1 00:00:00,280 --> 00:00:02,920 Speaker 1: Brought to you by the reinvented two thousand twelve Camray. 2 00:00:03,160 --> 00:00:07,560 Speaker 1: It's ready. Are you welcome to Stuff you Should Know? 3 00:00:08,160 --> 00:00:16,400 Speaker 1: From House Stuff Works dot Com. Hey, and welcome to 4 00:00:16,440 --> 00:00:19,720 Speaker 1: the podcast. I'm Josh Clark. Across from me is one 5 00:00:19,840 --> 00:00:23,640 Speaker 1: Charles W. Chuck Bryant. And since there's a couple of 6 00:00:23,680 --> 00:00:25,400 Speaker 1: the microphones in front of us that would make this 7 00:00:25,440 --> 00:00:28,960 Speaker 1: stuff you should know, the all audio podcast, All Goodness, 8 00:00:29,040 --> 00:00:31,600 Speaker 1: all the time. And in the other room, as guest producer, 9 00:00:32,000 --> 00:00:35,760 Speaker 1: Elizabeth Lizzie. Yeah, her old buddy is back here working, 10 00:00:36,320 --> 00:00:39,320 Speaker 1: which is nice, giving us um pieces of dry mango. 11 00:00:40,000 --> 00:00:42,040 Speaker 1: And in between she worked for Emily and so I 12 00:00:42,120 --> 00:00:44,400 Speaker 1: just haven't been able to lose Lizzie. That's good, but 13 00:00:44,520 --> 00:00:47,720 Speaker 1: she's not when you want to lose Lizzie's awesome. Stop 14 00:00:47,720 --> 00:00:50,320 Speaker 1: picking on Lizzie, Chuck. I'm a big fan. I started 15 00:00:50,320 --> 00:00:53,080 Speaker 1: the Lizzie Fan Club here. Oh yeah, and then I 16 00:00:53,120 --> 00:00:55,160 Speaker 1: dissolved it. I was gonna say, I have not been 17 00:00:55,200 --> 00:00:59,360 Speaker 1: invited to that. That's just me, Chuck. Remember when we 18 00:00:59,360 --> 00:01:01,560 Speaker 1: were on the call all with a senior White House 19 00:01:01,600 --> 00:01:06,760 Speaker 1: official yesterday, Yeah, that was kind of cool. Huh yeah 20 00:01:06,920 --> 00:01:11,440 Speaker 1: White House. Yeah, Obama Administration that's who's in there. Basically 21 00:01:11,480 --> 00:01:15,080 Speaker 1: we were talking about the UM. Well, we're basically going 22 00:01:15,080 --> 00:01:19,120 Speaker 1: over the talking points for the energy security policy that 23 00:01:19,160 --> 00:01:23,040 Speaker 1: he unveiled today as of this recording March thirty one, right, 24 00:01:25,680 --> 00:01:29,520 Speaker 1: I was tomorrow the thirty one. So he goes over 25 00:01:29,560 --> 00:01:34,039 Speaker 1: this or or she's going over this with us and UM. 26 00:01:34,080 --> 00:01:37,679 Speaker 1: Basically Obama has said that over the next decade he 27 00:01:37,720 --> 00:01:42,600 Speaker 1: wants to reduce American oil imports by a third, right, 28 00:01:43,160 --> 00:01:45,959 Speaker 1: And it's something that every president going back to I 29 00:01:45,959 --> 00:01:49,000 Speaker 1: think Nixon has said that. All right, So it's an 30 00:01:49,040 --> 00:01:51,320 Speaker 1: ambitious goal, is what you're saying. Well, not sorary third, 31 00:01:51,320 --> 00:01:53,320 Speaker 1: but yeah, they all There's a video that John Stewart 32 00:01:53,360 --> 00:01:55,480 Speaker 1: ran on The Daily Show where it literally showed the 33 00:01:55,520 --> 00:01:59,080 Speaker 1: same clip from like our last five presidents saying reduced 34 00:01:59,080 --> 00:02:03,200 Speaker 1: foreign dependency on they have the best researchers on that show. UM. 35 00:02:03,280 --> 00:02:06,600 Speaker 1: So okay, Well, Obama took his rightful place, following in 36 00:02:06,640 --> 00:02:10,519 Speaker 1: the footsteps of Richard Nixon, and UM has has said 37 00:02:10,560 --> 00:02:13,200 Speaker 1: that he wants to reduce our imports by a third 38 00:02:13,360 --> 00:02:16,440 Speaker 1: in about ten years. UM. And one way to do 39 00:02:16,480 --> 00:02:20,080 Speaker 1: that is to UM figure out how to conserve oil, 40 00:02:20,480 --> 00:02:24,840 Speaker 1: how to reduce use e g. A smarter grid, more windpower, 41 00:02:24,960 --> 00:02:30,720 Speaker 1: more nuclear um more um clean coal, clean coal was 42 00:02:30,760 --> 00:02:36,040 Speaker 1: another one. Natural gas, no clean coal, and to basically 43 00:02:36,480 --> 00:02:40,760 Speaker 1: get online are reserves that we have now. So the 44 00:02:40,800 --> 00:02:43,720 Speaker 1: big talking point around Washington with the Democrats right now 45 00:02:43,960 --> 00:02:49,440 Speaker 1: is that oil is um. That the oil companies have 46 00:02:50,480 --> 00:02:55,359 Speaker 1: leases on something like seventy nine million acres of UM 47 00:02:55,400 --> 00:02:59,919 Speaker 1: of oil land, suspected oil land that we were not tapping, right, 48 00:03:00,080 --> 00:03:03,280 Speaker 1: that's not being used. It just own these leases, right, 49 00:03:03,919 --> 00:03:08,480 Speaker 1: And then I think like nineteen million acres are actually 50 00:03:08,560 --> 00:03:13,600 Speaker 1: being mined for their oil or natural gas. And Obama's 51 00:03:13,600 --> 00:03:17,360 Speaker 1: position is, hey, you fat cats, um, you need to 52 00:03:17,360 --> 00:03:20,160 Speaker 1: go ahead and start producing or else we're going to 53 00:03:20,240 --> 00:03:24,280 Speaker 1: penalize you, like invest in the United States, come off 54 00:03:24,320 --> 00:03:27,240 Speaker 1: some of these profits and start spending on exploration and 55 00:03:27,320 --> 00:03:30,639 Speaker 1: production and get American oil out of the ground, which 56 00:03:30,680 --> 00:03:34,120 Speaker 1: is hugely different than what he was saying he should 57 00:03:34,120 --> 00:03:37,200 Speaker 1: do before, which is like no ausch or really nothing 58 00:03:37,240 --> 00:03:39,800 Speaker 1: like that. Um. So it's it's kind of a big 59 00:03:39,840 --> 00:03:42,480 Speaker 1: deal that he's really putting oil at the center of 60 00:03:42,560 --> 00:03:46,800 Speaker 1: his energy security policy. UM. But one thing we asked 61 00:03:46,840 --> 00:03:51,560 Speaker 1: that they didn't really answer very well is what role 62 00:03:51,920 --> 00:03:57,760 Speaker 1: does preventing speculation in the commodities market play in energy security? 63 00:03:58,120 --> 00:04:00,920 Speaker 1: That's my question. I get the sense, and this is 64 00:04:00,960 --> 00:04:03,800 Speaker 1: one of those topics again that you know, Chuck's little 65 00:04:04,040 --> 00:04:06,720 Speaker 1: guitar playing English major brain has a hard time wrapping 66 00:04:06,720 --> 00:04:09,640 Speaker 1: around this. But I get the feeling that there's not 67 00:04:09,720 --> 00:04:12,200 Speaker 1: a lot of people in the government they want to 68 00:04:12,240 --> 00:04:16,320 Speaker 1: talk a lot about oil speculation. It's like, don't bring 69 00:04:16,360 --> 00:04:20,040 Speaker 1: that up, no, um, which is strange because its whole 70 00:04:20,400 --> 00:04:23,200 Speaker 1: you know, there's that whole kicking around Wall Street, um 71 00:04:23,279 --> 00:04:26,159 Speaker 1: during the recession thing that was going on, and that 72 00:04:26,240 --> 00:04:30,800 Speaker 1: seems to have been largely abandoned. Um. But the question 73 00:04:31,040 --> 00:04:35,440 Speaker 1: of whether or not oil speculation is affecting oil prices today, 74 00:04:36,760 --> 00:04:39,960 Speaker 1: it still remains oils up to UH. I think triple 75 00:04:40,000 --> 00:04:43,240 Speaker 1: A saying a national average of three sixty right now 76 00:04:43,320 --> 00:04:48,600 Speaker 1: for unlighted for regular that's a national average. Yea, yeah, 77 00:04:48,760 --> 00:04:52,200 Speaker 1: that's crippling. And and well, I know the recession ended. 78 00:04:52,240 --> 00:04:57,880 Speaker 1: I just made air quotes, um, but people are hurting. Uh. 79 00:04:58,000 --> 00:05:01,840 Speaker 1: Food prices are increasing, oil prices are increasing, Gas prices 80 00:05:01,839 --> 00:05:05,800 Speaker 1: are increasing, and UM, a three dollar and sixty cent 81 00:05:05,880 --> 00:05:08,520 Speaker 1: gallon of gas is crippling to the average American. Yeah, 82 00:05:08,520 --> 00:05:10,279 Speaker 1: and that's average. I mean you've got to some places 83 00:05:10,320 --> 00:05:13,520 Speaker 1: like California and there in the summertime they may be 84 00:05:13,600 --> 00:05:16,320 Speaker 1: creeping up over five bucks a gallon. Yeah, so the 85 00:05:16,360 --> 00:05:18,600 Speaker 1: money for a gallon of gases, it is a barrel 86 00:05:18,640 --> 00:05:21,320 Speaker 1: of oil today is trading for opeque. By the way, 87 00:05:21,360 --> 00:05:26,040 Speaker 1: it stands to make one trillion in revenues in two 88 00:05:26,040 --> 00:05:29,159 Speaker 1: thousand eleven. That's the course it's on right now. Yeah, 89 00:05:29,320 --> 00:05:35,400 Speaker 1: it's a lot of UM. So so uh the there 90 00:05:35,480 --> 00:05:37,920 Speaker 1: there's this idea out there that oil trading at one 91 00:05:37,960 --> 00:05:42,040 Speaker 1: fifteen and barrel should actually be trading at something like 92 00:05:42,279 --> 00:05:48,240 Speaker 1: UM ninety a barrel, and that oil speculation is accounting 93 00:05:48,320 --> 00:05:51,240 Speaker 1: for UM twenty to twenty five dollars on top of 94 00:05:51,279 --> 00:05:53,600 Speaker 1: the barrel price, and it counts for a lot of 95 00:05:53,600 --> 00:05:57,560 Speaker 1: this increase in in UM the price of oil. So 96 00:05:58,120 --> 00:06:00,279 Speaker 1: this is nothing new. This is going on right now 97 00:06:00,360 --> 00:06:02,840 Speaker 1: in two thousand and eleven. But it just happened in 98 00:06:02,880 --> 00:06:05,160 Speaker 1: two thousand and eight. Do you remember when oil hit 99 00:06:05,200 --> 00:06:07,040 Speaker 1: four dollars a gallon? It hit four eleven as a 100 00:06:07,200 --> 00:06:11,800 Speaker 1: national average. This is the highest ever remember two seven, 101 00:06:11,839 --> 00:06:14,000 Speaker 1: So two thousand seven, two eight, Yeah, I remember when 102 00:06:14,000 --> 00:06:17,560 Speaker 1: it took the first big jump, um, whenever that was. 103 00:06:17,600 --> 00:06:19,320 Speaker 1: I was living in l a And I remember it 104 00:06:19,360 --> 00:06:21,640 Speaker 1: got over two dollars a gallon, and it was a 105 00:06:21,680 --> 00:06:24,560 Speaker 1: big jump. It was like one weekend it was you know, 106 00:06:24,640 --> 00:06:26,520 Speaker 1: a dollar or eighty five, and the next weekend it 107 00:06:26,560 --> 00:06:28,480 Speaker 1: was like to thirty five. Then we would have probably 108 00:06:28,520 --> 00:06:30,560 Speaker 1: been like two three or two thousand four. It was 109 00:06:30,600 --> 00:06:32,479 Speaker 1: a big It was like a fifty cent jump or 110 00:06:32,480 --> 00:06:34,600 Speaker 1: something like that. Um, don't quote me, I'm going on 111 00:06:34,600 --> 00:06:37,480 Speaker 1: my feeble memory, but I remember saying at the time, 112 00:06:37,560 --> 00:06:40,360 Speaker 1: you know what, I just had a feeling, said, this 113 00:06:40,400 --> 00:06:43,800 Speaker 1: is something different. Gas is never gonna be this cheap again, 114 00:06:43,920 --> 00:06:46,280 Speaker 1: never gonna go back down. You know, in nine, the 115 00:06:46,320 --> 00:06:50,800 Speaker 1: average was ninety cents a gallon. Nine it was it 116 00:06:50,839 --> 00:06:54,240 Speaker 1: was so twelve years ago a gallon. Now we're all 117 00:06:54,400 --> 00:06:56,719 Speaker 1: we're at three sixty, we've already hit four and change 118 00:06:56,720 --> 00:06:58,919 Speaker 1: for an average. I remember feeling a little hondap for like, 119 00:06:59,200 --> 00:07:03,359 Speaker 1: you know, fourteen dollars. Yes, that was just so beautiful now, 120 00:07:05,960 --> 00:07:09,760 Speaker 1: so um chuck. From two thousand four to two thousand 121 00:07:09,760 --> 00:07:13,280 Speaker 1: and eight, the price of a barrel of crude oil 122 00:07:13,800 --> 00:07:16,520 Speaker 1: increased from thirty one dollars and sixty one cents in 123 00:07:16,520 --> 00:07:19,840 Speaker 1: two tho four, two hundred and thirty seven dollars and 124 00:07:19,880 --> 00:07:23,119 Speaker 1: eleven cents in July two thousand eight. Right, so guess 125 00:07:23,120 --> 00:07:25,640 Speaker 1: prices grew from one to four oh nine over that 126 00:07:25,720 --> 00:07:29,920 Speaker 1: same period. There's a lot of things. There's so much 127 00:07:30,000 --> 00:07:34,320 Speaker 1: that goes into oil production that could affect the markets. 128 00:07:35,240 --> 00:07:39,600 Speaker 1: Instability right right now, people are taking to the streets 129 00:07:39,640 --> 00:07:42,840 Speaker 1: of Yemen, in Syria and once in a while in Iran, 130 00:07:43,520 --> 00:07:48,920 Speaker 1: Um they are um, they are overthrowing the government in Egypt. 131 00:07:48,960 --> 00:07:51,120 Speaker 1: There's a civil war going on in Libya. Libya's oil 132 00:07:51,120 --> 00:07:56,920 Speaker 1: production is virtually offline right now. So so well, it 133 00:07:56,960 --> 00:08:00,320 Speaker 1: depends on who you're asking. It's actually pretty stable. It's 134 00:08:00,320 --> 00:08:02,440 Speaker 1: just socialists, which is why everybody's like, oh, that's a 135 00:08:02,480 --> 00:08:06,360 Speaker 1: dangerous country. If you're America, it is, right, but that's 136 00:08:06,400 --> 00:08:08,800 Speaker 1: one of the reasons that people said, you know, geopolitics 137 00:08:08,800 --> 00:08:12,000 Speaker 1: in these instability unstable regions that produce oil has a 138 00:08:12,000 --> 00:08:15,360 Speaker 1: lot to do with it. But Michigan Senator Carl Levin 139 00:08:15,760 --> 00:08:19,400 Speaker 1: during a hearing said, you know what, yeah, it's unstable, 140 00:08:19,440 --> 00:08:21,760 Speaker 1: but it's been unstable for decades and we've been buying 141 00:08:21,760 --> 00:08:24,800 Speaker 1: oil from them. No problem. But that's how he claimed 142 00:08:24,840 --> 00:08:28,760 Speaker 1: at least right, and Hugo Chavez, remember for through SITCO, 143 00:08:28,880 --> 00:08:32,680 Speaker 1: that's the Venezuelan oil company that's here in the US. 144 00:08:33,200 --> 00:08:36,080 Speaker 1: Through SITCO. Remember, he used to donate like a million 145 00:08:36,080 --> 00:08:38,760 Speaker 1: gallons of heating oil to people in the Northeast to 146 00:08:38,880 --> 00:08:42,600 Speaker 1: keep them alive. And that was like basically him saying 147 00:08:42,640 --> 00:08:45,240 Speaker 1: like this is what socialism gets you, people of Boston 148 00:08:45,320 --> 00:08:50,400 Speaker 1: with UM. Yeah, so it's unstable in that he's not 149 00:08:50,520 --> 00:08:53,640 Speaker 1: a friend of America. We were not capable of pushing 150 00:08:53,679 --> 00:08:56,560 Speaker 1: him around, and we need their oil, right, but we 151 00:08:56,640 --> 00:08:59,400 Speaker 1: have a dayton because people like money, economies like money, 152 00:08:59,440 --> 00:09:01,760 Speaker 1: and we want to their oil. So everybody's chill out. 153 00:09:02,080 --> 00:09:06,240 Speaker 1: What's more with this um recent drop in production that 154 00:09:06,240 --> 00:09:09,200 Speaker 1: that's represented by Libya going in the civil war, Saudi 155 00:09:09,200 --> 00:09:12,000 Speaker 1: Arabia stepped up and said, you know what, that's three 156 00:09:12,000 --> 00:09:15,360 Speaker 1: percent of the oil that's produced every day, and we're 157 00:09:15,400 --> 00:09:17,320 Speaker 1: gonna add an extra three percent to make up for 158 00:09:17,360 --> 00:09:20,480 Speaker 1: this temporary shortfall. So there actually isn't any kind of 159 00:09:20,520 --> 00:09:23,640 Speaker 1: thing in the production or supply side. Well, no, because 160 00:09:23,720 --> 00:09:25,960 Speaker 1: you mentioned in the article like could it be peak oil, 161 00:09:26,080 --> 00:09:29,520 Speaker 1: but now it's not peak oil. Well, peak oil, do 162 00:09:29,600 --> 00:09:31,079 Speaker 1: we not podcast on the end? No, we know we 163 00:09:31,200 --> 00:09:33,640 Speaker 1: have we need to do that. That's the point where 164 00:09:34,040 --> 00:09:35,640 Speaker 1: you know there's only a fine it amount of oil. 165 00:09:35,720 --> 00:09:38,960 Speaker 1: So once we cross that little threshold, it's like all 166 00:09:38,960 --> 00:09:41,560 Speaker 1: of a sudden, there's getting less and less oil. Yeah, 167 00:09:41,559 --> 00:09:44,960 Speaker 1: and there's there's a whole um group of people out there, 168 00:09:45,040 --> 00:09:47,760 Speaker 1: very educated, smart people. They're not crack pots olas. Sometimes 169 00:09:47,760 --> 00:09:50,200 Speaker 1: people look at them like that, who believe we have 170 00:09:50,280 --> 00:09:52,560 Speaker 1: past peak oil and it's gonna take us five years 171 00:09:52,640 --> 00:09:55,000 Speaker 1: or ten years to figure it out. But by that 172 00:09:55,040 --> 00:09:57,360 Speaker 1: time it'll be way too late, and the the world's 173 00:09:57,360 --> 00:09:59,400 Speaker 1: gonna come to a grinding halt for a while until 174 00:09:59,440 --> 00:10:02,200 Speaker 1: we can figure out what to do. UM. A lot 175 00:10:02,240 --> 00:10:05,280 Speaker 1: of people think that we haven't hit peak oil. And 176 00:10:05,400 --> 00:10:08,760 Speaker 1: if you look at UM the at least the published figures, 177 00:10:09,120 --> 00:10:11,480 Speaker 1: Saudi Arabia is often accused of fudging on their numbers, 178 00:10:11,480 --> 00:10:13,760 Speaker 1: and I think they were found to UM a while back. 179 00:10:13,800 --> 00:10:18,120 Speaker 1: But most people say, no, supply still exceeds demand, which 180 00:10:18,400 --> 00:10:21,160 Speaker 1: if you look at Mr Adam Smith's The Wealth of Nations, 181 00:10:21,200 --> 00:10:27,480 Speaker 1: the the basis of the capitalist economy. If supply exceeds demand, 182 00:10:27,880 --> 00:10:30,880 Speaker 1: prices should remain low. And oil, Isn't that the kind 183 00:10:30,880 --> 00:10:35,480 Speaker 1: of thing you want rewriting the rules of base economics. No, 184 00:10:35,640 --> 00:10:38,920 Speaker 1: because ultimately it's a commodity, and a commodity is something 185 00:10:38,960 --> 00:10:41,240 Speaker 1: that we can make things out of, or something we need. 186 00:10:41,960 --> 00:10:46,080 Speaker 1: Wheat is a commodity, we need that. Pork bellies a commodity. 187 00:10:46,160 --> 00:10:50,080 Speaker 1: That's the most delicious commodities. Um, and oil is a 188 00:10:50,160 --> 00:10:54,560 Speaker 1: very very vital commodity. So if Carl Levins saying, yeah, 189 00:10:54,679 --> 00:10:57,600 Speaker 1: that's unstable, but were we we can deal with them. 190 00:10:57,640 --> 00:11:01,280 Speaker 1: If Saudi Arabia is saying, yes, Olivia's off line right now, um, 191 00:11:01,320 --> 00:11:04,400 Speaker 1: but we're gonna make up the shortfall. If if we 192 00:11:04,440 --> 00:11:07,959 Speaker 1: haven't actually passed peak oil and the supply still exceeds 193 00:11:07,960 --> 00:11:11,120 Speaker 1: the demand. A lot of people are saying, why is 194 00:11:11,240 --> 00:11:14,880 Speaker 1: oil so high? Why is it increasing and increasing? And 195 00:11:14,920 --> 00:11:19,360 Speaker 1: there's a correlation that's going on right now. The the 196 00:11:19,400 --> 00:11:22,240 Speaker 1: answer to that, obviously for a lot of people's minds, 197 00:11:22,240 --> 00:11:24,520 Speaker 1: And I'm not taking a position on this because it 198 00:11:24,600 --> 00:11:29,319 Speaker 1: is a very controversial thing to say that is oil speculation. Yeah, 199 00:11:29,360 --> 00:11:33,800 Speaker 1: there's speculation that the speculation is what's driving up the price, right, 200 00:11:33,880 --> 00:11:36,600 Speaker 1: that's perfect chuck uh. And one of the ways that 201 00:11:36,640 --> 00:11:41,079 Speaker 1: it's being. UM, I guess suggested is that from I 202 00:11:41,120 --> 00:11:44,199 Speaker 1: think July of two thousand, eight h there were six 203 00:11:44,440 --> 00:11:49,000 Speaker 1: D seventeen thousand oil futures contracts on the market, on 204 00:11:49,080 --> 00:11:52,480 Speaker 1: the oil commodities market. Can we explain what the future is? Well, 205 00:11:52,520 --> 00:11:54,760 Speaker 1: we'll go back. I just wanted to get this one 206 00:11:54,840 --> 00:11:57,080 Speaker 1: last stat out, and we'll go back to the beginning, UM, 207 00:11:57,320 --> 00:12:02,080 Speaker 1: and then July or January two thousand eleven. So July 208 00:12:02,120 --> 00:12:07,480 Speaker 1: two seventeen thousand, January two eleven, one million UH futures 209 00:12:07,520 --> 00:12:10,679 Speaker 1: contracts on the oil market, it's right. And between those 210 00:12:10,760 --> 00:12:13,840 Speaker 1: two times, after the last bubble burst, it's been creeping 211 00:12:13,920 --> 00:12:17,800 Speaker 1: up and up and up. Prices have basically commensurate with 212 00:12:18,240 --> 00:12:22,559 Speaker 1: oil futures contracts. So it really looks a lot like 213 00:12:22,640 --> 00:12:25,800 Speaker 1: it could be oil speculations driving up the prices. So 214 00:12:25,920 --> 00:12:28,760 Speaker 1: let's talk about oil speculations. Yes, and my mind starts 215 00:12:28,800 --> 00:12:32,960 Speaker 1: to melt starting now, all right, Josh, the future and 216 00:12:32,960 --> 00:12:34,760 Speaker 1: you're gonna tell me with this, But UM, any kind 217 00:12:34,760 --> 00:12:37,000 Speaker 1: of future is a contract between a buyer and as seller. 218 00:12:37,679 --> 00:12:41,559 Speaker 1: Buyer agrees to purchase a fixed amount of a commodity 219 00:12:42,160 --> 00:12:44,760 Speaker 1: that it fixed price, and oil future we're talking about 220 00:12:44,800 --> 00:12:50,960 Speaker 1: oil obviously, So it's different than actually buying into a 221 00:12:50,960 --> 00:12:54,760 Speaker 1: commodity because you're just betting on whether or not it 222 00:12:54,760 --> 00:12:56,800 Speaker 1: will be higher or lower at the end of your contract. 223 00:12:57,080 --> 00:13:00,000 Speaker 1: That correct, A future is a derivative and a derivative 224 00:13:00,040 --> 00:13:04,120 Speaker 1: of as any kind of financial contract or instrument that's 225 00:13:04,800 --> 00:13:07,080 Speaker 1: the value of which is based on the value of 226 00:13:07,120 --> 00:13:09,360 Speaker 1: something else. It's you know what it is to me, 227 00:13:09,440 --> 00:13:11,800 Speaker 1: to my little brain that doesn't think about the stuff, Well, 228 00:13:11,920 --> 00:13:14,080 Speaker 1: is it's a made up way to make money almost, 229 00:13:14,120 --> 00:13:17,479 Speaker 1: That's exactly right. It's like someone created this and said, hey, 230 00:13:17,600 --> 00:13:21,000 Speaker 1: this doesn't even exist, but as long as there's someone 231 00:13:21,080 --> 00:13:24,199 Speaker 1: buying and selling it, it does exist. Because so a 232 00:13:24,280 --> 00:13:29,040 Speaker 1: futures contract is very standard. It's not an exotic financial instrument, 233 00:13:29,360 --> 00:13:32,480 Speaker 1: but the way that it's being used in the derivatives 234 00:13:32,520 --> 00:13:38,600 Speaker 1: market is um extremely exotic and volatile. So, Chuck, you 235 00:13:38,760 --> 00:13:43,480 Speaker 1: have a bunch of oil, and I I have a 236 00:13:43,520 --> 00:13:48,640 Speaker 1: refinery over here in my backyard, and uh, well, I'm 237 00:13:48,679 --> 00:13:51,640 Speaker 1: I'm saving up it for a better life for it. Um, 238 00:13:51,760 --> 00:13:55,560 Speaker 1: So I want to buy some oil from you, all right, 239 00:13:55,840 --> 00:13:59,520 Speaker 1: But I think that oil, the price of crude is 240 00:13:59,520 --> 00:14:01,600 Speaker 1: going to go up. You know, A year from now 241 00:14:01,679 --> 00:14:04,600 Speaker 1: per barrel, right, and I'm going to so I'm gonna 242 00:14:04,640 --> 00:14:07,679 Speaker 1: go ahead and buy it for the market price now right, 243 00:14:08,160 --> 00:14:10,880 Speaker 1: and um, you're going to sell me a futures contract. 244 00:14:10,960 --> 00:14:13,880 Speaker 1: So we have an agreement that a year from now 245 00:14:13,960 --> 00:14:16,480 Speaker 1: in um, at the end of March two thousand twelve, 246 00:14:17,200 --> 00:14:20,840 Speaker 1: the that contract expires because you have to I have 247 00:14:20,920 --> 00:14:23,600 Speaker 1: to buy that oil from you, okay, but not now 248 00:14:23,640 --> 00:14:27,480 Speaker 1: a year from now. Right now, if I'm right and 249 00:14:27,880 --> 00:14:30,960 Speaker 1: oil goes up, say I, I'm buying a hundred barrels 250 00:14:30,960 --> 00:14:33,120 Speaker 1: at fifty bucks of barrel. That's our future contracts, our 251 00:14:33,120 --> 00:14:36,400 Speaker 1: contracts for five grands um. If it goes up. If 252 00:14:36,440 --> 00:14:38,360 Speaker 1: the price of oil goes up to fifty two dollars 253 00:14:38,400 --> 00:14:41,520 Speaker 1: of barrel a year from now, I just got fifty 254 00:14:41,560 --> 00:14:44,280 Speaker 1: barrels of oil for two hundred bucks less than I 255 00:14:44,280 --> 00:14:46,480 Speaker 1: should have paid. It's a good deal for you, it is. 256 00:14:47,040 --> 00:14:52,800 Speaker 1: But the future's um contract is also. Um. Well, it's 257 00:14:52,800 --> 00:14:56,240 Speaker 1: a bet, right because the price of oil could go down. 258 00:14:56,840 --> 00:14:59,840 Speaker 1: I said in two thousand twelve, and the MARCHI done. 259 00:14:59,840 --> 00:15:02,160 Speaker 1: Twe I'll buy those fifty barrels of oil from you 260 00:15:02,320 --> 00:15:05,360 Speaker 1: for fifty bucks. But if the value of oil in March, 261 00:15:05,400 --> 00:15:08,040 Speaker 1: she does twelve forty eight bucks of barrel. Then I'm 262 00:15:08,040 --> 00:15:09,960 Speaker 1: paying two more than I could have if I just 263 00:15:10,040 --> 00:15:12,880 Speaker 1: bought on what's called the spot market, which is I 264 00:15:12,960 --> 00:15:14,720 Speaker 1: go to you, I want your oil right now, and 265 00:15:14,760 --> 00:15:16,920 Speaker 1: you sell it to me for whatever the market prices. Right. 266 00:15:16,960 --> 00:15:19,400 Speaker 1: And if this sounds weird, it's not so different than 267 00:15:20,080 --> 00:15:21,880 Speaker 1: betting on whether or not a stock will go up 268 00:15:21,960 --> 00:15:24,680 Speaker 1: or down. It's the same thing. It is, but in 269 00:15:24,680 --> 00:15:27,960 Speaker 1: a lot of ways, it's just kind of it's it's 270 00:15:27,960 --> 00:15:31,200 Speaker 1: saying it can Also it also comes into play if 271 00:15:31,240 --> 00:15:33,680 Speaker 1: if I don't need oil right now, but I'm gonna 272 00:15:33,720 --> 00:15:35,600 Speaker 1: need it in the future, and I think it's gonna 273 00:15:35,640 --> 00:15:38,920 Speaker 1: go up right now. When the real bet comes in, 274 00:15:39,080 --> 00:15:41,320 Speaker 1: that's when when I'm when I'm saying that I think 275 00:15:41,360 --> 00:15:44,400 Speaker 1: it's gonna go up, I'm gonna go long. It's called 276 00:15:44,440 --> 00:15:46,360 Speaker 1: going long. Yeah. And at the end of this contract, 277 00:15:46,440 --> 00:15:50,960 Speaker 1: you're actually gonna get oil. Correct, if you're holding the 278 00:15:51,000 --> 00:15:54,560 Speaker 1: contract and that I have with you, um, then yes, 279 00:15:54,720 --> 00:15:56,720 Speaker 1: So that has to buy oil from you that is 280 00:15:56,720 --> 00:15:58,880 Speaker 1: a country and be like give me my money, I'll 281 00:15:58,880 --> 00:16:00,880 Speaker 1: give you your oil. Right. But that's an important thing 282 00:16:00,920 --> 00:16:03,080 Speaker 1: to distinguish because that is a future and that means 283 00:16:03,120 --> 00:16:06,440 Speaker 1: actually oil is being traded at some point, right, And 284 00:16:06,480 --> 00:16:09,720 Speaker 1: that's a normal thing. Right. Okay, Now that's going long. 285 00:16:09,760 --> 00:16:11,880 Speaker 1: If I'm betting that oil prices are going to go up. 286 00:16:11,920 --> 00:16:15,680 Speaker 1: If I think oil prices are gonna fall, I'll go short. Right. 287 00:16:15,960 --> 00:16:19,000 Speaker 1: So it's virtually the same thing. We go into a contract, right, 288 00:16:19,080 --> 00:16:23,560 Speaker 1: So Chuck, let's say conversely, Um, you you think that 289 00:16:23,600 --> 00:16:25,360 Speaker 1: oil is gonna go down, so you're happy to sell 290 00:16:25,400 --> 00:16:30,880 Speaker 1: me a future's contract, right, Um, the price of oil 291 00:16:31,160 --> 00:16:34,680 Speaker 1: goes down, right, we we say, we say, for you know, 292 00:16:34,760 --> 00:16:37,760 Speaker 1: five grand, Um, the price of oil goes down to 293 00:16:37,840 --> 00:16:40,640 Speaker 1: forty eight bucks of barrel, and you buy that contract 294 00:16:40,680 --> 00:16:43,520 Speaker 1: back from me at the market price you just made 295 00:16:43,560 --> 00:16:48,520 Speaker 1: two bucks. Okay, Okay, So there's going short and there's 296 00:16:48,560 --> 00:16:51,880 Speaker 1: going long. But as you said, in a standard commodities 297 00:16:51,920 --> 00:16:55,480 Speaker 1: market that there's not a secondary derivative derivatives market going on, 298 00:16:56,000 --> 00:16:59,480 Speaker 1: then ultimately there's going to be an exchange of oil 299 00:17:00,160 --> 00:17:04,919 Speaker 1: the secondary derivatives market. You never get caught with the 300 00:17:04,960 --> 00:17:08,280 Speaker 1: contract when it expires. Your trading contracts day by day, 301 00:17:08,359 --> 00:17:10,879 Speaker 1: moment by moment, as the price of oil changes up 302 00:17:10,920 --> 00:17:13,600 Speaker 1: and down throughout the day. You're making money off of 303 00:17:13,600 --> 00:17:18,879 Speaker 1: those fluctuations by buying and selling, by shorting and longing um, 304 00:17:19,080 --> 00:17:22,680 Speaker 1: the the price of oil on these contracts, and that 305 00:17:23,240 --> 00:17:29,479 Speaker 1: is speculation that, okay, leads to what's called an artificial market. 306 00:17:29,880 --> 00:17:34,120 Speaker 1: Supply and demand no longer applies to the commodity itself. 307 00:17:34,400 --> 00:17:41,040 Speaker 1: Supply and demand is also subject to the two the 308 00:17:41,040 --> 00:17:43,560 Speaker 1: the financial instruments as well. Yeah, the whims of who 309 00:17:43,560 --> 00:17:45,320 Speaker 1: has a lot of money and can affect a market 310 00:17:45,680 --> 00:17:50,119 Speaker 1: with a big purchase. So that's called an unstable market 311 00:17:50,160 --> 00:17:53,160 Speaker 1: because it's you don't it's very violable. It's not it's 312 00:17:53,200 --> 00:17:56,480 Speaker 1: not nearly as steady as a real tangible market. No. 313 00:17:56,880 --> 00:17:58,639 Speaker 1: I mean, if you look at if you look at uh, 314 00:17:58,880 --> 00:18:01,680 Speaker 1: you know, um, it's just a regular commodities market where 315 00:18:01,720 --> 00:18:05,760 Speaker 1: there aren't any futures or derivatives um trading by anybody 316 00:18:05,800 --> 00:18:10,000 Speaker 1: besides the people who actually will end up with this stuff. 317 00:18:10,080 --> 00:18:13,440 Speaker 1: There's the changes, the fluctuations over you know, a month 318 00:18:13,480 --> 00:18:16,800 Speaker 1: or a year or a quarter are you know, pennies 319 00:18:16,960 --> 00:18:20,960 Speaker 1: or a buck or two. Here it's when investment banks 320 00:18:21,160 --> 00:18:25,440 Speaker 1: and hedge funds, who, by the way, when interest rates 321 00:18:25,440 --> 00:18:28,520 Speaker 1: are very very low, tend to turn to the commodities 322 00:18:28,560 --> 00:18:32,480 Speaker 1: market for to safely park their money. Right, because they're 323 00:18:32,520 --> 00:18:36,040 Speaker 1: not gonna make much much money when interest rates are low. Um, 324 00:18:36,080 --> 00:18:38,440 Speaker 1: they turn to the commodities market when they get involved. 325 00:18:38,680 --> 00:18:41,959 Speaker 1: That's when things start going from thirty bucks of barrel 326 00:18:42,040 --> 00:18:44,320 Speaker 1: in two thousand and four two hundred and forty dollars 327 00:18:44,320 --> 00:18:46,480 Speaker 1: a barrel in two thousand and eight. Right, And that's 328 00:18:46,480 --> 00:18:50,439 Speaker 1: what happened with the housing uh bust, all of a sudden, 329 00:18:50,480 --> 00:18:53,200 Speaker 1: Wall Street Housing wasn't a good place to put any money, 330 00:18:53,240 --> 00:18:58,000 Speaker 1: So Wall Street flocked over to speculation futures, oil futures, right, 331 00:18:58,119 --> 00:19:00,679 Speaker 1: and and um, we should say in that this is 332 00:19:00,720 --> 00:19:03,520 Speaker 1: this is all very much debatable. This is if you 333 00:19:03,600 --> 00:19:08,080 Speaker 1: believe that oil speculations affecting oil, this is how it happens. Right. 334 00:19:08,200 --> 00:19:10,240 Speaker 1: They were just explaining that that's what we do. Well, 335 00:19:10,400 --> 00:19:13,560 Speaker 1: what we just explained was how derivatives trading works. This 336 00:19:13,680 --> 00:19:16,800 Speaker 1: is no secret. It's the effect that it has, that's 337 00:19:16,880 --> 00:19:20,280 Speaker 1: what's that's what's debatable. So the people who believe that 338 00:19:20,320 --> 00:19:25,040 Speaker 1: there is consequences for oil for derivatives trading to say 339 00:19:25,080 --> 00:19:29,400 Speaker 1: that here's what happens. Right, if you want, if you 340 00:19:29,440 --> 00:19:33,600 Speaker 1: want to get your hands on actual oil, right you 341 00:19:33,680 --> 00:19:35,159 Speaker 1: aren't going to be able to keep up with an 342 00:19:35,200 --> 00:19:38,639 Speaker 1: investment bank or a hedgephone manager who is buying up futures. 343 00:19:39,040 --> 00:19:41,199 Speaker 1: So you're gonna need oil now, and you're gonna have 344 00:19:41,200 --> 00:19:43,439 Speaker 1: to stockpile. It's one good thing about oil is you 345 00:19:43,480 --> 00:19:46,080 Speaker 1: can stockpile it for a while, right well, and oil 346 00:19:46,119 --> 00:19:49,760 Speaker 1: producers can hoard it. That that's exactly right as well, 347 00:19:49,880 --> 00:19:54,560 Speaker 1: But there's you could also the derivatives market in futures 348 00:19:54,600 --> 00:19:59,120 Speaker 1: can also inadvertently force a horde among people who actually 349 00:19:59,240 --> 00:20:02,359 Speaker 1: use the oil, who are buying oil for use, not 350 00:20:02,480 --> 00:20:05,919 Speaker 1: just trading in the derivatives market by saying, Okay, I 351 00:20:05,960 --> 00:20:09,359 Speaker 1: can't buy futures because they're just too expensive right now, 352 00:20:09,560 --> 00:20:11,640 Speaker 1: so I'm gonna buy whatever I can get my hands on. 353 00:20:11,880 --> 00:20:15,879 Speaker 1: So the spot market that deals in actual oil right 354 00:20:15,960 --> 00:20:20,040 Speaker 1: that moment has a higher demand, which means the actual 355 00:20:20,160 --> 00:20:22,840 Speaker 1: price of oil goes up, which means those oil futures 356 00:20:22,880 --> 00:20:27,320 Speaker 1: go up even further, which means prices across the board rise, 357 00:20:27,640 --> 00:20:31,480 Speaker 1: especially for gasoline. That's right, and when big companies like 358 00:20:31,800 --> 00:20:35,840 Speaker 1: Goldman Sackson City Group are these huge financial institutions are 359 00:20:35,880 --> 00:20:41,560 Speaker 1: buying up tons and tons of uh are speculating. Then 360 00:20:41,600 --> 00:20:43,439 Speaker 1: that's going to have a really big sway on the 361 00:20:43,480 --> 00:20:48,080 Speaker 1: market that alone will right, they stand and gain tons 362 00:20:48,119 --> 00:20:52,399 Speaker 1: of cash, tons of cash. But imagine if you not 363 00:20:52,560 --> 00:20:55,320 Speaker 1: only stood to getting tons of cash from the secondary market, 364 00:20:55,520 --> 00:20:58,919 Speaker 1: but you're an oil producer as well. Yeah, and all 365 00:20:58,960 --> 00:21:02,399 Speaker 1: of a sudden you're aculating on your own production or 366 00:21:02,480 --> 00:21:04,680 Speaker 1: buying oil features. If you buy a bunch of oil 367 00:21:04,720 --> 00:21:08,680 Speaker 1: features from higher price, you can actually the market um 368 00:21:09,200 --> 00:21:12,920 Speaker 1: trades on rumor, right, So people are like, well, somebody's 369 00:21:12,920 --> 00:21:15,000 Speaker 1: buying up a bunch of this stuff, and the prices 370 00:21:15,080 --> 00:21:17,879 Speaker 1: actually rising, right, so that a lot of people are 371 00:21:17,920 --> 00:21:19,400 Speaker 1: gonna be willing to pay more and more and more. 372 00:21:19,680 --> 00:21:22,560 Speaker 1: If you're an oil producer doing that, then you're going 373 00:21:22,600 --> 00:21:25,439 Speaker 1: to stand again through the financial instruments and through the 374 00:21:25,440 --> 00:21:28,800 Speaker 1: actual sale of your oil. And there was an investigation 375 00:21:28,880 --> 00:21:32,880 Speaker 1: into this um the the secondary oil markets that found 376 00:21:32,960 --> 00:21:35,680 Speaker 1: that in the New York Mercantile Exchange alone, which is 377 00:21:35,880 --> 00:21:39,480 Speaker 1: the commodities market, or one of them for the us UM, 378 00:21:39,480 --> 00:21:43,400 Speaker 1: eleven percent of the oil futures contracts were owned by 379 00:21:43,560 --> 00:21:47,639 Speaker 1: vital which is a Swiss oil producer. So how, Chuck, 380 00:21:47,720 --> 00:21:54,359 Speaker 1: how can an oil company be allowed to artificially inflate 381 00:21:54,440 --> 00:21:57,200 Speaker 1: the price of oil for its own gains, And how 382 00:21:57,240 --> 00:21:59,840 Speaker 1: can investment banks be allowed to drive up the price? 383 00:22:00,160 --> 00:22:02,760 Speaker 1: That is, in fact, what's going on. How can they 384 00:22:02,800 --> 00:22:05,840 Speaker 1: be allowed to drive up the price of a commodity 385 00:22:05,880 --> 00:22:08,440 Speaker 1: as valuable as oil If normally it should be something 386 00:22:08,480 --> 00:22:10,639 Speaker 1: like thirty or forty or fifty dollars a barrel, and 387 00:22:10,680 --> 00:22:14,119 Speaker 1: it's double or triple or quadruple, what what experts believe 388 00:22:14,160 --> 00:22:17,360 Speaker 1: it's actual value should be. Well, it shouldn't be able 389 00:22:17,400 --> 00:22:21,040 Speaker 1: to happen, because they're starting in with our congress. There 390 00:22:21,080 --> 00:22:24,640 Speaker 1: was something put in place called the Commodity Futures Trading Commission, 391 00:22:24,800 --> 00:22:28,399 Speaker 1: the CFTC, and they were put in place specifically to 392 00:22:28,480 --> 00:22:32,919 Speaker 1: prevent this kind of thing from speculation artificially inflating prices 393 00:22:32,920 --> 00:22:35,000 Speaker 1: of commodity. So they were like, they've realized a long 394 00:22:35,080 --> 00:22:36,880 Speaker 1: time ago this could be a real problem. Let's put 395 00:22:36,880 --> 00:22:39,480 Speaker 1: this thing in place and let's make them keep it 396 00:22:39,520 --> 00:22:43,359 Speaker 1: in check. So if you were trading on that exchange, 397 00:22:43,359 --> 00:22:46,200 Speaker 1: you gotta file reports every day. The Commission looks them over, 398 00:22:46,920 --> 00:22:49,280 Speaker 1: keeps an eye out for speculation. They know if somebody 399 00:22:49,320 --> 00:22:51,760 Speaker 1: is trying to corner the market. There who and they 400 00:22:51,760 --> 00:22:54,879 Speaker 1: try to stop it. But quite a few things have 401 00:22:54,960 --> 00:22:59,360 Speaker 1: happened to nooter for the most part. The CFTC. Yeah, 402 00:22:59,400 --> 00:23:02,160 Speaker 1: because you can create a federal agency and empowered all 403 00:23:02,200 --> 00:23:05,560 Speaker 1: you want, but if successive presidents disagree with you about 404 00:23:05,600 --> 00:23:08,840 Speaker 1: the value of that that agency, they can neglect it, 405 00:23:08,880 --> 00:23:10,840 Speaker 1: they can strip it of its powers. They can as 406 00:23:10,840 --> 00:23:12,840 Speaker 1: you say, new to it and not even have the 407 00:23:12,840 --> 00:23:17,520 Speaker 1: courtesy to put noodle noodicles on it afterward, just leave 408 00:23:17,600 --> 00:23:19,920 Speaker 1: it laying there, you know. So in two thousand, the 409 00:23:20,040 --> 00:23:22,960 Speaker 1: very big thing happened. Prices were still pretty low for oil, 410 00:23:23,040 --> 00:23:26,080 Speaker 1: less than thirty bucks of barrel, but a little company 411 00:23:26,080 --> 00:23:31,440 Speaker 1: called en Ron started lobbying Congress to remove regulatory powers 412 00:23:31,520 --> 00:23:35,000 Speaker 1: of the CFTC. And basically what the deal was. The 413 00:23:35,000 --> 00:23:40,480 Speaker 1: CFTC um had regulatory powers over the official exchange. So 414 00:23:40,760 --> 00:23:45,200 Speaker 1: Enron says, hey, New York Mercantile Exchange and uh, CFTC, 415 00:23:45,359 --> 00:23:47,120 Speaker 1: I'm sorry. And Ron said, hey, you know, we've got 416 00:23:47,119 --> 00:23:50,639 Speaker 1: the software that allows futures to be traded over the counter, 417 00:23:50,880 --> 00:23:54,119 Speaker 1: which is something outside of the formal exchange market. Right. 418 00:23:54,160 --> 00:23:57,560 Speaker 1: It's basically like I can say, hey, Chuck um, you've 419 00:23:57,600 --> 00:23:59,960 Speaker 1: got a bunch of futures like in your pocket, can 420 00:24:00,119 --> 00:24:02,200 Speaker 1: come to your house and buy it and it will 421 00:24:02,240 --> 00:24:04,280 Speaker 1: be a legitimate exchange. But it's over the counter. It 422 00:24:04,320 --> 00:24:06,280 Speaker 1: exists outside of the market, that's right. And that became 423 00:24:06,280 --> 00:24:08,280 Speaker 1: known as the Enron loophole because all of a sudden, 424 00:24:08,280 --> 00:24:10,959 Speaker 1: O t C trading was allowed for futures exchanges with 425 00:24:11,000 --> 00:24:13,440 Speaker 1: no government oversight because it was out of the jurisdiction 426 00:24:13,760 --> 00:24:17,080 Speaker 1: of the CFTC. So, josh, that was one thing happened 427 00:24:17,080 --> 00:24:20,399 Speaker 1: in two thousand. Then another little thing came along, uh 428 00:24:20,600 --> 00:24:24,240 Speaker 1: called the Intercontinental Exchange. The IC was set up in London, 429 00:24:24,840 --> 00:24:28,159 Speaker 1: and that was to trade European oil futures. And the 430 00:24:28,160 --> 00:24:31,320 Speaker 1: funny thing about that is it was headquartered here in Atlanta, 431 00:24:31,560 --> 00:24:34,920 Speaker 1: so it's headquartered in Atlanta, but it's European oil futures, 432 00:24:34,920 --> 00:24:39,640 Speaker 1: so the CFTC didn't have any oversight over them because 433 00:24:39,640 --> 00:24:43,760 Speaker 1: it was European, right, So, um, you could trade American 434 00:24:43,760 --> 00:24:47,720 Speaker 1: oil futures on this exchange. Well six years later, that's 435 00:24:47,720 --> 00:24:51,000 Speaker 1: when they set up the American terminals. Think about it, like, 436 00:24:51,280 --> 00:24:53,240 Speaker 1: the time in London and the time in New York 437 00:24:53,280 --> 00:24:56,879 Speaker 1: are totally different, and that's kind of a problem. So really, 438 00:24:56,920 --> 00:25:00,720 Speaker 1: if you can get these commodities, the same commodities trading 439 00:25:00,920 --> 00:25:04,960 Speaker 1: on the same time zone. You can really create you 440 00:25:05,160 --> 00:25:08,360 Speaker 1: you have a more robust market, that's right. And now 441 00:25:08,359 --> 00:25:11,920 Speaker 1: all of a sudden, the CFTC couldn't even regulate these 442 00:25:11,960 --> 00:25:16,880 Speaker 1: formal exchanges on the formal formal formal market, even though 443 00:25:16,880 --> 00:25:19,520 Speaker 1: it was based in Atlanta. They set up trading post 444 00:25:20,040 --> 00:25:23,520 Speaker 1: trading post terminals inside the United States in New York. 445 00:25:23,600 --> 00:25:27,200 Speaker 1: But it's almost like the O t B. Like horse 446 00:25:27,280 --> 00:25:30,640 Speaker 1: racing is illegal, but you can this race is in Cuba, right, 447 00:25:30,680 --> 00:25:32,520 Speaker 1: and but you can bet on it in you know, 448 00:25:32,680 --> 00:25:36,680 Speaker 1: on the Lower East Side. And so as these things 449 00:25:36,720 --> 00:25:42,679 Speaker 1: just kept going and going, um, the the CFTC just 450 00:25:42,760 --> 00:25:47,600 Speaker 1: lost any jurisdiction whatsoever. And rafty people that are coming 451 00:25:47,680 --> 00:25:49,960 Speaker 1: up with these things, they basically saying like, let's set 452 00:25:50,000 --> 00:25:52,760 Speaker 1: up away where we can make gobs of money outside 453 00:25:52,760 --> 00:25:57,960 Speaker 1: of regulation, and I mean outside of regulation. People have 454 00:25:58,040 --> 00:26:01,400 Speaker 1: no ideas. I was reading some blog post and it 455 00:26:01,440 --> 00:26:05,200 Speaker 1: was about how the aluminum market was being cornered by somebody, 456 00:26:05,600 --> 00:26:07,760 Speaker 1: and they thought it was some hedge fund manager and 457 00:26:07,800 --> 00:26:09,880 Speaker 1: they had an idea who but not enough to publish. 458 00:26:10,000 --> 00:26:13,600 Speaker 1: But they have no idea who's buying what there's it's all. 459 00:26:13,640 --> 00:26:16,080 Speaker 1: It all exists in the shadows the derivatives market too, 460 00:26:16,160 --> 00:26:19,720 Speaker 1: because it's outside of the jurisdiction of this federal agency 461 00:26:19,760 --> 00:26:23,560 Speaker 1: that was created specifically to police these things. You know, 462 00:26:23,600 --> 00:26:25,760 Speaker 1: I'm never gonna be wealthy because I'm one of those 463 00:26:25,800 --> 00:26:27,560 Speaker 1: dumb schlubs who it's just like, let me go out 464 00:26:27,600 --> 00:26:29,760 Speaker 1: and near my paycheck. And I'm not like against the 465 00:26:29,800 --> 00:26:31,560 Speaker 1: stock market, like I'll invest in the stock market and 466 00:26:31,560 --> 00:26:34,000 Speaker 1: set up my foreone can on that. But I'm not. 467 00:26:34,680 --> 00:26:38,680 Speaker 1: I can't even fathom the kind of what causes someone 468 00:26:38,720 --> 00:26:41,040 Speaker 1: to think of like, hey, how can I really make 469 00:26:41,080 --> 00:26:43,639 Speaker 1: tons of money with no oversight? And I'll invent this 470 00:26:43,680 --> 00:26:48,720 Speaker 1: way to trade ether and not really the people would 471 00:26:48,720 --> 00:26:51,720 Speaker 1: buy ether of them. They probably, especially drug dealers. Patrick 472 00:26:51,800 --> 00:26:55,600 Speaker 1: Bateman would have eaten you alive. Oh man, I'd be 473 00:26:55,640 --> 00:26:59,600 Speaker 1: so dead. So um. There was a July two thousand 474 00:26:59,680 --> 00:27:03,800 Speaker 1: eight or by the International Energy Agency that concluded that 475 00:27:03,840 --> 00:27:06,479 Speaker 1: speculation didn't really have anything to do with it. They're like, no, no, no, 476 00:27:06,520 --> 00:27:09,240 Speaker 1: that's not what's driving oil prices up. There's another report 477 00:27:09,280 --> 00:27:13,200 Speaker 1: the next September contradicted the i e. A report said, 478 00:27:13,240 --> 00:27:16,160 Speaker 1: now there's actually a lot of correlations between this big 479 00:27:16,160 --> 00:27:18,680 Speaker 1: influx of money and oil futures and the rising cost 480 00:27:18,680 --> 00:27:21,119 Speaker 1: of oil. I mean, I'm a dummy. To me, it 481 00:27:21,520 --> 00:27:23,600 Speaker 1: kind of looks plain that that's probably what's been happening. 482 00:27:24,119 --> 00:27:25,440 Speaker 1: But there's probably a lot of people are going to 483 00:27:25,480 --> 00:27:27,159 Speaker 1: right and say, oh, what you guys didn't consider was 484 00:27:28,000 --> 00:27:30,240 Speaker 1: X y Z. No. There's there's a lot of factors 485 00:27:30,240 --> 00:27:34,399 Speaker 1: that that um that go into producing and buying and 486 00:27:34,440 --> 00:27:37,359 Speaker 1: selling oil, and there's no way you can cover all 487 00:27:37,400 --> 00:27:39,480 Speaker 1: of them. And that's not the point. And I don't 488 00:27:39,480 --> 00:27:43,240 Speaker 1: think that's anybody who's accusing the speculation of influencing the price. 489 00:27:43,960 --> 00:27:46,520 Speaker 1: That's not the point of anybody, because it's not there's 490 00:27:46,520 --> 00:27:49,520 Speaker 1: nobody who's going to say this is a of the problem. 491 00:27:49,520 --> 00:27:52,400 Speaker 1: There's other stuff that does have this effect. I think 492 00:27:52,480 --> 00:27:56,280 Speaker 1: what gets people to say speculation is hav an effect 493 00:27:56,440 --> 00:27:58,280 Speaker 1: is because there's people out there who's like, it has 494 00:27:58,320 --> 00:28:02,840 Speaker 1: no effect, and it's just not possible that a million 495 00:28:03,000 --> 00:28:07,760 Speaker 1: futures contracts can't have some effect on the end price. 496 00:28:08,359 --> 00:28:13,520 Speaker 1: And it is just correlated, it's not causal. So quickly 497 00:28:14,160 --> 00:28:16,399 Speaker 1: right along with it it was I don't know, and 498 00:28:16,440 --> 00:28:20,200 Speaker 1: I mean, ultimately what it comes down to, is uh, 499 00:28:20,320 --> 00:28:24,080 Speaker 1: the average American who's still you know, maybe unemployed, paying 500 00:28:24,119 --> 00:28:28,359 Speaker 1: tons of money for food, is getting you know, reamed 501 00:28:28,400 --> 00:28:30,920 Speaker 1: at the pump still and if there's anything that could 502 00:28:30,920 --> 00:28:36,159 Speaker 1: be done to reduce that without causing harm to the 503 00:28:36,240 --> 00:28:39,800 Speaker 1: to the markets, why not. But hey, good news, Josh. 504 00:28:39,800 --> 00:28:44,080 Speaker 1: In two thousand eight, Congress introduced the Consumer First, Hey 505 00:28:44,120 --> 00:28:48,400 Speaker 1: how about that Consumers First the Energy Act in May 506 00:28:48,440 --> 00:28:51,080 Speaker 1: two thou and that would have extended oversight for the 507 00:28:51,120 --> 00:28:54,440 Speaker 1: CFTC to foreign lands, probably would have helped a lot, 508 00:28:54,520 --> 00:28:57,320 Speaker 1: and it died on the Senate floor a month later. 509 00:28:57,400 --> 00:29:00,600 Speaker 1: A month later. Yeah, they said consumer First, let's kill it. 510 00:29:00,680 --> 00:29:03,360 Speaker 1: They're talking about it now, like, um, this whole Obama 511 00:29:03,600 --> 00:29:07,000 Speaker 1: pushes basically making the oil companies out to be bad guys. 512 00:29:07,000 --> 00:29:09,320 Speaker 1: So the Democrats are really taking their they're banging the 513 00:29:09,520 --> 00:29:13,720 Speaker 1: war drumb against oil companies right now. And then investment 514 00:29:13,760 --> 00:29:16,520 Speaker 1: bankers are a fun target too. So this is this 515 00:29:16,600 --> 00:29:19,720 Speaker 1: is coming up again, but it's coming up like it 516 00:29:19,720 --> 00:29:22,920 Speaker 1: did in two thousand and eight because oil speculation is rampant. 517 00:29:23,760 --> 00:29:26,320 Speaker 1: And I know everyone thinks we're we're anti capitalism, but 518 00:29:26,400 --> 00:29:28,360 Speaker 1: that's not true at all. It was just just play fairly. 519 00:29:28,920 --> 00:29:31,400 Speaker 1: Just play fair at the very least, admit that you're 520 00:29:31,440 --> 00:29:35,000 Speaker 1: having the effect that you're having. That's that's what I 521 00:29:35,040 --> 00:29:38,600 Speaker 1: think would gal anybody who who is like, yes, oil 522 00:29:38,640 --> 00:29:41,480 Speaker 1: speculation as an effect. UM. And it's not just oil. 523 00:29:41,520 --> 00:29:42,880 Speaker 1: By the way, If you want to read a really 524 00:29:42,880 --> 00:29:48,440 Speaker 1: cool article UM on speculation commodity speculation, UM, read Frederick 525 00:29:48,520 --> 00:29:52,840 Speaker 1: Kaufman's The Food Bubble. It's he tries very hard but 526 00:29:52,920 --> 00:29:57,240 Speaker 1: fails ultimately in the end to connect Goldman Sacks trading 527 00:29:57,640 --> 00:30:01,480 Speaker 1: wheat and creating a wheat bubble that created the food 528 00:30:01,520 --> 00:30:03,640 Speaker 1: crisis in the riots in Haiti and Egypt in two 529 00:30:03,680 --> 00:30:07,560 Speaker 1: thousand and eight. UM and it's he came so close, 530 00:30:07,560 --> 00:30:10,000 Speaker 1: but he wasn't able to UM. But it's worth a 531 00:30:10,040 --> 00:30:13,520 Speaker 1: read anyway. It was in Harper's like last year. Interesting. Yeah, 532 00:30:13,680 --> 00:30:17,680 Speaker 1: so that is oil speculation. UM. It's us speculating on 533 00:30:17,760 --> 00:30:20,400 Speaker 1: oil speculation, or speculating as little as we as we 534 00:30:20,520 --> 00:30:23,320 Speaker 1: can write. UM. If you want to learn more about 535 00:30:23,440 --> 00:30:26,440 Speaker 1: that type in oil in the handy search bar how 536 00:30:26,440 --> 00:30:28,320 Speaker 1: stuff works dot com. We have a bunch of cool 537 00:30:28,400 --> 00:30:31,840 Speaker 1: stuff on the side about that. UM and I said oil, 538 00:30:32,320 --> 00:30:37,680 Speaker 1: followed by handy search bar, which means listener mail Josh, 539 00:30:37,680 --> 00:30:43,840 Speaker 1: I'm gonna call this uh sperm donation. Uh. Dear Josh, 540 00:30:43,920 --> 00:30:46,840 Speaker 1: Chuck and Jerry. What I'm gonna say Lizzie today? Because 541 00:30:46,920 --> 00:30:49,200 Speaker 1: Jerry has left us tell you it again? Dear Josh, 542 00:30:49,280 --> 00:30:51,960 Speaker 1: Chuck and Lizzie. My name is Melanie'm a college student 543 00:30:51,960 --> 00:30:55,400 Speaker 1: from Seattle attending full time school in South Korea. I 544 00:30:55,440 --> 00:30:57,360 Speaker 1: was listening to how twins work and it made me 545 00:30:57,360 --> 00:31:00,400 Speaker 1: think of my own unique family situation. My mom and 546 00:31:00,480 --> 00:31:02,680 Speaker 1: legal father, her husband could not have a child together, 547 00:31:02,920 --> 00:31:05,720 Speaker 1: so they decided to get a sperm donor. The laws 548 00:31:05,720 --> 00:31:08,400 Speaker 1: are looser now, but twenty years ago information was more 549 00:31:08,440 --> 00:31:11,120 Speaker 1: closed off in secretive. I grew up not knowing really 550 00:31:11,160 --> 00:31:13,920 Speaker 1: anything about my real dad until just about a month ago. 551 00:31:14,320 --> 00:31:16,640 Speaker 1: In late February, the day before I was to depart 552 00:31:16,640 --> 00:31:18,120 Speaker 1: back to South Korea, I got a letter in the 553 00:31:18,120 --> 00:31:20,960 Speaker 1: mail from my real father. He lives in Athens, Georgia. 554 00:31:21,240 --> 00:31:25,080 Speaker 1: Pretty cool. We have been communicating through Facebook and email, 555 00:31:25,440 --> 00:31:27,320 Speaker 1: and I've discovered that we have quite a bit in 556 00:31:27,360 --> 00:31:30,360 Speaker 1: common despite never knowing each other. Of course, you do 557 00:31:31,120 --> 00:31:34,760 Speaker 1: Jean's baby, it's all the Jenes. I wonder if it 558 00:31:34,840 --> 00:31:40,320 Speaker 1: turned out to be biker Lee. We have very similar handwriting, religious, 559 00:31:40,320 --> 00:31:47,240 Speaker 1: spiritual beliefs, paranormal, paranormal experiences, TVs TV show taste. He 560 00:31:47,360 --> 00:31:49,400 Speaker 1: is a nurse and that was the first job I 561 00:31:49,440 --> 00:31:52,280 Speaker 1: ever wanted, so it's not really And he was a 562 00:31:52,360 --> 00:31:54,320 Speaker 1: journalist in my main talent in a large interest of 563 00:31:54,360 --> 00:31:56,640 Speaker 1: mine's writing. On top of all this, five years ago 564 00:31:56,720 --> 00:31:58,440 Speaker 1: or so, my mom received a letter from a lady 565 00:31:59,000 --> 00:32:02,720 Speaker 1: who had registered the same donor number. So, in short, 566 00:32:02,880 --> 00:32:05,840 Speaker 1: I also have a half brothers. That's very cool. Um. 567 00:32:05,840 --> 00:32:07,840 Speaker 1: We were able to meet once actually my senior year, 568 00:32:08,120 --> 00:32:10,840 Speaker 1: and also discovered we had several things in common. My 569 00:32:10,880 --> 00:32:17,160 Speaker 1: boyfriend was a part Japanese guy named Max, and as 570 00:32:17,280 --> 00:32:20,640 Speaker 1: was his best friend, a part Japanese guy named Max Wow, 571 00:32:21,520 --> 00:32:25,920 Speaker 1: same political views, both played guitar, same favorite band, half brother, 572 00:32:25,920 --> 00:32:28,640 Speaker 1: half sister reunited. Does she say the same favorite band? 573 00:32:28,880 --> 00:32:31,680 Speaker 1: She doesn't mention what the band is, but she said, 574 00:32:31,720 --> 00:32:33,479 Speaker 1: this leads me to my request that we do an 575 00:32:33,480 --> 00:32:37,880 Speaker 1: episode on sperm and egg donation and how relationships can develop. 576 00:32:38,000 --> 00:32:42,160 Speaker 1: So let's add that to the kittie to the queue. Yeah, 577 00:32:42,280 --> 00:32:45,480 Speaker 1: let's do that, Melanie A thanks a lot, Melanie, And 578 00:32:45,800 --> 00:32:49,400 Speaker 1: we got to come down to Athens for a little while. Right, No, 579 00:32:49,600 --> 00:32:51,600 Speaker 1: she did not come down, she just was in contact. 580 00:32:51,640 --> 00:32:54,080 Speaker 1: You definitely have to go to Athens, and while you're 581 00:32:54,120 --> 00:32:56,600 Speaker 1: there to make sure you eat at Harry Bassett's. I 582 00:32:56,680 --> 00:33:00,320 Speaker 1: strongly recommend the chicken Rochambo and they do not kick 583 00:33:00,360 --> 00:33:02,160 Speaker 1: you in the crotch when you ordered. I promise this 584 00:33:02,240 --> 00:33:05,480 Speaker 1: isn't like of a prank. No no, um. If you 585 00:33:08,760 --> 00:33:12,400 Speaker 1: were produced outside of the traditional means of reproduction, we 586 00:33:12,400 --> 00:33:15,760 Speaker 1: want to hear about it. Yeah, good one, Um, wrap 587 00:33:15,760 --> 00:33:19,120 Speaker 1: it up. Sending in an email to stuff podcast at 588 00:33:19,200 --> 00:33:25,240 Speaker 1: how stuff works dot com for more on this and 589 00:33:25,280 --> 00:33:27,960 Speaker 1: thousands of other topics. Is it how stuff works dot com. 590 00:33:28,200 --> 00:33:30,800 Speaker 1: To learn more about the podcast, click on the podcast 591 00:33:31,000 --> 00:33:34,000 Speaker 1: icon in the upper right corner of our homepage. The 592 00:33:34,000 --> 00:33:36,640 Speaker 1: how Stuff Works iPhone app has a ride. Download it 593 00:33:36,680 --> 00:33:42,480 Speaker 1: today on iTunes. Brought to you by the reinvented two 594 00:33:42,520 --> 00:33:45,040 Speaker 1: thousand twelve camera. It's ready, are you