PEAK PUTTERS

House passes bill to reverse oil price increases
Posted Jun 27 2008, 01:49 AM by Andrew Horowitz
Filed under: Energy, oil, economy

After the close of the markets Thursday, as the fear of a continued parabolic rise in the price of oil was still fresh on the minds of investors, the U.S. House of Representatives approved a bill that that could help to reverse the direction of oil prices.

The bill would provide for the Commodity Futures Trading Commission (CTFC) to enact emergency measures to “maintain or restore orderly trading.â€

Summary please . . .

Nope...

Buying on margin is basically taking a loan from a broker to purchase stock, commodities like oil, ect.

Those speculators who are buying up oil and jacking the price up are not paying the full $140 a barrel. A small portion of it comes out of their pockets and the rest is loaned. When the price goes up, they sell the oil to pay off the loan back to the broker and keep the rest. The have been assuming that oil will just keep going up and up so it seems an easy way to make a buck. I liken it to borrowing money from a bank to play in a Casino with the hopes that you'll make money after you pay them back.

Kinda sounds like the real estate thing all over again doesn't it. Buy homes with the assumption that prices will keep going up and up. But in the end they tanked because no one can afford them after market speculation drove prices beyond what people can afford. Also don't adjustable rate mortgages sound like a gamble, get a loan with a very low rate with hopes of selling a home in less than a few years for more money. And our government wants to bail these people out and the banks that made it happen like Bear Stearns...with taxpayer money.


Same would happen with oil eventually. Or how about tech stocks in the '90s. People said they had nowhere to go but up at one point when they were worth so much less then what their stocks were priced at.

What this set of laws will do will require people buying the oil to come up with more money out of their pockets and make these loans harder to get. This margin crap should have been reduced or eliminated a long time ago. The thinking is this could reduce speculation to the point where oil falls about 25% but I've been reading figures down to $60 a barrel. They really don't know.

Speculation buying is basically today's buying on margin of the 20's that caused the great depression.... Why oil is traded and sold in a area that allows speculation buying is beyond me, that was designed for commodities such as produce not natural resources like oil....

Great responses, it's always the conservative middle income tax payer that ends up bailing out the risk takers in hard times. IMO

While you guys gave good definitions. . .the real deal is that it is like placing a bet with an illegal bookie that you can't cover and they come and break your kneecaps. . .so, they are going to force the gamblers to have all of the money up front to avoid the whole baseball bat thing. . .

It is good for us because the speculation on the commodoties market is causing artificial inflation of oil prices. The supply and demand market for oil and oil products is not represented by the price of oil because of all of the doomsday speculators and their buying on margin. If the speculators are forced to pay cash, then they won't be so quick to spend the money. . .especially money they don't have.