Date: Fri, 13 Jun 2008 14:33:37 -0700
Subject: Global Warming silliness and the Price of a Gallon of GasJohn Coleman's Comments Before the San Diego Chamber of Commerce
Global Warming and the Price of a Gallon of Gasby John ColemanYou may want to give credit where credit is due to Al Gore and his global warming campaign the next time you fill your car with gasoline, because there is a direct connection between Global Warming and four dollar a gallon gas. It is shocking, but true, to learn that the entire Global Warming frenzy is based on the environmentalist's attack on fossil fuels, particularly gasoline. All this big time science, international meetings, thick research papers, dire threats for the future; all of it, comes down to their claim that the carbon dioxide in the exhaust from your car and in the smoke stacks from our power plants is destroying the climate of planet Earth. What an amazing fraud; what a scam.
The future of our civilization lies in the balance.
That's the battle cry of the High Priest of Global Warming Al Gore and his fellow, agenda driven disciples as they predict a calamitous outcome from anthropogenic global warming. According to Mr. Gore the polar ice caps will collapse and melt and sea levels will rise 20 feet inundating the coastal cities making 100 million of us refugees. Vice President Gore tells us numerous Pacific islands will be totally submerged and uninhabitable. He tells us global warming will disrupt the circulation of the ocean waters, dramatically changing climates, throwing the world food supply into chaos. He tells us global warming will turn hurricanes into super storms, produce droughts, wipe out the polar bears and result in bleaching of coral reefs. He tells us tropical diseases will spread to mid latitudes and heat waves will kill tens of thousands. He preaches to us that we must change our lives and eliminate fossil fuels or face the dire consequences. The future of our civilization is in the balance.
With a preacher's zeal, Mr. Gore sets out to strike terror into us and our children and make us feel we are all complicit in the potential demise of the planet.
Here is my rebuttal.
There is no significant man made global warming. There has not been any in the past, there is none now and there is no reason to fear any in the future. The climate of Earth is changing. It has always changed. But mankind's activities have not overwhelmed or significantly modified the natural forces.
Through all history, Earth has shifted between two basic climate regimes: ice ages and what paleoclimatologists call "Interglacial periods". For the past 10 thousand years the Earth has been in an interglacial period. That might well be called nature's global warming because what happens during an interglacial period is the Earth warms up, the glaciers melt and life flourishes. Clearly from our point of view, an interglacial period is greatly preferred to the deadly rigors of an ice age. Mr. Gore and his crowd would have us believe that the activities of man have overwhelmed nature during this interglacial period and are producing an unprecedented, out of control warming.
Well, it is simply not happening. Worldwide there was a significant natural warming trend in the 1980's and 1990's as a Solar cycle peaked with lots of sunspots and solar flares. That ended in 1998 and now the Sun has gone quiet with fewer and fewer Sun spots, and the global temperatures have gone into decline. Earth has cooled for almost ten straight years. So, I ask Al Gore, where's the global warming?
The cooling trend is so strong that recently the head of the United Nation's Intergovernmental Panel on Climate Change had to acknowledge it. He speculated that nature has temporarily overwhelmed mankind's warming and it may be ten years or so before the warming returns. Oh, really. We are supposed to be in a panic about man-made global warming and the whole thing takes a ten year break because of the lack of Sun spots. If this weren't so serious, it would be laughable.
Now allow me to talk a little about the science behind the global warming frenzy. I have dug through thousands of pages of research papers, including the voluminous documents published by the United Nations Intergovernmental Panel on Climate Change. I have worked my way through complicated math and complex theories. Here's the bottom line: the entire global warming scientific case is based on the increase in carbon dioxide in the atmosphere from the use of fossil fuels. They don't have any other issue. Carbon Dioxide, that's it.
Hello Al Gore; Hello UN Intergovernmental Panel on Climate Change. Your science is flawed; your hypothesis is wrong; your data is manipulated. And, may I add, your scare tactics are deplorable. The Earth does not have a fever. Carbon dioxide does not cause significant global warming.
The focus on atmospheric carbon dioxide grew out a study by Roger Revelle who was an esteemed scientist at the Scripps Oceanographic Institute. He took his research with him when he moved to Harvard and allowed his students to help him process the data for his paper. One of those students was Al Gore. That is where Gore got caught up in this global warming frenzy. Revelle's paper linked the increases in carbon dioxide, CO2, in the atmosphere with warming. It labeled CO2 as a greenhouse gas.
Charles Keeling, another researcher at the Scripps Oceanographic Institute, set up a system to make continuous CO2 measurements. His graph of these increases has now become known as the Keeling Curve. When Charles Keeling died in 2005, his son David, also at Scripps, took over the measurements. Here is what the Keeling curve shows: an increase in CO2 from 315 parts per million in 1958 to 385 parts per million today, an increase of 70 parts per million or about 20 percent.
All the computer models, all of the other findings, all of the other angles of study, all come back to and are based on CO2 as a significant greenhouse gas. It is not.
Here is the deal about CO2, carbon dioxide. It is a natural component of our atmosphere. It has been there since time began. It is absorbed and emitted by the oceans. It is used by every living plant to trigger photosynthesis. Nothing would be green without it. And we humans; we create it. Every time we breathe out, we emit carbon dioxide into the atmosphere. It is not a pollutant. It is not smog. It is a naturally occurring invisible gas.
Let me illustrate. I estimate that this square in front of my face contains 100,000 molecules of atmosphere. Of those 100,000 only 38 are CO2; 38 out of a hundred thousand. That makes it a trace component. Let me ask a key question: how can this tiny trace upset the entire balance of the climate of Earth? It can't. That's all there is to it; it can't.
The UN IPCC has attracted billions of dollars for the research to try to make the case that CO2 is the culprit of run-away, man-made global warming. The scientists have come up with very complex creative theories and done elaborate calculations and run computer models they say prove those theories. They present us with a concept they call radiative forcing. The research organizations and scientists who are making a career out of this theory, keep cranking out the research papers. Then the IPCC puts on big conferences at exotic places, such as the recent conference in Bali. The scientists endorse each other's papers, they are summarized and voted on, and viola, we are told global warming is going to kill us all unless we stop burning fossil fuels.
May I stop here for a few historical notes? First, the internal combustion engine and gasoline were awful polluters when they were first invented. And, both gasoline and automobile engines continued to leave a layer of smog behind right up through the 1960's. Then science and engineering came to the environmental rescue. Better exhaust and ignition systems, catalytic converters, fuel injectors, better engineering throughout the engine and reformulated gasoline have all contributed to a huge reduction in the exhaust emissions from today's cars. Their goal then was to only exhaust carbon dioxide and water vapor, two gases widely accepted as natural and totally harmless. Anyone old enough to remember the pall of smog that used to hang over all our cities knows how much improvement there has been. So the environmentalists, in their battle against fossil fuels and automobiles had a very good point forty years ago, but now they have to focus almost entirely on the once harmless carbon dioxide. And, that is the rub. Carbon dioxide is not an environmental problem; they just want you now to think it is.
Numerous independent research projects have been done about the greenhouse impact from increases in atmospheric carbon dioxide. These studies have proven to my total satisfaction that CO2 is not creating a major greenhouse effect and is not causing an increase in temperatures. By the way, before his death, Roger Revelle coauthored a paper cautioning that CO2 and its greenhouse effect did not warrant extreme countermeasures.
So now it has come down to an intense campaign, orchestrated by environmentalists claiming that the burning of fossil fuels dooms the planet to run-away global warming. Ladies and Gentlemen, that is a myth.
So how has the entire global warming frenzy with all its predictions of dire consequences, become so widely believed, accepted and regarded as a real threat to planet Earth? That is the most amazing part of the story.
To start with global warming has the backing of the United Nations, a major world force. Second, it has the backing of a former Vice President and very popular political figure. Third it has the endorsement of Hollywood, and that's enough for millions. And, fourth, the environmentalists love global warming. It is their tool to combat fossil fuels. So with the environmentalists, the UN, Gore and Hollywood touting Global Warming and predictions of doom and gloom, the media has scrambled with excitement to climb aboard. After all the media loves a crisis. From YK2 to killer bees the media just loves to tell us our lives are threatened. And the media is biased toward liberal, so it's pre-programmed to support Al Gore and UN. CBS, NBC, ABC, CNN, MSNBC, The New York Times, The LA Times, The Washington Post, the Associated Press and here in San Diego The Union Tribune are all constantly promoting the global warming crisis.
So who is going to go against all of that power? Not the politicians. So now the President of the United States, just about every Governor, most Senators and most Congress people, both of the major current candidates for President, most other elected officials on all levels of government are all riding the Al Gore Global Warming express. That is one crowded bus.
I suspect you haven't heard it because the mass media did not report it, but I am not alone on the no man-made warming side of this issue. On May 20th, a list of the names of over thirty-one thousand scientists who refute global warming was released. Thirty-one thousand of which 9,000 are Ph.ds. Think about that. Thirty-one thousand. That dwarfs the supposed 2,500 scientists on the UN panel. In the past year, five hundred of scientists have issued public statements challenging global warming. A few more join the chorus every week. There are about 100 defectors from the UN IPCC. There was an International Conference of Climate Change Skeptics in New York in March of this year. One hundred of us gave presentations. Attendance was limited to six hundred people. Every seat was taken. There are a half dozen excellent internet sites that debunk global warming. And, thank goodness for KUSI and Michael McKinnon, its owner. He allows me to post my comments on global warming on the website KUSI.com. Following the publicity of my position form Fox News, Glen Beck on CNN, Rush Limbaugh and a host of other interviews, thousands of people come to the website and read my comments. I get hundreds of supportive emails from them. No I am not alone and the debate is not over.
In my remarks in New York I speculated that perhaps we should sue Al Gore for fraud because of his carbon credits trading scheme. That remark has caused a stir in the fringe media and on the internet. The concept is that if the media won't give us a hearing and the other side will not debate us, perhaps we could use a Court of law to present our papers and our research and if the Judge is unbiased and understands science, we win. The media couldn't ignore that. That idea has become the basis for legal research by notable attorneys and discussion among global warming debunkers, but it's a long way from the Court room.
I am very serious about this issue. I think stamping out the global warming scam is vital to saving our wonderful way of life.
The battle against fossil fuels has controlled policy in this country for decades. It was the environmentalist's prime force in blocking any drilling for oil in this country and the blocking the building of any new refineries, as well. So now the shortage they created has sent gasoline prices soaring. And, it has lead to the folly of ethanol, which is also partly behind the fuel price increases; that and our restricted oil policy. The ethanol folly is also creating a food crisis throughput the world – it is behind the food price rises for all the grains, for cereals, bread, everything that relies on corn or soy or wheat, including animals that are fed corn, most processed foods that use corn oil or soybean oil or corn syrup. Food shortages or high costs have led to food riots in some third world countries and made the cost of eating out or at home budget busting for many.
So now the global warming myth actually has lead to the chaos we are now enduring with energy and food prices. We pay for it every time we fill our gas tanks. Not only is it running up gasoline prices, it has changed government policy impacting our taxes, our utility bills and the entire focus of government funding. And, now the Congress is considering a cap and trade carbon credits policy. We the citizens will pay for that, too. It all ends up in our taxes and the price of goods and services.
So the Global warming frenzy is, indeed, threatening our civilization. Not because global warming is real; it is not. But because of the all the horrible side effects of the global warming scam.
I love this civilization. I want to do my part to protect it.
If Al Gore and his global warming scare dictates the future policy of our governments, the current economic downturn could indeed become a recession, drift into a depression and our modern civilization could fall into an abyss. And it would largely be a direct result of the global warming frenzy.
My mission, in what is left of a long and exciting lifetime, is to stamp out this Global Warming silliness and let all of us get on with enjoying our lives and loving our planet, Earth.
Marty's:
If I HAD a mission in life, it would be to stamp out the right-wing-nuts like John Coleman who politicize everything from taking a dump (they never defecate) to cancer research. This guy has been a full-of-himself hot dog all of his life...couldn't stand the bastard when he was the cutesy-folksy weatherman on Fahey Flynn's news programs in Chicago on WLS. About 4-5 years ago, when climate awareness was becoming a controversial, pop cultural subject and partisan, political topic...and because of my always constant interest in weather and water as they relate to and affect agriculture, engendered by my financial interest in 3,000 acres of capital intensive farmland...I decided to research the subject..not from a scientific standpoint, of which I am totally incapable, but from reading the studied opinions of scientists...when I want to learn something of cancer, of which which I am, as yet, a survivor, I don't make inquiry of a plumber. At any rate, the preponderance of esteemed scientists from all over the world who confirm the existence of a problem and the 'greenhouse effect', fossil fuels, carbon emissions, etc leads me to concur with them. For the record, I would have it known that I have only lately come to agree with Newton, his gravity findings notwithstanding, on his substituting 20 years for the 33 years once ascribed as the period of succession of Spartan Kings and, reservedly, I think Euclides was on to something with his mathematical algorithms. Seriously, my experience indicates that when anyone, in defense of their position on this or any other topic, resorts to personal, pejorative and denigrating attacks that serve only to expose the character of the attacker, divert attention from the pros/cons of the subject in question, and otherwise obfuscate the facts of the issue...I conclude the attacker has an agenda far afield and it usually involves money or economics, with which the attacker is somehow connected. On that note, my money is on the overwhelming, strictly scientific evidence promulgated by such prestigious bodies as the Royal Society, Britain's leading scientific organization, the Nobel winning Intergovernmental Panel on Climate Change and, not the least of leading scientific lights, James E. Hansen of the Goddard Institute for Space Studies...you may recall that he is the NASA leading authority who was muzzled in speaking on climate change by the Bush administration. My sense tells me if this guy doesn't know, who does? I realize, of course, that the naysayers are entitled to their right of dissent, however, the Cosa Nostra of the Bush, big oil, big mining, big logging, big power, big coal administration, the American Enterprise Institute, should be restrained from distributing Exxon's money, in $10,000 increments, i.e., bribes, to scientists who write anti-warming articles for the public press. As to the Rush Limbaugh, Hannity flacks of the world, let's face it, in spite of incontrovertible evidence to the contrary, there are, and have been throughout history, people who simply refuse to 'get it.' In enlightened circles and chi chi, liberal cocktail parties, these types are also known as a-s-s-h-o-l-e-s.
Here are two possible explanations:
Still ongoing: the agency’s six-month-old probe of oil-futures trading, which was just 
While I believe in keeping internet posts civil, the hearings are complete bulls--t. Congress is simply looking for a straw man to knock out. Even if a market as large as oil can be substantially inflated by speculation - very unlikely - they ignore the obvious. People are lining up to pay for oil derived products even at $125+ / barrel. Rampant waste continues, yet the country buys the product at the same rate as before. While buyers are willing to pay 125 or 140 barrels, sellers will be willing to accept their money. The hearings have nothing to do with controlling the price of oil; they are pandering to a subset of the population that believes a mysterious "they" are witholding their candy allowance/natural right to cheap gas, and they'll continue their tantrum until someone pays attention.
Gotta go, I gotta grab my 1.5 ton vehicle to move my 200# posterior home from work so I can crank up the AC. I can't walk or bicycle, that's just so.... trash. Now gimme my cheap gas!!
Posted by: Robert Baldwin | June 23, 2008 at 09:12 PM
Speculation has played an even bigger part in the price of a bbl of oil since 2000. That's when the "Enron" loophole, that allowed unregulated OTC trading to take off, was enacted. Added to that is that increased focus on commodities as a hedge against inflation (dollar devaluation) and alternative investment for investment bankers and hedge fund managers after the collapse of housing and decline in the stock market. The institution are desperate for investment performance for survival and are feeding off each other and market fears to drive of the value of their commodities funds in lieu of the collapse in other markets. Added to this is the unending supply of cheap dollars from the Fed (inflationary actions) which are being directed into this funds. Look at the rapid up tick in oil since the Feds panicked lowering of the Fed funds rate earlier this year and opening of the lending window to non-commercial banks. The Fed, under the approving watch of the administration, is financing the major US investment banks with cheap tax dollars so they can speculate in commodities and drive earnings off the increased cost of these commodities. Energy user at home and abroad are restocking the coffers of these institutions, through increased cost of these commodities, to prevent their collapse. Bailing out the banking community is probably a good idea, however the method chosen is questionable at best. Direct relief to the banking community, matched with increased regulation and oversight and repeal of the "Enron" loophole, is what's required. The deregulation of the banking and investment community over the past 20 years has gone to far. Common sense, not greed, needs to be the rule of the day.
Posted by: Chas | June 23, 2008 at 09:46 PM
Its not oil futures speculation that is the problem. Its the fact that the margin requirements are so small. Only being required to cover your purchase with a few percent of its total value means that a relatively small increase in the price of oil produces a extremely large return on investment. How about increasing margin requirements so that they approach what is required for trading equities? Low margin requirements fueled the stock market speculation of the 1920s. This contributed to the stock market crash, when investors couldn't cover their margin calls. Why should oil futures be any different!
Posted by: Ken | June 23, 2008 at 10:13 PM
When the economy melts down in early 2009 you can blame Phil Gramm and the Commodity Futures Act of 2000. Only the Wall Street lawyers who wrote knew what was in it. It was passed as a rider to an appropriations bill just before Christmas 2000 to help Enron game the energy market in secret.
Wendy Gramm was the former head of CFTC and later joined the Board at Enron. Hmmm. Phil is now Vice Chairman of UBS Investment Bank and UBS purchased what remained of the Enron Trading...Hmmm
Although Enron imploded it set an example for Wall Street investment banks, hedge funds, and the commodity speculators and to follow. Keep it secret. Ice,Ice, Baby!
Posted by: Matt Keefe | June 23, 2008 at 10:54 PM
I would argue that it doesn't matter if these prices are driven by speculators or actual demand. If prices are driven by speculators then prices supply should expand and wreck their positions.
Speculation is a self correcting problem. Look at California's real estate bubble,speculators simply built too much real estate and the price came down.
The financial amounts the House and Senate are talking about lilipitian on the order of several hundred billion dollars, by comparison Fannie and Freddie alone have issued 7 trillion dollars worth of mortgage backed securities, which are an order of magnitude greater than anything going into these commodity pools. These monies are comparatively speaking small change.
Of course who's fault is it that we have so much money floating around, the US Fed. For having an easy money policy that's resulted in 10-15% growth per annum.
If these commodity investments are really on the order of 200-300 billion, this is about twice as much as the Fed or ECB would put into their respective banking systems in a week under a stressful financial situation. So I would argue that compared to how truly valuable these commodity markets are they're comparitively undercapitalized.
Looking at global liquidty situation its hard not see commodities as being underpriced. They're irreplacable and a vital part of day to day life. I mean how people MUST have a home in O.C. or West LA versuses Odessa Texas. On the other hand people must have food and oil,regardless of whether they live in West LA or Odessa Texas.
In this case I think the House and Senate seems to be missing the forest for the trees. The trees are the high oil prices however the forest is the dollar based on oil system. When companies trade in oil futures they do so in dollars because that's what the contracts are quoted in.
However if we decide to initiate these regulations to limit funds flow into our markets and they actually succeed then we are in trouble. People will take their money elsewhere and get an oil contract based on Brent instead of WTI.
The world is an international place and if these new contracts happen to be denominated in Euros then the US is going to have BIG problems. Right now we have a sweet deal. We give the Russians and Arabs dollars and we get oil. Of course the Russians, Arabs and Chinese really can't buy anything useful with those dollars, except for Treasuries or Mortgage Backed Securities(which I'm sure everyone in California's knows is such a good deal with the "hot" real estate market).
These foreigners will inevitably realize why do we want dollars when we don't buy anything with them? Or can't buy anything with them,I.e. Dubai Ports and CNOOC.
If we push oil buyers (I am including speculators in this group too) out of New York then they will take their marbles and go elsewhere and if other people start offering contracts in Euros instead of dollars we're going to actually need to accumulate Euros to buy oil. This of course is a troubling prospect for a country with a 5-6% trade deficit.
Paying 5-9 dollars for gas is a nuisance paying 3-6 Euros a gallon is going to destroy the United States.
Posted by: Alex | June 24, 2008 at 12:40 AM
I'm surprised the government and the media have not focused on a major way to reduce gasoline consumption, which is merely to slow down a little bit. People don't really have to drive at 70 MPH.
Posted by: Marky | June 24, 2008 at 02:01 AM
Some of the people buying oil to make a profit if the prices rises are investors, not speculators. But longterm investors in oil are even worse than speculators, they plan on holding the oil off the market for a longer time. Or is there a flaw in this logic?
Posted by: newageblues | June 24, 2008 at 03:44 AM
There are some studied and insightful comments here...with the exception of those on increasing futures margins. Equity and futures markets are different animals, and "speculator" is not a boogie man in futures but rather an integral cog in the wheel that is price discovery. I have been a futures speculator for 45 years...why am I not hearing anything of China's and India's participation in the oil market? I'm not denying excessive speculation...but I can't precisely define it..and I sure as hell can't quantify it.. because all raging bull markets are grounded on facts that precipitate the move. If a commercial user of oil normally hedges, say, 100 contracts..but has come to believe supply/demand/price projections indicate an extraordinary future situation so he buys 200 contracts instead of 100....is he speculating with 100 contracts? And, speculators are on both sides of the market...are there losers in these markets? Who loses in bear markets? The problem causing the great hue and cry against speculation is that very little of the public understand futures markets and politicians need a scapegoat. For the most part, Americans are for "free markets", less government, individual choice, etc...until their pocketbook is affected. You cannot have it both ways.
Posted by: martscan | June 24, 2008 at 08:02 AM
It is unlikely speculation has much effect on oil prices, although it certainly has some effect. It is no secret that oil is running out, and the remaining supplies are the most expensive to extract (twenty years ago it took 1 KJ of energy to pump and refine 100 KJ worth of oil, today 1 KJ gets you 15 KJ worth of oil). It also doesn't help that the dollar has lost a lot of its value. All imported products are more expensive, including oil.
I think the biggest knock on speculators is that people don't like to see someone profiting from someone else's pain. That may be distasteful, but it is part of capitalism.
Posted by: Brian | June 24, 2008 at 08:46 AM
newageblues:
Yes, there is a flaw in your 'logic.' Futures trading involves the buying and selling of a piece of paper..or an entry in a computer. The physical, spot, commodity is NOT transferred as you would expect the word 'market' to imply, EXCEPT at the expiration of the delivery month where sellers post notices of intent to deliver the actual and the oldest buyer of that contract is in line to receive the actual. However, 99+% of contracts are simply offset by liquidating the position, i.e., sellers buy the # of contracts they have sold short and buyers, longs, sell their contracts. And, particularly in the last few years, futures prices don't necessarily converge with cash, spot, prices at contract expiration..as one would expect..from an arbitrage standpoint if nothing else. If a farmer in Edgar County, IL sold, say, 25,000 bushels of December corn, 5 contracts, at $5.40/bu..he is short in his futures account. After harvest, if corn is at $5.80/bu he has a $2,000 loss per contract, $10,000 total in his futures account. However, he takes his corn to his local elevator and normally will receive approximately $0.40/bu more for his actual corn. He liquidates his futures position with a keystroke or a phone call. His cash account increases by $10,000 while his futures account loses $10,000, he effectively pushes and receives his hedge price. This works conversely for, say, a user hedge such as a baker or a flour miller. In the interim of his placing the hedge and lifting the hedge, other hedgers' and speculators' trading activity determined the prices based on changing supply/demand, weather, acts of God, wars, etc., etc. This could be any physical commodity.
Posted by: martscan | June 24, 2008 at 09:03 AM
SHAKE THAT MONEY TREE, Dingell! First, Congress takes lobbyist money to ALLOW them to aggressively speculate. Then Congress gets worried that voters are 'pixxed off' before the election, and now, want MORE lobbyist money, to hold off closing the loop holes and 15% tax rate on all that profit the speculators of (can you say 'WALL STREET' again?) have extorted from American families. Congress is a parasite that thrives on peoples' BLOOD... and Wall Street BLOOD MONEY. Let's FIRE the sons of bushs in November.
Posted by: GIMME A BREAK! | June 24, 2008 at 09:30 AM
Isn't this the same Michigan Congressman who for years fought against improvements in gas mileage standards for motor vehicles because he thought it would hurt the US car companies and auto workers? Washington should be careful about scapegoating anybody for our oil problems. Maybe John Dingell should be blaming himself rather than some mythical speculators. Would the speculators ever be pictured as blond haired, blue eyed aryans? More likely, they would caricatured as people with dark features and hooked noses, or perhaps people with slanted eyes. The US is no longer the world's dominant supplier of oil, as it was until about 1971. Unfortunately, it now consumes far more oil than it produces. Too bad most of the world's oil supply is controlled by national oil companies that are quite willing to limit their oil production for a variety of reasons. We tried invading Iraq for its oil, but that strategy only made things worse. Get used to paying higher prices for oil.
Posted by: Rocky | June 24, 2008 at 11:16 AM
Every time a HEDGE FUND DEALER gets in trouble and that's quite often, they have a habit of changing their name from HEDGE FUND DEALERS to OIL SPECULATORS. Also the instrument they use are various forms of DERIVATIVES--swaps, options, tigers, and many others. The object is to confuse the public. They also hate any regulations. They brag about "free enterprise" but when they do get in trouble, they act like real hippocrits such as a government bailout of Bear Stearns and many others. The closing of the ENRON LOOPHOLES would be a great start. There are a number of books out on this subject such as "Free Lunch" by David Cay Johnston. We should also reinstate the Glass-Stegall Act which the lobbyists worked so hard to kill. Even the Sarbanes-Oxley Bill which was voted overwhelmingly in the Senate is being ignored. It proves that if you are a lobbyist with a lot of money what one can get done and who you can buy off. That's why the middleclass is disappearing and the billionaires listed in Forbes magazine are getting bigger and bigger every year. You would think they would have some obligation and want to contribute to our society and pay their fair share on income taxes like President Franklin Roosevelt stated, "Taxes should be based on ability to pay." They shouldn't go offshore to Bermuda and the Cayman Islands to escape paying federal income tax.
Yours truly, Disgusted Middleclass Taxpayer, LaVern Isely
Posted by: LaVern Isely | June 24, 2008 at 01:09 PM
martscan: I don't understand why it matters whether the "physical commodity is transferred" or not. It's still being withheld from the market. If your argument is that it all balances itself out eventually when the speculators and investors sell, that doesn't take into account the pain inflicted in the meantime. Just like the real estate bubble, the markets get carried away if left unregulated, and vulnerable people get devastated.
Free market fanatics have gotten their way time and again since 1980, but they've racked up terrible budget deficits and created bubble after bubble. The real estate bubble and energy/food speculation have devastated many people's lives.
Posted by: newageblues | June 24, 2008 at 01:41 PM
newageblues:
It matters a great deal that the physical commodity is not actually transferred ACCORDING TO THE SPECIFICATIONS OF THE CONTRACT, and futures trading has absolutely nothing to do with the traded commodity being "withheld from the market."
If the oil futures contract, for example, calls for delivery in Tulsa and the futures' seller's oil is in Los Angeles, you can truck or pipeline 1,000 bbls of the grade necessary to satisfy the contract's specs or you can liquidate your short position by buying a like amount...and selling your oil locally. If the wheat contract calls for delivery in a bonded facility in Chicago or Houston..a Kansas farmer can truck his wheat to the delivery points, or he can close out his short hedge on the futures mkt and sell his wheat locally. When a trade is made in futures, there is a buy and a sale and the 'open interest' is 1. Let's imagine that the entire cash, actual physical wheat market hedged on the exchange is 1. If 4 speculators..or hedgers (commercials), funds, or anyone else, each trade 1 contract..the open interest is 5. As the contract approaches expiration, everyone liquidates, offsets, their position and the open interest drops to -0-. The size or volume of the physical market wasn't affected. In this simple illustration the futures mkt was 5 X the cash mkt and nothing was withheld from the cash mkt. The only way futures can be utilized to without product from cash mkts would be to take delivery of the commodity at the expiration of the contract month, pay the full cost of the commodity (1000bbls crude X $130/bbl=$130,000, plus storage, handling, insurance, etc). Those wishing to continue holding a long position simply sell the expiring contract month and buy a more distant, or the next most current month. If you want govt to alleviate "pain" in bull mkts, what is govt's role in bear mkts? No one ever said life is fair.
Posted by: martscan | June 24, 2008 at 03:58 PM