FTC investigating manipulation by oil companies

And how much of our oil comes from OPEC countries again? Seems to me we have shifted our purchasing away from OPEC countries. Last I knew anyway, neither Canada nor Mexico were part of the cartel. Aren't these nations our major importers now?

LadyJazzer wrote: The whole myth of "supply & demand" has been busted... It's a lie.

archer wrote:

neptunechimney wrote:

archer wrote: I post about what I read here....in the last couple weeks I have seen righties post that they don't much care how Walmart treats it's employees, or if small mom and pop stores fail in communities as long as they get their cheap Chinese goods......Walmart depends upon that greed and disdain for small business and low income employees to keep growing.......now I see where you don't much care if oil companies make ever growing profits at the expense of middle America.....


see a trend here? I do.

You are seeing what reinforces what you already believe.

What you righties post reinforces what I believe....

BearMtnHIB wrote: my priority as a consumer is in low cost products- I am not interested in bankrolling a Walmart employee's career opportunities.

You all have this strange adoration of corporations, almost a hero worship, and I don't see anywhere that you care much who a corporation hurts.....what destruction they do to this country (reference the big banks, insurance companies, and other financial institutions....and yes, oil companies) just as long as you get your cheap goods. Yeah, I see what I want to see? you guys make it easy for me with your fawning and gushing over your corporate gods.

I stand by my statement if you see government as the antidote.

It is a lie...

Matt Taibbi Blows The Lid Off Oil/Gas Speculation By Goldman Sachs
By JUSTIN GARDNER

And what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical-commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

Listen, it’s not just Taibbi who thinks that the market was gamed. Dem Senators tried unsuccessfully to close this loophole last year…

Many politicians and energy industry analysts blame oil speculators for cashing in on the fuel cost crisis and, in the process, boosting the price of oil. Hedge funds, trusts, and independent investors have also poured funds into crude oil as a hedge against the weakened dollar.

“A major contributor [to high oil prices] is the rise in speculation,” said Sen. Carl Levin, D-Mich, who estimated that speculation has added about $35 to a barrel of oil. “This is not a supply and demand issue.”

Levin said the solution can be found in closing the loopholes that allow electronic traders to buy oil outside of the United States. Levin noted that the “Enron loophole” will be ended if President Bush signs legislation that Congress passed as part of the proposed Farm Bill.

And Goldman Sachs’ involvement is clear in all of this…

Crude prices hit a record $123.90 a barrel Thursday, after a Goldman Sachs analyst predicted earlier this week that oil could rise as high as $200 over the next six months to two years.

That was May of last year. Want to know why oil prices finally dropped? Because Americans started driving less and forced the speculators to sell off their hoards or face financial ruin. But there’s literally no reason why oil prices should rise much above $2 a gallon given current market forces. The demand is being artificially created by speculators and it has been that way for quite some time.

Just take a look at this graph if you don’t believe me…

Does that look like a realistic demand curve?

Of course not. The market is being driven by folks who want to make an easy buck, and right now they can because nobody realizes what’s going on and there’s not enough political pressure to stop them. That could change if Americans simply wise up and look at the facts, but right now we believe the supply/demand lie we’ve been sold for the past few decades. Hopefully that’ll change, but that’s where we are right now.

Long story short, commodities speculation is a shameful practice that needs to stop immediately…and I’m not even getting into how Goldman gamed the mortgage markets.

I’ll give Taibbi the last word…

Goldman has its alumni pushing its views from the pulpit of the U.S. Treasury, the NYSE, the World Bank, and numerous other important posts; it also has former players fronting major TV shows. They have the ear of the president if they want it. Given all of this, I personally think it’s absurd to talk about the need for “balance” in every single magazine and news article. I understand that some people feel differently, but that’s my take on things.

http://donklephant.com/2009/07/03/rolli ... man-sachs/

Government, if it can reign in the speculators with appropriate regulations, IS the answer to at least controlling it...

Well no duh! I said this years ago, and in several previous posts, futures trading in oil is what is causing the price volatility.

This is old news.

But its more fun to use the standard "attack the Oil companies" BS before the election.

BTW, there is no practical way to control this futures speculation. Oil is a worldwide commodity. It will just move to another location where the US can't regulate it (or tax it). Raising the margin requirements (~6%) may help a little, but I doubt it will lead to cheap oil.

Better set up an ethanol still.

And there is an Oil futures ETF for the small investor USO. It is only leveraged 1:1 though, and hard to make money on long term. Its all BS, and we pay at the pump.

Where is Dodd and Barney Frankfurter? I thought those two housing financial masterminds were going to fix all this?

So, the U.S. possesses 2% of the world's oil-reserves; we produce approximately 11% of the world's supply, (not all of which stays in the U.S., because it gets sold to the highest bidder); and we consume 25% of the world's supply... So, which part of that is going to move to another "location" so the US can't regulate it?.... And what bloody difference does it make?

Yes, it's old news...And it's still correct, and it's still valid...and the fact that it's old doesn't make it any less true.

I am not talking about physical oil. Oil futures contracts can be traded on any exchange anywhere in the world. Over regulate it here and it will be traded somewhere else, and it's all paper contracts that are never physically delivered. Hard to regulate worldwide, that is all I am saying.

There is also alot of disagreement about whether raising margin reqm'ts will even work. Who knows?

http://seekingalpha.com/article/78899-r ... ces-higher

In April 2008, U.S. Sen. Byron Dorgan, a North Dakota Democrat, told Congress, “There is an orgy of speculation in futures markets. This is a 24-hour casino with unbelievable speculation.” He and others in Congress have been raising the idea of changing margin requirements that traders must pay up front in order to engage in oil speculation. Dorgan said stock speculation requires a 50% margin, but commodities like oil demand a much lower threshold, just 5% or 7%.

That's my point... What will it hurt to try? Force the traders to put more skin in the game... Then let's see if they are so ambitious about ripping off profits when they don't even care about the product.

I agree, and I think margins should be higher for all commodities. The airlines, truckers and farmers may disagree though.

You know that speculation is a risky business, no matter which size you choose.

And the standard line in the options market? The easiest way to make a small fortune in oil future is to start with a large fortune.

No one is forcing the holders of oil stocks to option them to the speculators. A few years ago during the Bush oil price jump, I found out one of the small oil companies I was invested in had already sold options to the speculators so I thought I had a big payday waiting, but someone was buying their oil for $0.50 on the dollar.