Wednesday, February 29, 2012

Oil Speculation

CNN's Jack Cafferty asks, "Should price controls be imposed on gasoline?"

My answer is that it is not just Wall Street that is the problem. Crude oil prices are determined on a “futures” market at the NYMEX or ICE (Intercontinental Exchange). Traders need only put down a small fraction of the price to control a larger amount of futures contracts (leverage). The oil futures market is now dominated by speculators (70% versus 30% a decade ago) who never intend to take delivery of any crude oil. Not only should speculators be required to put at least 50% down, but there should also be limits on the amount of oil that speculators could trade in the energy futures market. Time was that prices were determined by supply and demand. Trading futures and allowing speculation has added an expensive middleman which costs consumers (both here and worldwide) dearly.

See Sen. Bernie Sanders' post, "Crack Down on Oil Speculators".

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