Gas could fall to $2 if Congress acts to limit speculation

[w¡n9Nµ7 §£@¥€r 123]

WASHINGTON (MarketWatch) -- The price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy-futures markets, four energy analysts told Congress on Monday.

Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.

Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters' assessment at a hearing on proposed legislation to limit speculation in futures markets.

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"Record oil prices are inflated by speculation and not justified by market fundamentals," according to Gheit. "Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel."

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"Energy speculation has become a growth industry and it is time for the government to intervene," said Rep. John Dingell, D-Mich., chairman of the full committee. "We need to consider a full range of options to counter this rapacious speculation." It was Dingell's strongest statement yet on the role of speculators.

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The committee will likely consider legislation that would rein in index speculation by imposing higher-margin requirements; setting position limits for speculators; requiring more disclosure of positions; and preventing pension funds and investment banks from owning commodities.

Both major presidential candidates have supported closing loopholes that encourage speculation in the energy markets.

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Speculators now account for about 70% of all benchmark crude trading on the New York Mercantile Exchange, up from 37% in 2000, said Rep. Bart Stupak, D-Mich., chairman of the investigations subcommittee. Stupak introduced a bill on Friday that would limit index speculation.

http://www.marketwatch.com/news/story/gas-...st=MostReadHome

[one...two...tree 2,762]

Buy your SUV now and enjoy it later.

[w¡n9Nµ7 §£@¥€r 123]

deleted

Edited June 26, 2008 by VJ Troll

[Jenn! 918]

Can I stock up and store it in my house?

[Amby 490]

just make sure it doesn't get too hot in there jenn

[Mr. Big Dog 10,747]

I sonehow doubt that this will happen.

[Dan J 277]

I sonehow doubt that this will happen.

At least part of the current prices are due to speculation by itself. Some changes in regulations regarding speculation would curb that.

But really speculation is how problems in other areas manifest themselves. A weak currency is a small problem by itself, but coupled with speculation, it gets amplified. You can restrict, and even put an end to commodity speculation, but it will not address some of the underling problems with our current economic state.

[Ilya R. 0]

u think big oil would allow this?

hahaahhahaha

[Dan J 277]

u think big oil would allow this?

hahaahhahaha

Big Oil doesn't matter, its wall street. But if OPEC can still sell oil at $100+ a barrel, what incentive do they have to drop the price?

[eric&gen 0]

He he he is it a dream that will never come true.

[Ban Hammer 13,352]

i heard about this from my neighbor over a week ago. you're slacking, troll.

[Ilya R. 0]

u think big oil would allow this?

hahaahhahaha

Big Oil doesn't matter, its wall street. But if OPEC can still sell oil at $100+ a barrel, what incentive do they have to drop the price?

Big Oil doesnt matter? Big oil fuels speculations, Have you seen their profits?

[mendeleev 68]

I don't buy that speculation in oil markets, or commodity markets in general, is driving commodity inflation the way voices coming out of Congress says it is.

Oil, along with other mined resources -- metals, potash, all that stuff, turned strongly inflationary 2-3 years ago. I saw it happen in my former job, where one of my responsibilities was to try to win price concessions on materials costs. At the beginning of decade, we had a great run with very nice savings and we hit a wall about three years ago.

Oil lagged precious metals, rare earths, molybdenum, and first row transition metals (titanium, manganese, iron, cobalt, nickel, copper) but oil got strongly inflationary a couple years ago. Strong global demand, especially from China, India, and Russia seems the dominant cause.

Yesterday's front page story in Financial Times was about how the Chinese capitulated to Rio Tinto (a huge mining company), agreeing to a 98% increase in the cost of iron for this year. Last year, iron costs rose strongly, too.

A couple weeks ago, when there was a $8+ jump in oil the day after a $3-4 rise that took oil to $139 and change, speculators on Wall Street got caught with their pants down, since there were big bets that the market would drop in the near term and instead, it hit a record high. They had to scramble to cover their lost bets.

Petroleum consumption is dropping in the USA, but it is not dropping in developing Asia and Russia and that demand, coupled with very little spare capacity, drives prices right now. It will stay that way for some time. If Nigerian production can regain normal levels (they are down a million barrels a day because of guerrilla warfare there) *and* if the Saudi's manage next year to bring a big new field into production, prices may come down some in 2009.

But it is time to adopt to high prices and to bring new, sustainable technologies to market that will help prices come down in the medium term.

Congress looks for a whipping boy and finds them in capitalistic speculators -- a fig leaf to cover the fact that we haven't had a serious energy policy since President Carter -- if then.

Edited June 27, 2008 by novotul

[eric&gen 0]

I remembere when gas used to be in the low $3.00 range last summer will never see that anymore.