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I agree 100 % with this article. Government needs to repeal the Commodity Futures Modernization Act of 2000 which allows for speculators that drive up the price of oil. Oil changes hands so many times on paper/electronic trading before it reaches the refinery that it is ridiculous and it is all to make a buck at the expense of the consumer. People need to write their representatives, not emails, about this unless you like paying $4 a gallon of gasoline and high heating costs.
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Drill Now? Try Regulate Now.

Printed in The Wall Street Journal, page A13 Write to thomas@wsj.com.
Thomas Frank
By the standards of Washington, President Obama’s decision last week to open new areas off the nation’s coasts to oil drilling was something of a master stroke. With one deft move he both swiped a strong Republican issue from 2008 and defied environmentalists, an element of his coalition that is roundly despised on the right. The president also extended a hand to the people he trounced in the health-care debate, setting the stage for possible acts of bipartisanship in the future.

For a city that regards this kind of calculated “pivot” as the noblest form of statesmanship, the announcement was almost Clintonesque in its brilliance. Triangulation is back and the cherry trees are a-bloom as though in celebration.

The actual results of the offshore drilling itself are secondary considerations, if they come up at all. Essentially, we are going to allow drilling off the coast because “drill here, drill now” was a slogan that polled well during the last presidential campaign—which unfolded, you will recall, as gasoline prices were hitting $4 a gallon.

Now, I don’t know whether offshore drilling will be an environmental catastrophe; maybe if it’s done carefully everything will be fine. And while ending our dependence on OPEC would be a marvelous thing, I have no idea whether offshore drilling will do much in that regard.

But I have my doubts. “Drill here, drill now” was itself a purely political gesture, not a real solution to the problem. It was a way of pinning blame for the insane price of gasoline on liberals, who, according to legend, hold squishy pink ocean creatures in higher esteem than American consumers. Those who popularized the phrase were not asking us so much to resolve the energy question as to spit a little hate at an ugly stereotype.

But if what the president wants to do is to make sure that another oil shock of the 2008 variety doesn’t happen again, this is not the way. After all, oil didn’t zoom to $147 per barrel in ’08 and then plummet to $35 the next year because OPEC declared an embargo and then suddenly lifted it. Nor did it happen because Chinese motorists decided en masse to junk their cars.

We may never know for sure the combination of circumstances that brought on the energy crisis of that year. But one factor was almost certainly the Commodity Futures Modernization Act of 2000, which allowed unprecedented levels of speculation in oil futures by investment banks and pension funds, bringing the familiar boom-bust cycle home to the gas pump.

To understand this we need only turn to the business section of the Washington Post on the very day that Mr. Obama’s new offshore drilling policy was announced. There, reporter David Cho described the history of the deregulatory measures, their probable effect on the zany oil-price swings of recent years, and the low-profile battle that is currently under way at the Commodity Futures Trading Commission (CFTC) to re-regulate energy markets. If the Obama administration succeeds in bringing oil prices under control, this is where they will do it.

“Wall Street failed America,” CFTC Chairman Gary Gensler told Mr. Cho. That comment could apply to countless aspects of the economy these days. “And Washington’s regulatory system failed America. And if we don’t fix it, it’s going to happen again.”

The essential similarities between the oil fiasco and the larger financial crisis are striking. Both episodes showed us the same cast of characters—Goldman Sachs, AIG and the rest—taking advantage of deregulation.

And the whole rotten thing was then defended by the same bunch of free-market wise men, who brushed off doubts with a condescending laugh and a snort of indignation. How little critics know about the fantastic complexities of markets. And how arrogant they are as they threaten our freedom to speculate.

But the heyday of that perfect faith is behind us now. Today we must answer this question, put to me by hedge fund manager Mike Masters, a well-known critic of commodity-market deregulation: “How long is the lady in Maine supposed to pay higher prices for her heating oil to accommodate the asset allocation needs of the world’s pension funds?”

And how long are the rest of us supposed to sit passively as we watch gas prices zoom up again? Countries have fought wars for oil, but what is required of us is that we dump the shibboleths of the last 30 years. We should drill if we must, but the best slogan would be: Regulate here, regulate now!

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I read this article and couldn’t believe the reasoning behind the latest crude price increase. It just screws us all and puts a drag on the recovery so speculators can make a killing thanks to the fed keeping interest rates low causing a weak dollar.

I’m thinking the Fed should raise the interest rates a little as low rates keep the dollar weak but creates higher oil and gasoline prices which put a drag on consumer spending which in turn keeps job increases low as companies don’t need to hire because there isn’t any consumer demand because there is no spending. If the dollar is strong, oil/gasoline prices decrease giving more money to consumers to make purchases. This latest increase in oil and gasoline on the market seems to be speculators since the dollar is weak, there is a surplus of crude inventory and weak job news and they just blow it off. They just want to make money so they are driving up the cost. Just my opinion.
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Oil rises near $84 with weak US dollar

Oil settles near $84 as dollar weakens and investors shrug off weak employment report

Deborah Jian Lee, AP Energy Writer, On Wednesday March 31, 2010, 3:17 pm EDT

Oil prices rose near $84 a barrel Wednesday as the dollar weakened and oil traders shrugged off weak job news and a bigger-than-expected build in crude inventories.

Benchmark crude for May delivery climbed by $1.39 to settle at $83.76 on the New York Mercantile Exchange.

“The bottom line is this is just a market that’s advancing in a relatively thin pre-holiday atmosphere,” said oil analyst Jim Ritterbusch. “The market is zeroing in on the fact that the dollar is weak.”

Even a surprisingly poor jobs report didn’t pull down oil prices. Payroll company ADP said employers slashed 23,000 private-sector jobs in March. Economists surveyed by Thomson Reuters forecast the report would show employers added 40,000 jobs during the month.

“This bad employment report reinforces the notion that interest rates will stay low for a longer period of time, thereby putting downward pressure on the U.S. dollar and upward pressure on oil prices,” said Phil Flynn, an analyst with PFGBest.

Flynn expects the Fed will not raise interest rates until the job market improves. The weaker greenback makes crude oil cheaper for holders of other currencies.

Crude prices trimmed some gains after the Energy Information Administration said crude inventories rose by 2.9 million barrels last week. Analysts expected a build of 2.65 million barrels.

Meanwhile, President Barack Obama said there should be more oil and gas drilling off the East Coast, in the Gulf of Mexico and in waters off Alaska. The plan modifies a ban in place for more than 20 years that limited drilling along coastal areas other than the Gulf of Mexico.

Flynn called the news “a very positive long-term story for the oil markets,” but said it’s too far into the future to move oil markets today.

A number of energy companies could eventually be involved in the new offshore areas, although investors did not rush to buy shares, many of those companies showed modest gains. The AMEX Oil Index, comprised of a dozen major oil companies and refiners, rose about five points, or a half of a percentage point. The Philadelphia Oil Service Sector Index, which tracks shares of 15 companies in that sector, gained more than 1 percent.

At the pump, retail gasoline prices edged up. The national average rose less than a penny to $2.798 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 9.3 cents more than it was a month ago and 75 cents above the price a year ago.

In other Nymex trading in April contracts, heating oil rose 3.99 cents to settle at $2.1646 a gallon, and gasoline gained 3.53 cents to settle at $2.31 a gallon.

Wednesday is the last day for trading the April heating oil and gasoline contracts, and most traders have switched over to May contracts. May heating oil rose 4.74 cents to settle at $2.1790 a gallon, and May gasoline added 3.51 cents to settle at $2.3072 a gallon.

Natural gas for May delivery fell 10.4 cents to settle at $3.869 per 1,000 cubic feet.

In London, Brent crude rose $1.42 to settle at $82.70 on the ICE futures exchange.

Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.

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In an earlier post I questioned whether the rise in gasoline and oil prices would hinder the economic recovery. After reading this article it just may do that.

I guess I may have a little common sense and may not be as stupid as I thought I was. lol.


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