JSB Forex Trader
Prohibitions On Market Manipulation and False Information in Subtitle B of the Energy Independence and Security Act of 2007
A recommendation to help remove market manipulation in the Energy Markets: Tracking the Demand Side. Solution: Display in real-time, in chart format, the number of gallons of gasoline pumped in the US every day. Superimposed on this chart would be a real-time graph of the price of crude oil. Chart function should allow for historical comparisons of both. The chart should be available to anyone in the world 24 hours a day everyday. Why: In a free market price is determined by the flow of information with regards to supply and demand. Accurate demand information obtained by the solution above would trump any other demand information. How: Every gasoline pump in the US would transmit, in real-time, the number of gallons pumped during the day. This transmitted data would be collected and summed at a single source (perhaps the EIA). The source would combine the summed gallons with the current crude oil price and present, in electronic format, a real-time chart showing two lines: gallons of gasoline pumped for the day and the current price per barrel of oil. Cost of implementation: Most gas pumps in America have imbedded computers and electronic flow meters which transmit flow data to an indoor software sales system. Gas stations use software provided by their suppliers to track flows and sales. So the cost of obtaining the required data at the point of sale is zero ($0). Supplier software used by gas stations is typically prioritized for individual supplier needs so that data from service stations using different suppliers may not be compatible. Therefore, a law needs to be passed that requires all such programs to have a common algorithm which converts flow data into a format that can be used by the source computer system (presumably operated by the EIA). The cost of this requirement is minimal and should be borne by the software providers or suppliers at a minimal charge (perhaps a one time fee of $5.00 per pump). The cost of real-time transmission from the gas station to the source (EIA) should be charged against all market trades made in spot and derivative crude oil markets. The costs required that creates a source program which accepts the flow data from gas stations, converts the data into graphical form and displays the graph in real-time on the source web-site (presumably the EIA website) may be borne by customers at the pump in the form of a tax. Critical Questions: 1)Without real-time demand information from the rest of the world’s gasoline consuming countries won’t this information be useless? No. The US consumes nearly as much gasoline as the next 24 largest oil consuming nations combined. In this context the US is the tail that wags the dog (see table attached). 2)How will tracking gasoline flows help determine the demand component in crude oil prices? Over 60% of each barrel of crude oil in the US is refined into gasoline 3)How valuable is this information without the second price determination component – supply? Valuable – “one in the hand is worth more than two in the bush.” US gasoline consumption is the most critical component of the supply and demand equation in price discovery.