It makes sense to me to have a general transactions tax on finance rather than specifically one on oil speculation.
On Thu, Apr 12, 2012 at 10:44 AM, Robert Naiman <[email protected]> wrote: > I'm all for what JK proposes. But in addition, how about a little > transactions tax in this market to make prices more sticky? The > proceeds of the tax could be devoted to subsidies for clean energy > development, so that for diversified energy actors, the tax would be a > wash (just as the federal gas tax is earmarked for transportation > infrastructure.) > > On Thu, Apr 12, 2012 at 12:16 PM, Jim Devine <[email protected]> wrote: >> The New York Times / April 10, 2012 / opinion >> >> The High Cost of Gambling on Oil >> >> By JOSEPH P. KENNEDY II >> >> Boston >> >> THE drastic rise in the price of oil and gasoline is in part the >> result of forces beyond our control: as high-growth countries like >> China and India increase the demand for petroleum, the price will go >> up. >> >> But there are factors contributing to the high price of oil that we >> can do something about. Chief among them is the effect of “pure” >> speculators — investors who buy and sell oil futures but never take >> physical possession of actual barrels of oil. These middlemen add >> little value and lots of cost as they bid up the price of oil in >> pursuit of financial gain. They should be banned from the world’s >> commodity exchanges, which could drive down the price of oil by as >> much as 40 percent and the price of gasoline by as much as $1 a >> gallon. >> >> Today, speculators dominate the trading of oil futures. According to >> Congressional testimony by the commodities specialist Michael W. >> Masters in 2009, the oil futures markets routinely trade more than one >> billion barrels of oil per day. Given that the entire world produces >> only around 85 million actual “wet” barrels a day, this means that >> more than 90 percent of trading involves speculators’ exchanging >> “paper” barrels with one another. >> >> Because of speculation, today’s oil prices of about $100 a barrel have >> become disconnected from the costs of extraction, which average $11 a >> barrel worldwide. Pure speculators account for as much as 40 percent >> of that high price, according to testimony that Rex Tillerson, the >> chief executive of ExxonMobil, gave to Congress last year. That >> estimate is bolstered by a recent report from the Federal Reserve Bank >> of St. Louis. >> >> Many economists contend that speculation on oil futures is a good >> thing, because it increases liquidity and better distributes risk, >> allowing refiners, producers, wholesalers and consumers (like >> airlines) to “hedge” their positions more efficiently, protecting >> themselves against unseen future shifts in the price of oil. >> >> But it’s one thing to have a trading system in which oil industry >> players place strategic bets on where prices will be months into the >> future; it’s another thing to have a system in which hedge funds and >> bankers pump billions of purely speculative dollars into commodity >> exchanges, chasing a limited number of barrels and driving up the >> price. The same concern explains why the United States government >> placed limits on pure speculators in grain exchanges after repeated >> manipulations of crop prices during the Great Depression. >> >> The market for oil futures differs from the markets for other >> commodities in the sheer size and scope of trading and in the impact >> it has on a strategically important resource. There is a fundamental >> difference between oil futures and, say, orange juice futures. If >> orange juice gets too pricey (perhaps because of a speculative >> bubble), we can easily switch to apple juice. The same does not hold >> with oil. Higher oil prices act like a choke-chain on the economy, >> dragging down profits for ordinary businesses and depressing >> investment. >> >> When I started buying and selling oil more than 30 years ago for my >> nonprofit organization, speculation wasn’t a significant aspect of the >> industry. But in 1991, just a few years after oil futures began >> trading on the New York Mercantile Exchange, Goldman Sachs made an >> argument to the Commodity Futures Trading Commission that Wall Street >> dealers who put down big bets on oil should be considered legitimate >> hedgers and granted an exemption from regulatory limits on their >> trades. >> >> The commission granted an exemption that ultimately allowed Goldman >> Sachs to process billions of dollars in speculative oil trades. Other >> exemptions followed. By 2008, eight investment banks accounted for 32 >> percent of the total oil futures market. According to a recent >> analysis by McClatchy, only about 30 percent of oil futures traders >> are actual oil industry participants. >> >> Congress was jolted into action when it learned of the full extent of >> Commodity Futures Trading Commission’s lax oversight. In the wake of >> the economic crisis, the Dodd-Frank Wall Street reform law required >> greater trading transparency and limited speculators who lacked a >> legitimate business-hedging purpose to positions of no greater than 25 >> percent of the futures market. >> >> This is an important step, but limiting speculators in the oil markets >> doesn’t go far enough. Even with the restrictions currently in place, >> those eight investment banks alone can severely inflate the price of >> oil. Federal legislation should bar pure oil speculators entirely from >> commodity exchanges in the United States. And the United States should >> use its clout to get European and Asian markets to follow its lead, >> chasing oil speculators from the world’s commodity markets. >> >> Eliminating pure speculation on oil futures is a question of fairness. >> The choice is between a world of hedge-fund traders who make enormous >> amounts of money at the expense of people who need to drive their cars >> and heat their homes, and a world where the fundamentals of life — >> food, housing, health care, education and energy — remain affordable >> for all. >> >> Joseph P. Kennedy II, a former United States representative from >> Massachusetts, is the founder, chairman and president of Citizens >> Energy Corporation. >> >> -- >> Jim Devine / "In science one tries to tell people, in such a way as to >> be understood by everyone, something that no one ever knew before. But >> in poetry, it's the exact opposite." -- Paul Dirac. Social science is >> in the middle.... and usually in a muddle. >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l > > > > -- > Robert Naiman > Policy Director > Just Foreign Policy > www.justforeignpolicy.org > [email protected] > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l -- Jim Devine / "In science one tries to tell people, in such a way as to be understood by everyone, something that no one ever knew before. But in poetry, it's the exact opposite." -- Paul Dirac. Social science is in the middle.... and usually in a muddle. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
