Oil Prices and Congress

I watched the congress and the senate hearings, interrogating the oil industry’s executives, treating them as culprits or worse as criminals guilty of making profits on the back of the regular, poor consumer having to pay a “high” price for gasoline. It reminded me the old communist system I escaped 49 years ago. The communists would have condemned and executed the culprits, the executives.

Of course this is the United States of America, and is not that easy for politicians to eliminate people they don’t like. Believe me, if they could, they would.

The most ridiculous statement was from congresswoman Maxine Waters, stating from the podium of the House of Representative, that the government might have to nationalize the oil industry. How arrogant, or rather stupid that statement can be?

If you think congresswoman Waters is an aberration, think again, she is not. The liberal congress is opening an investigation on “oil futures speculators”.

Futures market has been around for long time. It has served the free trading commerce environment flawlessly for hundreds of years. Japan had a futures trading system for rice going back to 1750.

Communist system eliminated free trade and credit. Under communism, if you wanted to buy a motorcycle, you had to save the money, deposited in the bank to pay in full, and once you had the full amount, you were allowed to place your name on the waiting list that might take a year or more to take delivery of your motorcycle.

If it was left to the Maxine Waters of the world, we would have to deposit money into a gasoline account and wait with a coupon at a gas station to get our two gallon allocation.

Of course, I am exaggerating, but maybe not.

Futures speculators are the most honest of the bunch; they are using their own money to make a quick buck. Most of them, 95% loose money in the process. Hillary’s $1,000 investment in futures returning $100,000 was a bogus gain; it was a payout. It was impossible. A $10,000 investment could have returned $100k if everything was right. However, a $10K investment could have resulted in a $100k LOSS just as easily.

Futures trading background

In 1878, a central dealing facility was opened in Chicago, where farmers and dealers could deal in ‘spot’ grain, and immediately deliver their wheat crop for a cash settlement. Futures trading evolved as farmers and dealers committed to buying and selling future exchanges of the commodity. For example, a dealer would agree to buy 5,000 bushels of a specified quality of wheat from the farmer in June the following year, for a specified price. The farmer knew how much he would be paid in advance, and the dealer knew his costs.

The most valuable service provided by speculators: PRICE of Commodity

Light oil crude futures, February 2008 with delivery in August, were trading around $90. Any buyer of crude oil, planning delivery in August, 2008 paid $90 for a barrel of oil. Today, June 2008, you can’t get any future delivery contract at below $130.

Take a look at the chart below:

Light Crude Oil

The speculators’ reading: Congress is not going to do anything good to help alleviate the problem. Secondly, you are on your own and you will pay these high and even higher prices for the near future.

Note from the editor

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Computer Security

As a computer/internet user you already know how important the security of your computer is. I am a retired computer designer, had computers in my house for more than 25 years. For most part, I didn’t have to worry much about the safety of my computer, except in the last few years. Presently, I am evaluating and changing my computer security program every six months.

Here is the latest: Netcom3 Internet Security.

Better feel safe than sorry.