by Jack Lee
Dear Mr. President,
It is estimated at this time about 50-60% of the price of crude is due to oil speculators buying up virtually unlimited numbers future oil contracts; greed has caused a cascade effect …driving up our oil prices far beyond supply and demand prices. In this current situation the more they speculate (buying future oil contracts with small down payments), the higher crude oil goes and the more the speculators make. This is a concerted effort by a consortium of funds, banks and brokerages. They have discovered a loop hole for guaranteed riches at our expense. It’s time for you to dump at least 30% of our strategic oil reserves on the market under cutting the prevailing price. This will cause the price of oil to dip sharply and spread panic into the speculators ranks. I would do it now and here’s why. What these speculators are doing violates the basic premise of our fair trade laws and imposes an undue burden on an otherwise free market commodity.
DESTROY SPECULATORS WITH THEIR OWN TACTICS: When it dips those oil speculators who are leveraged by virtue of using only a small down payment to secure an oil “futures” contract will be faced with a “margin call”. As you know, this means they must pay more money to hang on to their oil contract. Those who can’t meet the margin call or panic and sell will add to the falling price and the more the price falls, the more margin calls, the more sharply the price dumps, it’s a cascade effect again and it’s happened many times before. This is why speculators are very quick to dump their holdings and it wouldn’t take much to start the stampede.
ADDING INSULT TO INJURY: You may wish to dump another 20% on the market and those who have been holding out will be destroyed and the price of crude will drop even further…. into normal supply and demand limits, my guess around $50-60 a barrel. This will also strengthen the US dollar and that will be good for future oil purchases and keeping the price stable and at affordable levels.
BOTTOM LINE: The US can slowly buy back its oil supply at a substantially discounted price as speculators are ruined. A win-win.
Shorting the market: (Withdrawn as too unlikely and not ethical anyway, we should never do it)