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Author Topic: Oil: Wall Street vs. Main Street  (Read 1940 times)
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WhiskeyGirl
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« on: July 11, 2008, 11:50:46 AM »

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It's the interests of pension-fund managers against those of waitresses as Congress digs into the controversy surrounding oil speculation
by Moira Herbst

Are oil speculators just making sure they retire comfortably—or bleeding working Americans? It depends on your perspective.

On a day when oil futures prices shot up more than $5 per barrel, to $141.65, a congressional hearing on oil speculation heard from both proponents of unfettered commodity trading and those who would rein it in.

Representatives of Wall Street traders told the House Agriculture Committee at the July 10 hearing that more oversight of the oil market would cause consumers more pain than relief. Barring certain types of investors from commodities markets would send investment offshore, they said. And because much of the money being invested in oil futures contracts is coming from pension plans, such a move would "put at risk the retirement funds of the very workers it intended to help. In effect, it would be robbing Peter to pay Paul," said Robin Diamonte, on behalf of the Committee on the Investment of Employee Benefit Assets (CIEBA), the lobbying group for corporate pension plans.

But other witnesses said that the massive influx of investment into commodity markets is taking a great toll on working Americans. Representative Steve Kagen (D-Wis.) spoke of a waitress in his district earning $2.43 an hour plus tips who is spending 25% of her paycheck on gas and having trouble raising her children. "We are in a very real crisis, and we have to take it seriously," said Kagen.

A Painful, Rising Cost
The hearing was the latest public airing of a debate over the role speculators are playing (BusinessWeek.com, 7/9/08) in boosting oil prices, and what government should do, if anything, to stop them. For the past two months, Congress has been roiling over the politics of oil as pressure mounts for the U.S. government to relieve consumers and businesses from the sting of $4-a-gallon gasoline, high-priced jet fuel, and other fast-rising petro prices. On July 9 six members of Congress laid out bills aimed at curbing speculation. Testimony will continue July 11.

Also on July 10, Acting Chairman Walter Lukken said the Commodity Futures Trading Commission would issue a report on its oil markets investigation in the coming weeks. The final report is due on or before Sept. 15. He told a House Appropriations subcommittee that the CFTC has seen no evidence so far that speculators are driving record oil prices.

At the House hearing, some little-seen members of Wall Street pleaded their case. Greg Zerzan, counsel and head of global public policy for the International Swaps & Derivatives Assn. (ISDA), and Charles Vice, president and chief operating officer of IntercontinentalExchange (ICE), defended the current trading regime and talked of the virtues of speculation.

They urged Congress to trust the market to allocate resources. Far from undermining the interests of Main Street, Zerzan and Vice argued, banks like Goldman Sachs (GS) and Morgan Stanley (MS) are actually helping airlines and pension funds hedge against inflation when they engage in swaps deals for oil trades. "Removing swap dealers [from the market] would mean their clients wouldn't be able to obtain their protection," said Zerzan. "That risk would be passed on to consumers."


read the rest of the article here -
http://www.businessweek.com/bwdaily/dnflash/content/jul2008/db20080710_610685.htm

I remember a time when banks, savings and loans, the energy industry, mortgage, and other groups were regulated by the government.  The government guarantees (with limits) many of the investments of consumers and businesses.  Deregulation seems to cause catastrophic losses, and the taxpayers keep picking up the bill.  Simplification, but my opinion.

In the case of the oil market, it seems to be a commodity/monopoly that isn't going to get more plentiful in the future.  mo

It seems to me the government should do more to encourage competition.  Build infrastructure to support electric and alternative fuel vehicles.  Help people convert to other forms of energy like electric and solar for their needs.  It seems like the rising price of oil will drive up many entitlement programs linked to inflation.  Where is the money going to come from? 

When the pension funds go belly-up, who pays?   taxpayers  

Taxes are already oppressive, where does the buck stop?

It seems like speculators and others continue to bleed one industry after another dry, and the American taxpayers are paying for it.  The world is not a level playing field.  I think the U.S. needs leadership that will continue to provide the opportunity for a good for all Americans. 

jmho



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WhiskeyGirl
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« Reply #1 on: July 11, 2008, 11:53:36 AM »

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Some in U.S. replace oil heat with wood stoves

Fri Jul 11, 2008 9:32am EDT
By Jason Szep

BOSTON (Reuters) - It's summer in the United States, but many Americans are already fretting about winter.

Record prices for home heating oil are rippling across America's northern regions, stoking demand for wood stoves and other alternatives, and forcing some heating oil companies out of business.

In New England, which has the nation's highest rates of heating oil use, homeowners are bracing for a near doubling in the cost to fill home oil storage tanks compared with last year.

The surging cost has spread alarm among heating oil distributors, mainly small and often family-run businesses. Their profit margins already squeezed, they now face the prospect of taking on unprecedented amounts of debt to buy fuel for winter.

"It's cutting into us really deep now," said Ray Scarfo, president of Ranco Fuel, a 33-year-old family-run business in Medford, Massachusetts. "We don't even know if we'll even have a heating oil business when it comes to next winter."

Three heating oil companies have failed since March in Connecticut. Vermont is creating a task force to help residents deal with rising heating oil and gas prices, and from Maine to Minnesota authorities are warning residents to prepare for a surge in the cost of staying warm.

On July 9, the governors of Maine, Massachusetts, New Hampshire and Rhode Island called on Washington to increase the region's home heating assistance to $1 billion from $252 million last winter.

"This is a human catastrophe coming at us in the state of Maine in terms of energy supply and costs," Angus King, the state's former governor, told a recent alternative energy industry gathering. Maine has the highest rate of heating oil use in the nation, with about 87 percent of homes using heating oil or kerosene.

King said he expects the cost to fill a typical family's heating oil storage tank in Maine could top $1,000 this winter, double last year's cost, following a recent spike in heating oil prices above $4 a gallon. Other estimates put the cost at about $800, up 60 percent from last year.

"Most people are going to have to fill up that tank six times," said King. "How is somebody who is making $350 or $400 a week going to pay to fill up the tank to keep warm?"

New England pays more for energy than the rest of the nation because of its reliance on fossil fuels such as oil and natural gas extracted from distant states and countries.

The Massachusetts Oilheat Council estimates that heating oil prices in New England are now around $4.65 a gallon, up 116 percent since 2005. It expects prices to keep rising as the market tracks record-high crude oil prices.

read more here -
http://www.reuters.com/article/domesticNews/idUSN3043933420080711
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It doesn't do any good to hate anyone,
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WhiskeyGirl
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« Reply #2 on: July 11, 2008, 11:57:23 AM »

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Oil-Futures Players Resist Controls

By IAN TALLEY
July 11, 2008; Page C6

WASHINGTON -- A strong lobbying effort by Wall Street banks, the trading industry and market operators may successfully head off proposals for tougher federal controls on oil-futures trading.

Lawmakers in Washington are getting an earful about skyrocketing fuel costs from airlines, truckers and the manufacturing industry -- not to mention constituents. Airlines mounted a campaign, including letters sent to customers, to drum up support for measures to rein in what they called "poorly regulated market speculation."

The airlines urged customers to visit a Web site, StopOilSpeculationNow.com.

The top CEOs of U.S. companies such as AMR Corp.'s American Airlines, Delta Air Lines Inc., Continental Airlines Inc. and US Airways Group Inc. this week asked their customers to press Congress to rein in speculation, which they say could contribute between $30 and $60 a barrel to current oil prices trading near $140.

In response, Wall Street firms such as Goldman Sachs Group Inc. and J.P. Morgan Chase & Co., market operators, the trading industry and their Washington lobbyists have blanketed the Capitol, urging lawmakers and their aides to take a much slower approach, one recommended by the Commodity Futures Trading Commission.
 
Senate Majority Leader Harry Reid (D., Nev.), late Thursday night met with industry representatives of both advocates for and against more stringent regulation, including the head J.P. Morgan's Global Commodities division, the president of Nymex Holdings Inc.'s New York Mercantile Exchange and Michael Greenberger, a former official at the futures regulator and professor at the University of Maryland who has been a lead witness for lawmakers seeking tougher oversight.

www.StopOilSpeculationNow.com

read more here -
http://online.wsj.com/article/SB121573866230544661.html?mod=googlenews_wsj
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
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