MyFoxPhilly

If ever there was a more glaring example of our elected officials living in a bubble, I would be hard-pressed to unfavorably contrast it with this! What is so difficult to understand about our energy problem? It is a classic supply vs. demand issue, as I have been saying in so many forms for the last several blogs. Twenty-plus years of whistling past the oilfields/nuclear plants/alternative energy has left us with our energy-pants down. This is not brain surgery - though it appears the US Congress needs some serious brain transplants.

Oil "speculators" are those who buy oil futures and sell them to a third party (other oil speculators, I would assume). This is the same racket in which Hillary Clinton turned $1K into $100K on cattle futures. The same type of trade if done on a larger scale can ruin an individual. Eventually the "speculator" will have to produce the "produce" so-to-speak, and that is where all advance trades end up. So here is the meat of the proposed "regulation" of "oil speculators":

The Senate legislation would require institutional traders to give the Commodity Futures Trading Commission more details on unregulated over-the-counter transactions to determine if price manipulation or excessive speculation is occurring. The CFTC also would review trading practices of swaps dealers and commodity index funds. The legislation would not require the higher margins to buy and sell oil that the futures industry had feared. But the bill requires tough position limits on speculators to restrict the number of oil contracts they could control.

Who determines what "excessive speculation" is? The CFTC. Who is the CFTC? Read the link for more, but this is the summary:

Congress created the Commodity Futures Trading Commission (CFTC) in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the United States. [...] The Commission consists of five Commissioners appointed by the President, with the advice and consent of the Senate, to serve staggered five-year terms. The President designates one of the Commissioners to serve as Chairman. No more than three Commissioners at any one time may be from the same political party. (Marks Note: We could appoint Libertarians instead of Democrats, but they would never survive Senate "speculation" in the form of "advice and consent"...)

Two things to point out here, followed by my own speculation. Number one: They regulate markets "in the United States" and nowhere else. Any idea how much tax revenue in capital gains is raked in from "market speculators"? My precise guess would be that famous economic number most economists use with such precision: "A bunch!"

Second, we are talking about political appointees making majority judgments upon "free-market" principles which are not necessarily shared by our two-party political system. How are they to determine a certain trade is somehow tainted? The answer is politically, unless I'm a dunce. It will be a majority-driven determination, and ultimately will perform about as well as a dog with no teeth.

In effect, the first obvious condition that will result from this legislation is US market share of trades will dwindle. It won't stop, but trades that might trigger CFTC review will move offshore. This will immediately result in less tax revenue for the IRS. Markets have been moving abroad for years, and usually are driven there by government pre-conditions like this proposed legislation. The bottom line is regulating "speculators" results in the failure of the government to collect taxes.

As I have stated many times over the course of the last month, energy prices will only drop when there is an energy glut. So far, there has been zero increase in our energy generation or oil production. That absence is why you are paying $4 for a gallon of gas, and until either demand drops or production increases you will continue to pay through the nose to keep your current lifestyle in order.

I recommend hypermiling and public transportation as a way for you to save money, but you will lose time as a result. Life is full of trade-offs, and this Congress is proving we should have paid attention to their mismanagement long ago.

Time for that Congressional brain transplant...

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