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Obama Calls for Oil Crackdown

.…2) Ensure That U.S. Energy Futures Cannot be Traded on Unregulated Offshore Exchanges: CFTC oversight of oil market speculation is also limited by rules that allow energy traders to engage in unregulated transactions through foreign subsidiaries of U.S. exchanges. Currently, about 30 percent of U.S. oil futures trades fly below the regulatory radar because they are transacted on a U.S. exchange that works through a subsidiary in London. Similar arrangements are being pursued by U.S. exchanges in partnership with Dubai as well. Barack Obama would limit the price impacts of excessive speculation by preventing traders of U.S. crude oil from routing their transactions through off-shore markets in order to evade speculation limits and also impose reporting requirements…

Let’s be clear what Obama is proposing. He’s wants foreign futures markets to submit to U.S. regulation, and if they don’t; U.S. citizens, funds, and financial entities will be barred from trading on those foreign markets. This heavy-handed, Soviet-style, restraint of trade will accomplish only one thing, to drive capital out of the United States. Obama’s distaste for free markets and capitalism is plainly evident, but not as evident as the catastrophe that would accompany the implementation of this misguided nightmare.

If politicians are looking for a scapegoat on which to blame soaring oil prices, perhaps they need only look at the Federal Reserve, who’s massive injections of capital into the system coincided perfectly with the recent rocket launch in oil prices. (See chart.) As I see it, the Fed has pumped money into the system to re-liquefy credit markets and stem the housing collapse. Unfortunately, money injected into the system cannot be directed to a specific need, like botox to a matron’s wrinkle. Rather, the spare cash naturally goes into those markets that are rising (oil) rather than falling (houses.) The Fed’s attempts to fix the housing collapse are in part, responsible for the oil bubble.

click chart to enlarge