[ Tuesday ]
Oil Prices...A Regulatory Issue?
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Now that a spokesperson for OPEC has declared that the current value of a barrel of oil is only $70 USD, and industry economists have stated that there is no justification, demand or otherwise, for oil to be priced at more than a $55 to $80 range, one has to wonder how the current futures price reached the current level (around $135 to $140).
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The facts are clear: speculators have driven up the price, and firms such as Goldman Sachs operate in an unregulated market, outside of the SEC and other agencies, with regard to this issue. Just last week, a GS analyst suggested that the price of oil would hit $150 per barrel by July 1st, and the price that day jumped $11 per barrel in response to the suggestion. Does anyone believe that Goldman Sachs did not already have a futures position in advance of the announcement, thereby insuring a neat profit?
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While not a proponent of government regulation, this is more of a security issue as it deals with speculators rather than profiteering, similar to the silver market of the 1980's. However, where the silver market affected only a small portion of the economy, oil price speculation by these investment firms has created a worldwide economic problem. The ramifications include food shortages, increased healthcare costs, budget problems for municipalities affecting basic services, as well as inflationary trends in virtually ever sector of the economy. This may well be considered an insider trading issue, except that the penalty to the petroleum consumers of the world will be in the trillions of dollars. In the USA, perhaps emergency regulation of these speculators should be addressed by Congress, along with the appropriate penalties on windfall profits.
MM [11:07]
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