity. But a few people would get richer at a slower pace, so we cant have any of that fairness stuff.


Okay, but it is interesting to note that of the 17 U.S. Senators who recently signed a letter calling for greater regulation on oil speculators, just one was a Republican. 

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