More pandering from Obama:
[youtube]http://www.youtube.com/watch?v=vnsmFQy62uM&t=28s[/youtube]
Of course government needs to step in to protect consumers because god knows us consumers can’t think for ourselves and we need to be protected from those eeeevvviiiiiilllllll bankers…woops, I mean those eeeeevilllllll CEO’s….woops, I mean those evvvvvillllll speculators.
Now it’s the speculators and their evil capitalist ways. I mean how dare they want to make a profit? To a Socialist, like this man, it’s pure evil to want to make money. Everything should be done to help the State, all profits should be confiscated and the government should be allowed to decide who is worthy to receive that which they didn’t work for.
This is how this man thinks.
By the way, did we hear these kinds of complaints when the price of oil went down to 30 bucks a barrel not so long ago? No, Didn’t think so.
So now our President is going to take 52 million dollars of our tax money to pay for more bureaucrats to investigate speculators AGAIN!
In the U.S., we’ve had repeated federal investigations of speculators’ role in driving up prices — in 2003, 2005, 2006, 2008, 2011 and again this year. Not one has found evidence of pervasive market manipulation.
How else to describe this as anything other than pure political pandering to his base. His base wants the mighty hand of government to control all aspects of life in this country. Somehow they believe if government bureaucrats get involved they will stop oil speculators from making a profit and THAT will drive the price of oil down?
Let’s not even mention the fact that our exchange is not the only exchange in the world. There are exchanges and speculators all over the planet, and our government can’t do a damn thing about preventing them from making a buck. Speculators will just move to those exchanges if he makes it difficult for speculators to make a buck AND speculation will still occur.
The fact of the matter is that speculators don’t cause higher prices. Higher prices occur because of supply and demand: (pdf)
In theory the price effect of commodity financial investment is ambiguous. On the one hand, well-informed, rational investors should add liquidity to commodity derivatives market, facilitating price discovery and keeping prices more aligned with fundamentals. As commodity investors buy when prices are low and sell when prices are high, this should help clear the market. However, some argue that “ill informed” investors exhibiting herding behavior could add to price volatility (page 6).
That said, most empirical studies find that financial investment in commodities does not have a significant effect on commodity prices. The World Bank, commenting in its June 2011 Global Economic Prospects, observes that “[d]espite such contrasting views [on the relationship between investment fund activity and commodity prices], the empirical evidence is, at best, weak.” (World Bank (2011). p. 62) Moreover, financial investment plays a key role in liquidity provision, and some speculation is needed to clear commodity derivatives markets.
…and volatility
The French G-20 leadership and other official sector entities have also expressed concern regarding the potential role of financial investment in causing commodity price volatility. The most recent upswing in commodity prices beginning in 2009 was accompanied by a sharp rise in commodity price volatility, peaking in February 2010, though volatility has since returned to levels prevailing
during 2000-2009 (Chart 6 below).However, the even more striking increase in commodity prices during 2008 was not accompanied by a commensurate increase in commodity price volatility.
Broadly speaking, research on the impact of financial investment on commodity price volatility—including work done by the BIS in 2007, the IMF in 2008, and the OECD in 2010—suggests that there is little evidence linking financial investment in commodities to higher commodity price volatility. Indeed, some researchers have found that the presence of key financial investors (index and swap funds) actually helps reduce market volatility. (OECD (Irwin and Sanders). (2010). IMF World Economic Outlook. (October 2008). BIS Quarterly Review. (March 2007)). That said, some recent research indicates that new investment vehicles may have been responsible for at least part of the post-2005 volatility in commodity prices. (World Bank (2011). p. 62)
Is the end goal of Obama here to bring back OPEC? I doubt it. The end goal here is just to rile up the base. Nothing he suggests, no “five point” plan he puts out has any hope of bringing down the price of gas. He needs to open up drilling to every inch of this country and off-shore. THAT will bring down the prices.
Until then we will continue to get inane pandering from this insult of a President.
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