$4 Gasoline and the Price of Silver: Yeah, There’s a Connection
U.S. gas prices have hit their highest level ever for springtime, at $3.96 a gallon for regular on average. Yep, higher even than the record surge in 2008, as oil companies reap near-record profits. So what does that have to do with the price of silver?
The speculative price of silver is dropping, maybe crashing, from its high around $50 an ounce largely because of one move: the New York Mercantile Exchange, where silver is traded, increased how much of the price of a trade has to be paid up front. Instead of a few cents on the dollar, it’s now several cents on the dollar.
Oil futures are sold even more cheaply–with speculators still putting up only around 6 cents on the dollar to trade hundreds or thousands of barrels of oil. That makes it too easy to gamble and encourages trades that are intended to push the price up further, to the detriment of your personal wallet. Just as with silver, most of the traders don’t produce oil and never intend to take delivery of a barrel of oil on their Manhattan doorsteps. Just as with silver, oil is attractive to speculators looking for a commodity that’s protected from any drop in the value of the dollar–even if their activity ends up hurting the value of the dollar, as shown in a 2009 Rice University study on energy speculation.
There are some differences, including the fact that oil markets are too vast to be cornered by one or a few traders, unlike silver. But the similarities are more numerous.
So why not raise the margin–the amount that pure speculators have to pay up front–on oil futures trading? Sens. Bill Nelson of Florida and Maria Cantwell of Washington recently asked the Commodity Futures Trading Commission to do just that–and quickly. But the CFTC hasn’t lifted a finger and won’t even comment on the Nelson letter–which is evidence of the power of the financial industry’s lobbying power in Washington.
The White House appoints the members of the CFTC. If its chairman, Obama appointee Gary Gensler, won’t exercise his power to protect consumers and the economy, President Obama should be all over him.
If you’re interested in raising the price of speculation to lower the price of gasoline, why not give the president a call and tell him to give the CFTC a kick in the pants? White House e-mail is here (put “oil speculation”) in the subject line). Comment line is 202-456-1111, and live switchboard is 202-456-1414. Every call is logged.
12/16/2014Blog PostI have been watching oil companies get away with price gouging for so many years that it was refreshing to see California's... More >
12/15/2014News ReleaseConsumer Watchdog Report Calls On California Officials To Watch For Oil Company Production Cut Backs As Ploy To Raise Gas Prices & Undermine Cap and TradeOakland, CA – The nonprofit Consumer Watchdog released a report chronicling the tactics California oil companies are likely... More >
10/9/2014News Storydefended Michael Peevey, the embattled president of the California Public Utilities Commission. The commission, which regulates... More >
12/16/2014News StoryDecember 16, 2014--Santa Monica-based Consumer Watchdog on Monday released a report warning that oil industry officials plan to... More >
12/18/2014News StoryConsumers who purchased Hyundai and Kia cars based on the companies' misrepresentations about the fuel economy of several of... More >