I agree. But maybe a tax on oil speculation would be the thin end of the wedge.
On Thu, Apr 12, 2012 at 1:06 PM, Jim Devine <[email protected]> wrote: > 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 -- 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
