Market Currents
"We caution against mistakenly categorizing speculation as a form of manipulation," says the...
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Tuesday, April 17, 2012, 2:56 PM ET"We caution against mistakenly categorizing speculation as a form of manipulation," says the CME, responding to the President's proposals this morning. "To use margin requirements to control cash prices is misplaced ... (this) would make the markets less efficient, less tied to fundamentals ... push hedgers out of the market ... (and) make oil more expensive for all consumers."
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At the start of 2007, oil cost about $50 a barrel.
By July of 2008, oil prices had shot to nearly $150 per barrel and then, by the end of the year, crashed to $35.
In the beginning of 2011, oil prices took off again, climbing to over $110 a barrel in May.
By October, the price fell to $75 a barrel, a drop of more than 30 percent over four months. Now, three and a half months later, oil prices are back up.
One of the major factors driving these high prices isn’t getting enough attention: excessive speculation in the commodity markets.
The Senate Permanent Subcommittee on Investigations, ... ha(s) shown how the activities of speculators – those who don’t produce or use oil, but who bet on oil price changes – have overwhelmed normal supply and demand factors and pushed up prices at the expense of consumers and American business.
http://bit.ly/HR7bUj
You don't understand what is meant by 'speculation' here as the term isn't being used in the broadest sense possible.
Commodities markets were set up for producers and consumers, not speculators, and were deregulated just over a decade ago, allowing speculators entry. Honest price discovery, the intent of the commodities markets, has since evaporated as financial entities push the markets around, while neither consuming nor producing the commodity.
If Pres O wanted lower oil prices, he could have approved the Keystone XL pipeline.