Oil Speculators Greasing their Wheel

Karl FitzgeraldCommentaryLeave a Comment

Crude oil is the world’s most actively traded commodity. Margin requirements see that speculators have to lodge only 5 – 7% of the total investment in an oil futures contract to gain ownership. This is compared to stocks, where 50% must be deposited upfront. The low margin required and the risk of investment in the land and sharemarkets has seen oil as the go-to investment vehicle for the immense wealth circulating the global financial markets.

This has seen commodity indexes rise $40 billion in the first three months of this year, a larger gain than the whole of 2007.

Whilst raising the margin is one way to reduce the liquidity in the oil market, we are strong believers in the right of the public to share in this oil bubble, and in the process take the heat out of the market. A 10% Resource Rental charged at source would ensure the public shares in the booming price appreciation, especially when prices have risen over $30 this year alone.

As stated over on our sister website:

The threat this (oil bubble) places to the world economy is paramount. The 1970’s oil crisis was blamed on the Middle East. How ironic that today’s looming global economic crisis can be blamed on monopoly capitalism. Speculation in land (ie US sub-prime), oil, coal, wheat, corn and water is due to the failure of the government’s taxation system to capture economic rent. Such a powerful medium can replace all other taxes on incomes and rid us of indirect taxes like the GST.

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