We all heard the Republicans religiously chanting that the rise is oil and gas prices was due to not drilling. Unfortunately, that is far from the truth. In fact to the dismay of many environmentalists, he is drilling for oil, even in the Arctic!
Since April oil prices are down 21% and according to Forbes, it mostly, if not all has to do with President Obama.
The Forbes article states,
President Obama’s $52 million plan to increase the margin requirements and otherwise tighten the screws on oil speculators — who borrow huge sums to bet on the direction of oil without taking delivery — would cut oil prices by 10%. He’s beaten that prediction and the lowered price of gasoline has added $78.4 billion to its consumers’ spending power.
In case you never heard about it, in April the Obama administration asked Congress to spend $52 million to regulate this speculation. According to the Washington Post, this included the following steps:
Increase by a factor of six Commodity Futures Trading Commission (CFTC) surveillance and enforcement staff “to better deter oil market manipulation,”
Boost 10-fold to $10 million the civil and criminal penalties against “firms that engage in market manipulation,”
Give the CFTC authority to increase the trader margins — the amount of their own capital that traders must set aside for each bet. The administration officials said such authority “could help limit disruptions in energy markets,” according to the Post.
So how does all of that affect the price of oil?
Well, increasing the margins, makes speculating on commodities less attractive and the speculators place their bets somewhere else.
Historically, when margins are raised, oil prices fall. This is exactly what happened in February of 2011. Oil prices dropped 10% in a few months. A year later these margins were lowered, and oil prices spiked back up to 109 dollars a barrel.
So in April and May, what happened? The Obama Administration and the CFTC implemented their $52 million dollar plan to regulate the oil speculators. Now oil dropped from $106 dollars a barrel in April to $84 dollars a barrel by mid-June.
Amazingly, what worked in 2011 worked again in 2012.
Of course there are other factors in play, which is why the drop was more than the original prediction of 10%. The strengthening dollar against the Euro, the slowdown in demand and the worries over in Europe definitely play a role. But the combined effort has made filling up a little bit less costly, and that has to do with the Obama Administration.
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Disillusioned
Jun. 29th, 2012 at 3:33 pm
It’s widely known oil is market driven and leaders really don’t or can’t have much “if any”
effect on prices but they all blame each other when prices soar.
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Mtp2inTX
Jun. 29th, 2012 at 4:51 pm
@Disillusioned, did we read the same article? If we did are you then calling into question the credibility of the author and the facts from the Forbes article? Please enlighten us all as to why the specific measures listed above didn’t produce the results which are the subject of the article. Oh and please leave out opinions, we’re intrested in facts not your unsubstantiated opinion.
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HoneyLight
Jun. 29th, 2012 at 6:19 pm
Agrees with you and awaits the response from disillusioned LOL!
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billzilla
Jun. 29th, 2012 at 6:51 pm
The oil market is widely REPORTED to be driven by the market, but the truth of the matter is now ‘proof in the pudding’ obvious – that speculators and oil company manipulation of refinery output is the real culprit, as is insider trading on big oil exports (since the USA doesn’t consume all the oil it buys and re-sells to other countries).
Please don’t try to play the ‘it’s supply and demand’ nonsense game. Nobody is buying that Koch-fueled lie any more.
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Diane
Jun. 29th, 2012 at 9:15 pm
Actually, leaders can make a big difference in the price of oil when they rein in the oil speculators. If the speculators get out of hand and the price of oil starts climbing, get out your investigators and watch the price come down. The speculators don’t want attention.
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Ryan Clarke
Jun. 29th, 2012 at 3:51 pm
*their ($52 million plan)
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JJM
Jun. 29th, 2012 at 4:30 pm
No wonder the Koch Brothers, who were among the biggest speculators previously, are so angry with our president.
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Mike Lynch
Jun. 29th, 2012 at 6:26 pm
JJM, sorry but I copied and pasted you.
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rod
Jun. 29th, 2012 at 4:47 pm
So happy that the powers that be like Obama being President. This has never crossed the minds of the ignorant racists repugs and it’s a good chance it never will.
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Ron
Jun. 29th, 2012 at 7:46 pm
I think Disillusioned was being sarcastic. If the market wasn’t manipulated to the degree it is then the law of supply and demand would be more applicable.
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John
Jun. 29th, 2012 at 9:20 pm
I paid 2.579 for 93 octane yesterday in central Ohio. I blame Obama for the price drop. After all, when I paid 4.50 for the same product a few months ago that was all his fault, right? Oh, wait, could it be the market, and not his fault at all? Wow, now that would be just amazing, something that is NOT political!
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Ed Breider
Jun. 29th, 2012 at 9:54 pm
I consider myself a progressive, but this article is crap. The effects of speculators (or “market makers” as they would prefer) are very short term and cancel themselves out in time. Decreases in the price of oil these past few months were due to worldwide economic slowdown, strength of the dollar, and MAINLY because of a reduction in the Iran “fear premium.” Sure… this premium was implemented by the oil traders, but they are merely messengers… and as the old adage goes, “Don’t shoot the messenger.”
Oil, gold, and foreign currencies (relative to the dollar) were all up BIG TIME today based on a meeting of the European leaders and the reaching of an “agreement.” Are you going to blame that on speculators?
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majii
Jun. 29th, 2012 at 10:36 pm
Regular unleaded is selling here in red, red Middle Ga for $2.88 per gallon. I haven’t heard a word from Newt Gingrich or any of the conservatives who were shooting their mouths off a few months ago about the lower gas prices. If they do say something about the declining price of gas, it will have nothing to do with giving President Obama credit for putting pressure on the oil speculators. These tools are giving Nathan Deal, our republican governor, credit for the decrease in our unemployment rate because see, according to them, GA didn’t receive one red cent of the stimulus funds.
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Dan Skinner
Jun. 30th, 2012 at 3:29 am
are u sure Romney wasn’t responsible? Afterall he saved the automobile companies when he folded his arms saying ” Ya’ll go bankrupt now, ya hear?”
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Shawn
Jun. 30th, 2012 at 11:11 am
It was a speculation bubble that caused the crash of ’08. He should regulate all speculation, or better yet, just get rid of it.
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