The Global Oil Scam: 50 Times Bigger than Madoff 248 comments
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$2.5 Trillion - That’s the size of the global oil scam.
It’s a number so large that, to put it in perspective, we will now begin measuring the damage done to the global economy in "Madoff Units" ($50Bn rip-offs). $2.5Tn is 50 times the amount of money that Bernie Madoff scammed from investors in his lifetime, but it is less than the monthly excess price the global population is being manipulated into paying for a barrel of oil.
Where is the outrage? Where are the investigations?
Goldman Sachs (GS), Morgan Stanley (MS), BP (BP), Total (TOT), Shell (RDS.A), Deutsche Bank (DB) and Societe Generale (SCGLY.PK) founded the Intercontinental Exchange (ICE) in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate "dark pool" trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel.
A Congressional investigation into energy trading in 2003 discovered that ICE was being used to facilitate "round-trip" trades. Round-trip trades occur when one firm sells energy to another, and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands. But when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company. This is nothing more than a massive fraud, pure and simple.
"Traders of the the ICE core membership (GS, MS, BP, DB, RDS.A, GLE & TOT) wouldn’t really have to put much money at risk by their standards in order to move or support the global market price via the BFOE market. Indeed the evolution of the Brent market has been a response to declining production and the fact that traders could not resist manipulating the market by buying up contracts and “squeezing” those who had sold oil they did not have. The fewer cargoes produced, the easier the underlying market is to manipulate." - Chris Cook, Former Director of the International Petroleum Exchange, which was bought by ICE.
How widespread are round-trip trades? The Congressional Research Service looked at trading patterns in the energy sector and this is what they reported:
This pattern of trading suggests a market environment in which a significant volume of fictitious trading could have taken place. Yet since most of the trading is unregulated by the government, we have only a slim idea of the illusion being perpetrated in the energy sector.
DMS Energy, when investigated by Congress, admitted that 80 percent of its trades in 2001 were round-trip trades. That means 80 percent of all of their trades that year were bogus trades where no commodity changed hands, and yet the balance sheets reflect added revenue. Remember, these trades are sham deals where nothing was exchanged. Duke Energy (DUK) disclosed that $1.1 billion worth of trades were round-trip since 1999. Roughly two-thirds of these were done on the InterContinental Exchange; that is, the online, nonregulated, nonaudited, nonoversight for manipulation and fraud entity run by banks in this country. That means thousands of subscribers would see false pricing. Under investigation, a lawyer for JPMorgan Chase (JPM) admitted the bank engineered a series of “round-trip” trades with Enron.
You can chart the damage done by Goldman Sachs and their gang of thieves by looking at commodity pricing pre- and post-ICE. Before ICE, commodities followed a more or less normal growth path that matched global GDP and was always limited in price appreciation by the fact that, ultimately, someone had to take delivery of a physical commodity at a set price.
ICE threw that concept out the window and turned commodity trading into a speculative casino game where pricing was notional and contracts could be sold by people who never produced a thing, to people who didn’t need the things that were not produced. And in just 5 years after commencing operations, Goldman Sachs and their partners managed to TRIPLE the price of commodities.
Goldman Sachs Commodity Index funds accounted for $60Bn out of $100Bn of all formula-managed funds in 2007 and investors in the GSCI lost 15% in 2006 while Goldman had a record year. John Dizard, of the Financial Times, calls this process "date rape" by Goldman Sachs as the funds index rolls cost investors 150 basis points of return annually ($9Bn on the Goldman funds) but GS, under the prospectus, is able to "manage our corresponding position," which means that it has to deliver a price at the end of the roll period. If Goldman can cover that obligation at a better price, they will, and GS pockets the difference. This is why we see such wild moves in the days before rollover, since there are billions riding on GS hitting their target every month.
It is not surprising that a commodity scam would be the cornerstone of Goldman Sachs’s strategy. CEO Lloyd Blankfein rose to the top through Goldman’s commodity trading arm J Aron, starting his career at J Aron before Goldman Sachs bought them over 25 years ago. With his colleague Gary Cohn, Blankfein oversaw the key energy trading portfolio. According to Chris Cook: "It appears clear that BP and Goldman Sachs have been working collaboratively – at least at a strategic level - for maybe 15 years now. Their trading strategy has evolved over time as the global market has developed and become ever more financialised. Moreover, they have been well placed to steer the development of the key global energy market trading platform, and the legal and regulatory framework within which it operates." Cook adds:
It appears to me that what has been occurring in the oil market may have been that – through the intermediation of the likes of J Aron in the Brent complex – long term funds have been lending money to producers – effectively interest-free - and in return the producers have been lending oil to the funds. This works well for as long as funds flow into the market, or do not withdraw in quantity, but once funds withdraw money from the market, there is a sudden collapse in price.
A combination of market hype, the opacity of the Brent Complex and the relatively small scale of trading of the benchmark BFOE crude oil contract enabled the long run up in prices, and several observers believe that the dramatic spike to $147.00 per barrel was the specific outcome of the collapse of SemGroup, which that company’s management subsequently blamed mainly on Goldman Sachs.
Mike Riess issued a study called "Modern Market Manipulation" in which he describes how GS, MS, DB et al have systematically created an environment that rewards those who manipulate the system, robbing the poor to send the money up they company ladder in exchange for record bonus payouts, which (by design) are the majority of their traders’ salaries:
Before the ‘80’s, there were just us traders. "Rogue" traders arrived on the scene with the large institutional participants, both private and public. Today’s companies and government marketing boards are large enough for senior management to distance itself from controversy, including market manipulation.
In a competitive, amoral environment, middle managers in these mega-organizations have the authority to hijack an institution’s reputation and the financial clout to manipulate the market—and they do. As long as they succeed, they enjoy promotions and perks and, sometimes, the fruits of embezzlement. If the manipulation unravels, the company denies any knowledge and hangs the rogue out to dry. We’ve seen this over and over again, most recently with D’Avila and Codelco, Hamanaka and Sumitomo, Leeson and Barings and Tsuda and Daiwa Bank.
The CFTC’s definition of manipulation is:
- A planned operation that causes or maintains an artificial price
- Unusually large purchases or sales in a short period of time in order to distort prices
- Putting out false information in order to distort prices.
In mid-2008 it was estimated that some $260 billion was invested in the Brent energy markets on the ICE, while the value of the oil actually coming out of the North Sea each month, at maybe $4 to $5 billion at most. NYMEX trading follows a similar path with 258,000, 1,000-barrel contracts open for December delivery (258M barrels), which were traded 327,000 times yesterday alone yet, at the end of the period, less than 40M barrels of oil will actually be delivered as that is the total capacity at Cushing, Okla. - where NYMEX contract deliveries are settled. Every single one of those traders know it is not even possible for 80% of the contracts they are trading to be fulfilled - it's a joke, but the joke is on you.
Over the course of an average month at the NYMEX, 5 billion barrels of oil will be traded, with a fee collected on every single transaction. That is ultimately passed down to US consumers, yet less than 40M barrels will actually be delivered. That is just 8 tenths of 1 percent of actual demand for the product that is being traded - ie. 99.2% of the oil transaction fees being paid by the American people do nothing more than create fees for the traders and record profits and bonuses for the trading firms.
Index speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years. Today, in many commodities futures markets, they are the single largest force. The huge growth in their demand has gone virtually undetected by classically trained economists who almost never analyze demand in futures markets. As money pours into the markets, two things happen concurrently: The markets expand and prices rise. One particularly troubling aspect of index speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing.
Before ICE, the average American family spent 7% of their income on food and fuel. Last year, that number topped 20%. That’s 13% of the incomes of every man, woman and child in the United States of America, over $1Tn EVERY SINGLE YEAR, stolen through market manipulation. On a global scale, that number is over $4Tn per year - 80 Madoffs! Why is there no outrage, why are there no investigations? Well, the answer is the same - $4Tn per year buys you a lot of political clout. It pays to have politicians all over the world look the other way while GS and their merry men rob from the poor and give to the rich on such a vast scale that it’s hard to grasp the damage they have done and continue to do to the global economy.
CIBC Chief Economist Jeff Rubin issued a report last year that blames the current recession on high oil prices, saying defaulting mortgages are only a symptom. According to Rubin, these higher oil prices caused Japan and the Eurozone to enter into a recession even before the most recent financial problems hit. Higher oil prices started four of the last five world recessions; we shouldn’t be too surprised if they started this one also:
Oil shocks create global recessions by transferring billions of dollars of income from economies where consumers spend every cent they have, and then some, to economies that sport the highest savings rates in the world. While those petro-dollars may get recycled back to Wall Street by sovereign wealth fund investments, they don’t all get recycled back into world demand. The leakage, as income is transferred to countries with savings rates as high as 50%, is what makes this income transfer far from demand neutral.
There is no shortage of oil. OPEC alone has 6-7 million barrels a day of spare capacity, more than the total disruption of any single country and any two countries other than Saudi Arabia could offset. Additionaly, ICE partners Total and JPM are part of the cartel that is totally skewing the global demand picture by storing 125M barrels of oil in offshore tankers. That’s 15 days of US imports that have been "ordered" but never delivered, so they show up as an extra 1Mbd of global demand, though nobody actually wants them. Land-based storage is also bursting at the seams, with global supplies up to 61 days of total consumption (84Mbd) up from 52 days last year.
That’s 5 billion barrels of oil already out of the ground, in barrels and ready to go AND THEY KEEP MAKING 86M MORE EVERY DAY! Where is the shortage? Mainly, it is media hype pushed by "analysts" at the very firms that profit the most from high oil prices. Goldman Sachs issues bullish opinions on oil and builds large positions in oil, while it is the cartel’s job to hide oil in offshore tankers, and then sell forward all the oil, with futures contracts, locking in the high price. Of course they have their media hounds as well, most notably the Drudge Report. As noted by Goldmansachsrules:
Type in the word "OIL" inside the "Drudge Report" search engine. It returns 1,965 headlines with the word "OIL." Over the last couple years, The Drudge Report has ran 1,965 headlines with the word "OIL." Most of these articles were hosted by the worthless organizations of Yahoo, Breibart, APNews, and Reuters. The Drudge Report just creates the headline, and links it the article hosted by who ever is doing the "hyping."
Search on the word "credit crisis" and you only get 12 archived headlines. The word "bailout" yields only 268. The word "bank" returns only 568. So you have the Drudge Report hyping the oil market, because they bring it up almost 2,000 times. Unlike the "credit crisis" or "Wall Street Bailout" that actual did happen, the oil market and what did/didn’t happen between Israel/Iran is plugged 10 times more!
Of all the 1,965 articles that the Drudge Report ran with the word "OIL" in the title, most were hyping the oil market. The most notorious cases, a few times a week, were hosted by Yahoo, Breibart, and AP News. Most of these articles were plugged with the same paragraph that stated if "Israel were to attack Iran, Iran would retaliate by taking over the straits of Hormuz, the largest pathway for oil and we all know what that would do to the price of oil.
It truly takes a global village of manipulators and their lackeys to pull off a con on the scale of oil, but it’s also the most profitable scam ever perpetrated on the people of this planet, as they take control of a vital resource and then create artificial shortages and drive speculative demand in order to charge you an extra dollar per gallon of gas. You don’t complain because it’s "only" $15-$20 every time you fill up your tank, but that’s what they count on and that’s where you’re wrong - it’s $20 from you and $20 from every single one of your customers once or twice a week, and $20 more your employees need just to get to work. It’s money that could be going into your business instead of a new gold bathtub for a Saudi Prince or a Goldman trader.
Global drivers consume 1.7Bn gallons of gas every single day. That $1 is $50Bn a month, a Madoff per month that is being taken away from you and your business and the non-energy/financial businesses you invest in. Of course we can give up and invest in those sectors (we do) but that doesn’t do much for the global economy and, even as you sit here now, not doing anything, those oil profits have been plowed into the copper and gold markets and now the same Goldman energy cartel is bidding to take over your clean air (through Carbon Credit trading) and your clean water.
Maybe when they are charging you $80 a gallon for water and ten cents a breath you’ll want to do something about it. I think I’ll start right now and you can too! Here are the Email addresses and fax numbers for all of your Senators, Congresspeople and Governors. Send this article to them and let them know you’d like to see an investigation. Take a few minutes of your time to save a few bucks on your next gallon of water!
Editor's note: ICE has a web site www.globalmarketfacts.com that seeks to set the record straight on the exchange and the changes it has made to attempt to rein in problematic trading practices.
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This article has 248 comments:
I have more outrage than I can put to this page.
Bill, in the third paragraph : ----- "they artificially boost revenue for the company". WHO is "the company"? I presume you mean ICE, but you could mean that it supports the price of oil for the participating companies, or both.
There is no need for me to write to my senators and reps in my state as they are in league with whatever makes more money for themselves and their real constituents -- the corporations. I've tried it before and have been more than disappointed every time.
Some people come by honesty completely naturally, and some must be forced to practice it- - or else.
You've given us a lot of troubling history and revealed fraudulent practices that have been going on for a long time.
We should at least apply the "Martha Stewart standard" here, i,e., if the wrong doing is at least as bad as hers then they should be prosecuted and sent to jail.
Thanks for this impressive and excellent piece of investigative work.
ryanclarke you're buying into the exact hype the author is talking about. I work in the industry, and the oil in the oilsands of Canada (2nd largest oil reserves in the world) can be extracted at a cost of $20-$30/barrel. That's paying Canadian taxes and employing Canadian workers.
Don't you dare tell me oil being extracted in the Middle East at a cost of $2/barrel is the reason why oil shot up to $150/barrel.
Secondly, did all of his points go over your head? He's talking about trades that dramatically articially increased the demand for a product. What you're doing is sitting there saying it's alright because there's no connection between demand and the price of oil.
You're a classic example of why we let this go on. The blatantly ignorant and factually devoid peak oil culture has penetrated the mainstream, and consequently when oil was at $150 you and peopel like you were saying "I knew this was going to happen" as opposed to "What the ****!"
seekingalpha.com/artic...
Why are we controlled by the needs of the few rich while the majority are poor and essentially slaves ? Time for big change .
I disagree with most of what you say. Yes there is speculation and deliberate manipulation in the commodities futures market. But NO, there is no scam here. It's part of market volatility as a result of free market principles at work. Some speculators make money but there are also some speculators lose money at the same time.
Peak oil is real. Oil price is going to go much much higher. If you think oil price has been bumped up artificially and it is going to crash down, well, you are WELCOME to speculate the opposite way and enter a short position against the oil bull speculators. You might even make money if you speculate right on the bearish side.
Both you and I agree with one thing, the speculators in the commodities futures market never actually take delivery so there is never actual physical demand.
But exactly because no physical commodities are involved, speculators have NOT looted the consumers of physical commodities, they have merely looted each other's pocket. It's either bull speculators take money out of bear speculator's pocket, or vise versa. It's a gamble between two groups of speculators, One group write future contracts they they know they could never deliver the physical stuff, another group purchase future contracts that they know they will never ask for delivery of the nasty substances. It's a zero sum-gamble and fist fight between speculators and speculators.
Let me put this way. If I today pay $6 a gallon gasoline versus $3. As a consumer I paid extra. But I bought the physical thing. My money did NOT pay into Goldman Saches's pocket, as they did not sell gasoline to me. My money is paid to the producers who produced and supplied that gallon of gasoline to me.
The only time I paid money to the Wall Street, is when they actually HAVE interacted with the physical commodities. If Goldman Saches has hired some oil tankers to stockpile oil at $30 and then sell them at $80. I pay the price for $80 oil and the original oil producer get paid only $30, and Goldman Saches, as a middle man, get pockets the difference.
If they have not hires a oil tankers. Then the oil transaction is directly between the oil producers and me, and gain and loss is between me the consumer and the producers, not a penny of that money enters Goldman Saches' pocket. If they pocke some money, it's because they bet bullish on the paper futures market, and you, Philips Davis, betted bearish and you lose your betting money to Goldman Saches.
Please read here why the only sensible way of investing (versus gambling) in commodities, is to physically HOLD the stuff:
seekingalpha.com/autho...
If you don't hold it, you don't have it.
When lots of money chases a narrow market of commodities, the end result is extreme volatility. But unless physical possession is taken, it does not affect physical demand and does not affect long term prices.
For example you can "invest" a billion dollars or a trillion dollars in the global palladium market. But there are only less than a million ounces available for investors to buy. Only those who bought the physical ounces will rip long term profit at the end.
seekingalpha.com/autho...
Capitalism and truly free markets have allowed more people to live in freedom and comfort than any other system ever previously devised. To condemn capitalism on the basis of these thefts is total ignorance that plays right into the politicians hands. They use your ignorance to grab even more power to "regulate" in favor of their friends.
By definition, a falsley manipulated market is not a free market. WISE UP!!
On Nov 11 01:36 PM RSAAKKS wrote:
> Very enlightening. I guess that is free market capitalism at its
> best.
Further, on the issue of Wall Street bankers stockpiled 125M barrels of oil you think that skewed the global oil supply and demand. The opposite is true. They did not skew the true supply/demand, they help to restore the true supply/demand picture.
How could you blame they for stockpiling 125M barrel of oil and seek profit from it. Sure no one wants that 125M at $30 a barrel. So they buy since no one else wants it, what's wrong with it? And later, the same oil that no one wants at $30, now some one wants to have at $80, so they sell, what is wrong with it? It's free market principle at work. Thanks to the 125M hoarding, the price of oil did not drop below $30, and because of availability of this 125M precious hoarded up, there is now extra supply so that oil has not raise to more than $80 yet.
It's free market principle at work. Buy when no one wants it, and sell when every one wants it. That's how things work and how one can make money, LEGALLY. The world is an idiot that it does not want that 125M at $30, and then wanted to pay $80 a couple of month later. Some one has to make that money and restore some sanity.
Yes it makes sense to stockpile oil at $30 and sell it at $80, but it becomes a scam when you inflate the price to $80 by participating in a series of neutral trades that put on the facade of activity in the oil trading market.
On Nov 11 02:44 PM Mark Anthony wrote:
> Philip:
>
> Further, on the issue of Wall Street bankers stockpiled 125M barrels
> of oil you think that skewed the global oil supply and demand. The
> opposite is true. They did not skew the true supply/demand, they
> help to restore the true supply/demand picture.
>
> How could you blame they for stockpiling 125M barrel of oil and seek
> profit from it. Sure no one wants that 125M at $30 a barrel. So they
> buy since no one else wants it, what's wrong with it? And later,
> the same oil that no one wants at $30, now some one wants to have
> at $80, so they sell, what is wrong with it? It's free market principle
> at work. Thanks to the 125M hoarding, the price of oil did not drop
> below $30, and because of availability of this 125M precious hoarded
> up, there is now extra supply so that oil has not raise to more than
> $80 yet.
>
> It's free market principle at work. Buy when no one wants it, and
> sell when every one wants it. That's how things work and how one
> can make money, LEGALLY. The world is an idiot that it does not want
> that 125M at $30, and then wanted to pay $80 a couple of month later.
> Some one has to make that money and restore some sanity.
How is that working out for ya?
No one thanks Wall Street speculators for pushing oil down to $30 and save every one money. Now the prie is pushed to $80, I hear no producers thank Goldman Saches for letting them make more profits. But when the volatility moves against you, every one blames on the speculator.
The fact of the matter is the "round trip trades" does not generate net commodity demands, and hence does NOT change the supply/demand/price fundamentals in the long run. It generate short term volatilities. Volatility works on both ways, it could price too high and could push price too low. It forces consumers to pay more at a time and pay less at another time. Long term, it cancels out. I as a consumer, will accept the volatility and I would not complain when I have to pay more, nor would I need to thank any one when I end up paying less than I expected.
It's free market principles at work.
On Nov 11 03:00 PM Shaftsinker wrote:
> While you are making good points, you have not addressed the issue
> of the round trip trades the author was discussing, which I believe
> was the focal point of his argument that consumers are being scammed.
> From my understanding it's not at all pure futures speculation where
> there is a winner and a loser like you were rebutting earlier.<br/>
>
> Yes it makes sense to stockpile oil at $30 and sell it at $80, but
> it becomes a scam when you inflate the price to $80 by participating
> in a series of neutral trades that put on the facade of activity
> in the oil trading market.
I bet you have lost alot on your portfolios out there.
"Round Trip" = Painting the tape
In racing, you cheat counting on others to also cheat, so no one is blackballed by the larger group for calling you out. They all win. They all get paid, and the guys playing fair can't keep up and can't stay solvent to keep going. AND always wonder why they could never catch the lead pack...
> jack
Did you sent a copy of this article to the CFTC and the Congressional Oversight Committees?
Jack
Firstly, this is an open public market - no entity knows who they are buying or selling from. Bids and Offers are placed into a public exchange. Even if true, I have no idea what a round trip trade can do other than cost the speculators commissions. If an entity has the ability to move a market (manipulate) through nefarious means then that should be illegal. The author makes no case for this though
If there were a competitor to oil in cars, the price of oil would fall to something like the price of extraction -- $6/bbl.
No, there's no shortage of the commodity, and no "free market". It's a "managed market" in oil, and the scam is real. Ironically, the exchange name, "ICE" is the same acronym as used for Internal Combustion Engine.
Without the oil-fired car "needle", the oil "drug" would not be so profitable; note that oil, unlike cars, is burned and leaves us nothing but the pollution. At least with cars, the junk cars get recycled, and the materials are still saleable.
Most crude oil sold by producers is transacted outside the futures market, but those sales are priced in accordance with the futures market. (Saudi Arabia, Russia, Kuwait e.g., sell directly to refiners and distributors) But If you can manipulate the futures market, you can price the actual commodity. The NYMEX or ICE can be a tremendous lever in this way.
I gave evidence to the UK Parliament's Treasury select committee last year on the subject of oil market regulation, and my position is that the global oil market structure is now entirely dysfunctional and sociopathic.
As I said in this interview
www.hardassetsinvestor...
investment banks are like submarines - beautiful pieces of engineering with a malign purpose. Trading intermediaries have an interest in opacity and in volatility, so don't be surprised if the market platform they implement, own and control operates in an opaque and volatile way. You don't let the submarines run the convoy system.
I think Phillip maybe misses the point that producers are probably up to their neck in this global manipulation, because they are the principal beneficiaries from high oil prices, and of course producers essentially store oil in the ground at nil cost. While the long standing close relationship between BP and Goldman - and their totally comprehensive knowledge in respect of every barrel that moves - probably puts them in a better position than any other middlemen, I suspect that the Saudi trading and financing strategy would be an interesting study.
The problem the oil producers have is that gradually inflating the oil price with money borrowed from funds is essentially like a car with no reverse gear, or the shark that dies if it stops swimming. Massive 'macro' volatility is built in to the system, and of course this is where the middlemen make their money, from both producers (to whom it is a tax) and consumers (to whom it is an additional cost burden).
But the producers I have talked to, including one OPEC oil rep, made it quite clear that they regard oil price stability as being as important as an oil price that reflects the increasing scarcity and costs of exploration.
I believe that a global Energy Commission should be convened without delay to investigate the operation of the global energy markets, take evidence from all stakeholders, and make recommendations for a new global market architecture - I would envisage an International Energy Clearing Union based not upon new global institutions (we have enough of those), but upon globally valid agreements and standards.
It is true, as you say, that speculation in commodities futures is a zero sum game. When speculators buy commodities they increase demand and thereby increase the price of the commodity. But when it comes time for those same speculators to sell their commodities they increase supply which puts downward pressure on the price of the commodity. The excess demand of speculation on the upside is exactly equal to the excess supply of speculation on the downside so there should be no net effect on the price of the commodity. Some speculators 'win' by selling to other speculators who lose. It is precisely a poker game where speculators' money is the pot and some win and some lose.
But this is not what is happening anymore. Now we have very deep pocketed speculators who keep their money in the futures market. They are no longer buying and selling deliveries of oil. They have 'securitized' the futures market. Now they buy and sell "contracts", not oil deliveries. So they push up the price of real future delivery contracts by raising demand, but they never push the price back down by unwinding those positions and increasing supply. They just roll over their contracts again and again, with GS and friends collecting fees on each transaction. So the fee collectors like GS reap gains while investors in the GS index fund lose their money to pay Goldman's gains. Speculators who buy commodities futures as a hedge against currency devaluation may actually come out ahead, if the US$ loses 5% and their loss on the futures market is only 2%, for e.g.
Meanwhile the speculative money that is holding demand price at artificially high levels means real oil suppliers sell to real oil buyers at the inflated price. Oil suppliers get the gain. And that inflation is 100% passed on to us, the ultimate consumers of gas and diesel and jet fuel. Actually a bit less than 100% is paid by end consumers, as refiners have been suffering lower profit margins so they eat a share of the cost too.
Oil was pushed down to $30 when GS and the other big speculators faced the cash crunch of 2008-09 and had to liquidate their commodities positions to cash up and cover losses (i.e. "add capital") in their other activities. That is what happens when speculators actually sell, the price collapses to (or below) its natural supply-demand level. But TARP, etc "recapitalized" the newly converted "bank holding company" GS and friends so they're back in business inflating the futures markets and sucking money out of the pockets of consumers and the smaller scale suckers who try to profit from commodities speculation in a field that is owned and operated by GS & Co.
I fail to understand how trading transactions are "passed down to the consumer" by firms that don't take delivery.
(I side with Mark Anthony on this issue... though spell check would help his case.)
There are many variables that affect the price of oil but the biggest is probably the Fed (and other central banks of the world) and the loose money policies they are advocating. (inflation = rising commodity prices)
Phillip, I enjoyed your article about the dollar...a very contrarian perspective but this article is way too emotional and subjective with way too many cut and paste quotes from people with an agenda.
Furthermore, the last thing I want to do is call my congress people (I live in CA) because these people have already screwed up our economy (and continue to do so) and the last thing I want them to do is screw up the oil mkt's. If you think oil and gasoline are expensive now what till the gov't gets involved...(more involved that is)
PS>No offense but the article hints of paranoia and conspiracy...I guess it's just an extension of the psychological stress many of us are experiencing during this time of uncertainty... or... perhaps it was a slow trading day:)
My analysis is that the true speculators are the intermediaries who are borrowing money from funds (probably captive) and lending it to producers. In return, producers are lending - ie selling forward oil contracts like 21 day BFOE - to the funds. This is going on OFF exchange, but has an effect as and when BFOE cargoes are delivered.
WTI has long been a zombie contract leaning on the BFOE price through the arbitrage on the ICE platform.
ETFs on the other hand, who are getting the blame, are IMHO the opposite of speculators. They are off loading the price risk of dollars and taking on energy price risk. Producers hedging are doing exactly the opposite - ie they are off-loading energy price risk in favour of dollar price risk. IMHO ETFs dealing on-exchange add much needed liquidity to the exchanges in their principal role of risk transfer. It is the middlemen who have an interest in opacity and volatility.
Sooner or later the oil price reaches a point at which demand destruction of products blows back to crude oil itself, and the cost of buying in cargoes of crude oil to support the oil price becomes unsustainable. Then the price rapidly collapses through the need to deleverage, as is the case with every bubble.
The futures market is pretty much entirely irrelevant: it is the tail, not the dog. The only way of affecting the benchmark Brent/BFOE physical market price is by having the capability of making and taking delivery of BFOE crudes. Funds categorically do not have this capability, and their exchange clearing brokers - unless entirely mad - will generally not allow their positions on any deliverable contract (and note that the ICE BFOE contract is cash settled) to be held anywhere near expiry.
I think that six years spent managing the deliverable IPE Gas Oil contract gives this view some authority.
In my view the simultaneous spikes of oil and metals last year,and the correlation of oil and other asset prices - eg the Dec WTI and S & P demonstrates conclusively that commodity prices have lost touch temporarily with the real world price determined by physical supply and demand.
The forward curve of commodity prices is mirroring the forward curve of the money price (yield curve), and this phenomenon is what you get at the 'zero bound' in what Keynes called a 'liquidity trap'.
yesterday, some traders and i were talking about UNG vs $natgas....i said my guess is $natgas is priced in digital quote and the extremely low ratio with UNG is both 'costs and ACTUAL delivery,,,,...reflecting that quite possibly,,,natgas has 'lost demand for delivery' ,,,,,which can be explained with some electrial companies using natgas for energy (think a/c at a time everyone was laying off or cutting back on top of growth of solar.)
anyway,,, there is a disconnect and i am just throwing out some ideas.
UPDATE 1-Canadian heavy oil sells at $50 discount-Frontier
Wed Nov 7, 2007 3:30pm EST
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By Robert Campbell
NEW YORK, Nov 7 (Reuters) - Independent oil refiner Frontier Oil (FTO.N: Quote, Profile, Research) said Wednesday it has purchased Canadian heavy crude oil for January delivery at a massive $50 discount to WTI prices.
Frontier chief executive James Gibbs told analysts the company had done deals for 8,000 barrels per day of Canadian heavy crude at $50 under WTI. Gibbs said Frontier had been paying around WTI minus $45 for December Canadian heavy oil.
"We have bought crude for December delivery at $45.25 and $45.75 under WTI. I just found out (today) our first batches of Canadian crude were bought at $50 under," Gibbs said on a conference call following the company's quarterly results.
"We are going to run every single barrel of heavy Canadian crude we can get our hands on."
Gibbs said the large discounts were due to a surplus of oil in Alberta and limited pipeline space to move it to market.
"I'm reluctant to call it a glut -- but definitely an over-supply situation on the heavy side that has been emerging for a few months now or related to insufficient pipeline take-away capacity for heavy crude in Canada," said Martin King, energy commodities analyst at FirstEnergy Capital in Calgary.
Approximately 32 percent of the crude Frontier processed in its two refineries in the third quarter was heavy crude, Frontier said. The company expects to increase this proportion to 44 percent in the fourth quarter.
Frontier operates a 110,000 barrels per day (bpd) refinery in El Dorado, Kansas and a 52,000 bpd plant in Cheyenne, Wyoming. (Additional reporting by Scott Haggett in Calgary; Editing by Marguerita Choy)
Simply put, when Bush Allowed - actually "PUSHED" the 2005 Oil Mergers through so rapidly, WHICH WERE TRULY VIOLATION OF ANTI-TRUST LAWS - I remarked that we would be soon screwed at the pump...and yes, we soon were! I also begin to tune-in to CNBC, I could sense, via the GS "analysts" reports' that the MAYA was gushing full stream. It has all been a big greed conspiracy between the groups mentioned in the article and the Bush Admin in order to pull it all off.
ryanclarke and M Anthony, I have read many of your comments...The supply problems are a good ways off, the whole picture, and especially in your minds, is a function of falling prey to all the rumors and hype, and "prices come true" as have been demanded and engineered by GS et al over the last couple of years...SO PLEASE WAKE UP T TEH REALITY THAT WE ARE A GOOD $16 OVERPRICED TODAY, WITH ONLY $4 OF THAT BEING THE DOLLAR...
And Mike Masters et al. did the number crunching to help verify the problem...and yes, the $147 spike and drain off up to that point was the main culprit of the great global Recession, and another will be right around the corner if this greed cartel is not busted up soon!
Please, people DO FAX your Pols, we need the pressure!!
Let me say, there is no doubt that "financial games" are being played by participants, at all points of the Energy (Oil) trail.
That said, there are some basic information, which suggest future trends, including -
1) Oil is a Finite commodity.
2) Global Population will continue to expand until at least 2030-2040, as will demand for Energy.
3) It is likely that the "Extraction/Production" of Oil effectively Peaked in 2005, as it has subsequently failed to keep pace with Inflation, Population Growth & Demand.
4) The Depletion rate of "Extraction/Production" over the next 20 years will exceed that rate at which new supplies come online, either in the form of conventional Oil from Deep Seas or Artic or from Unconventional, in the form of Canadian Tar Sands or Shale Oil. It should be noted that the EROEI on these new forms of supply, are much lower than the old super fields.
In my opionion, the existing Economic/Political establishment will use every avenue at its disposal, to retain the status quo, as long as possible.
Notwithstanding the establishment’s best efforts, it is likely, in the not too distant future, after several more Oil Related Financial shocks, that OIL/FOSSIL FUELS will cease to be perceived as THE VIABLE GLOBAL ENERGY SOURCE! These shocks will of course be accompanied by further collapses in Share Markets and the Real Economy.
When that time comes, there will be a Tectonic shift away from the OIL/FOSSIL FUELS sector, as capital pours into a desperate search for alternative Energy sources.
As this occurs, investment in Exploration & New Technology for the OIL/FOSSIL FUELS sector will be decimated, causing the DEPLETION RATES for the OIL/FOSSIL FUELS sector to escalate rapidly.
The upshot of all of this is that both $20 & $200 are possible and may happen several times, over the short to medium term!
Your follow up comment was very well stated, and describes the problem very well....hopefully some of these who are clinging to 'peak oil production' and speculators even each other out mantras will begin to see the light, as they pull their head out of the tar sands....
GO STRAIGHT TO JAIL DONT PASS GO DO NOT COLLECT $200.00. LOOSE 2 TURNS
On Nov 11 02:20 PM Mark Anthony wrote:
> Philips:
>
> I disagree with most of what you say. Yes there is speculation and
> deliberate manipulation in the commodities futures market. But NO,
> there is no scam here. It's part of market volatility as a result
> of free market principles at work. Some speculators make money but
> there are also some speculators lose money at the same time.
>
> Peak oil is real. Oil price is going to go much much higher. If you
> think oil price has been bumped up artificially and it is going to
> crash down, well, you are WELCOME to speculate the opposite way and
> enter a short position against the oil bull speculators. You might
> even make money if you speculate right on the bearish side.
>
> Both you and I agree with one thing, the speculators in the commodities
> futures market never actually take delivery so there is never actual
> physical demand.
>
> But exactly because no physical commodities are involved, speculators
> have NOT looted the consumers of physical commodities, they have
> merely looted each other's pocket. It's either bull speculators take
> money out of bear speculator's pocket, or vise versa. It's a gamble
> between two groups of speculators, One group write future contracts
> they they know they could never deliver the physical stuff, another
> group purchase future contracts that they know they will never ask
> for delivery of the nasty substances. It's a zero sum-gamble and
> fist fight between speculators and speculators.
>
> Let me put this way. If I today pay $6 a gallon gasoline versus $3.
> As a consumer I paid extra. But I bought the physical thing. My money
> did NOT pay into Goldman Saches's pocket, as they did not sell gasoline
> to me. My money is paid to the producers who produced and supplied
> that gallon of gasoline to me.
>
> The only time I paid money to the Wall Street, is when they actually
> HAVE interacted with the physical commodities. If Goldman Saches
> has hired some oil tankers to stockpile oil at $30 and then sell
> them at $80. I pay the price for $80 oil and the original oil producer
> get paid only $30, and Goldman Saches, as a middle man, get pockets
> the difference.
>
> If they have not hires a oil tankers. Then the oil transaction is
> directly between the oil producers and me, and gain and loss is between
> me the consumer and the producers, not a penny of that money enters
> Goldman Saches' pocket. If they pocke some money, it's because they
> bet bullish on the paper futures market, and you, Philips Davis,
> betted bearish and you lose your betting money to Goldman Saches.
>
>
> Please read here why the only sensible way of investing (versus gambling)
> in commodities, is to physically HOLD the stuff:
> seekingalpha.com/autho...
>
> If you don't hold it, you don't have it.
>
> When lots of money chases a narrow market of commodities, the end
> result is extreme volatility. But unless physical possession is taken,
> it does not affect physical demand and does not affect long term
> prices.
>
> For example you can "invest" a billion dollars or a trillion dollars
> in the global palladium market. But there are only less than a million
> ounces available for investors to buy. Only those who bought the
> physical ounces will rip long term profit at the end.
> seekingalpha.com/autho...
By having active markets that takes account of these differences the forward opinions of supply and prices can, and do, help manage the continuation of supply and actually reduce pricing volatility.
If all oil is sold at its extraction cost there will be a very quick good bye to supply and consequent massive leap in price of the remainder.
On Nov 11 03:47 PM Mark Anthony wrote:
> I guess to be fair, the consumers should also send a big Thank You
> note to Goldman Saches for knocking price down to as low as $30 per
> barrel, saved consumers quite a bit of money during that few brief
> months.
>
> No one thanks Wall Street speculators for pushing oil down to $30
> and save every one money. Now the prie is pushed to $80, I hear no
> producers thank Goldman Saches for letting them make more profits.
> But when the volatility moves against you, every one blames on the
> speculator.
>
> The fact of the matter is the "round trip trades" does not generate
> net commodity demands, and hence does NOT change the supply/demand/price
> fundamentals in the long run. It generate short term volatilities.
> Volatility works on both ways, it could price too high and could
> push price too low. It forces consumers to pay more at a time and
> pay less at another time. Long term, it cancels out. I as a consumer,
> will accept the volatility and I would not complain when I have to
> pay more, nor would I need to thank any one when I end up paying
> less than I expected.
>
> It's free market principles at work.
>
> On Nov 11 03:00 PM Shaftsinker wrote:
On the subject of what is real oil supply, BP's latest Gulf of Mexico discovery involved drilling through 35,000 feet of rock underneath 4,000 feet of water. If a company resorts to such lengths, I have to imagine that peak oil is probably closer than we think.
bp.com/genericarti...
Buy an electric car. Charge it from a solar panel on your garage roof. Oil is evil.
On Nov 11 10:33 PM moneyagent wrote:
>
> GO STRAIGHT TO JAIL DONT PASS GO DO NOT COLLECT $200.00. LOOSE 2
> TURNS
> On Nov 11 02:20 PM Mark Anthony wrote:
On Nov 12 05:38 AM bluesky123 wrote:
> Buy an electric car. Charge it from a solar panel on your garage
> roof. Oil is evil.
supply.
On Nov 12 03:29 AM chris coonan wrote:
> I am begining to think that creation of systems is the sure way to
> make money these days. And not actually creating value. I am sure
> the gang of theives running this scam sold it as "Value Added"....
On Nov 11 10:41 PM Dean M wrote:
> I wish oil would go to $1000/bbl so we could get rid of it once and
> for all in this country and let Ahmedinejad and Chavez drink it.
and therein lies the problem. No "goods or services" are actually being exchanged. This is not true capitalism.
Capitalism has been subverted by government regulations based on big industry money.
Selling a contract for nothing, or packaging up toxic debt and then selling/buying "credit default swaps" is NOT a "service."
The financial world has finally spun to the edge of its control. Regretfully we have a lot of future pain before we ever see the end of the manipulation.
On Nov 11 03:28 PM stockferret wrote:
> According to Adam Smith, in a free market each participant will try
> to maximize self-interest, and the interaction of market participants,
> leading to exchange of goods and services, enables each participant
> to be better of than when simply producing for himself/herself. He
> further said that in a free market, no regulation of any type would
> be needed to ensure that the mutually beneficial exchange of goods
> and services took place, since this "invisible hand" would guide
> market participants to trade in the most mutually beneficial manner.
>
>
> How is that working out for ya?
The price of oil is what it is because OPEC is no longer in a position where they have to sell oil at bargain basement prices. They have always been able to jack up the price, but because of the supply-demand situation in the PHYSICAL market, they could not keep it up. Now of course they can. and if there is a problem Russia would probably help them.
I*ve explained this dozens of times on this site, but people still miss the point. That's OK, because obviously their economics teachers were ignorant. And by the way author, better get yourself am elementary book on finance, because you don't seem to understand what futures markets are all about.
On Nov 12 08:52 AM Ferdinand E. Banks wrote:
> Let's turn this one over to the leading academic energy economist
> in the world: MY GOOD SELF.
>
> The price of oil is what it is because OPEC is no longer in a position
> where they have to sell oil at bargain basement prices. They have
> always been able to jack up the price, but because of the supply-demand
> situation in the PHYSICAL market, they could not keep it up. Now
> of course they can. and if there is a problem Russia would probably
> help them.
>
> I*ve explained this dozens of times on this site, but people still
> miss the point. That's OK, because obviously their economics teachers
> were ignorant. And by the way author, better get yourself am elementary
> book on finance, because you don't seem to understand what futures
> markets are all about.
Phillip, your the best.
I have seen at first hand the trading of commodities by a major commodity trading organisation, and on one particular Oil trade they bought and sold the consignment that was on the high seas no less than four times during the two hours of my visit. On each occasion, the price was increased.
Clearly to stop these trades and to make them more visible to the authorities, every trade should be immediately paid with cash and registered. This will stop most so called 'Oil Traders & Brokers' in their tracks and only those organisations with a true interest in the Oil should be allowed to trade on the exchanges. For too long Banks have been using their financial muscle to buy and sell commodities and it is us, the end-users, that pay the costs for their spurious transactions.
No exceptions.
I thank you again for putting this out into the light for all the world to see.
gatwickcity.phpbb3now....
I'm no paranoid Conspiracy Theorist, but isn't the fact this dynastic family is not mentioned in this 'mother-of-all-scams' is just another example of how well we are all manipulated & controlled, and how well are strings are being pulled - they even manage not to get listed accurately in Fortune 500.
It is very clear - for those who want to see - that Rothschilds control the Federal Reserve & the Bank of England - and through Goldman Sachs & JP Morgan appear to be the pivotal player in this Global Oil Scam.
I would go as far to say that Rothschilds are the 'Hidden Hands' here, like the tentacles of a giant octopus.
Richard W. Symonds
GATWICK CITY OF IDEAS
gatwickcity.phpbb3now....
I tell my friends, the human race has spawned a sub-species, Homo sinecognitas, or "clueless man".
End of rant, thank-you for your kind indulgence.
Paxman
*morgan stanley and goldman sachs have paid back TARP, so how are they using your TARP money to rachet anything?
*it is typical of ALL futures markets that the face value of outstanding contracts is much higher than the underlying market, and the number of contracts delivered. ICE is no different in that regard.
*Nymex trades energy contracts too, which are deliverable, and yet have experienced exactly the same price movements. so, logically, it is not the lack of a delivery process which has allowed crude to rally.
*last year, crude got up to $140, then fell to $40. hello! was that price manipulation too? or was it only price manipulation when the price rises, but not when it falls?
*ICE US, which trades coffee, sugar, cocoa and cotton is US regulated, and those contracts have also experienced huge rallies.
*ICE Europe IS regulated, just not by the US authorities. so the assertion that it is unregulated and unaudited is incorrect, a fact which the author well knows. and we know what it is called when you say something you know to be untrue. of course, that is ok if you are a journalist, right?
First step is to dismantle GS. Second is to vote out Congress. Third is to vote out Obama. If those all fail, the fourth is to load up on ammo.
OK then just invade the middle east and take their oil then. Sorry you tried that already, why do good men have to die for Neo cons and their addiction to cheap oil. I supported the Iraq war but I will not support any future attempt by US neo cons to take other peoples oil, your on your own mate. The Saudis can sell THEIR OIL at what ever price they choose and good luck to them, they have the good sense to conserve their oil, while you wasted yours.
First Point: Commodity futures can only be manipulated, but the effect on the actual commodity is limited. The spot price is always for delivery between the buyer and seller. The ulitmate price for oil is determined by supply and demand.
Second Point: Price spikes in oil are going to occur because of inelastic supply and demand. Oil was the inelasticity example used in almost every economics textbook on the planet. About 15 yrs of low oil prices meant NO drilling for oil. Lets a look awhile kids, before saying there is none left in the house.
When oil prices spike, every dry well on the planet gets something pumped into to it, to force more oil out. There's Sassoil that can turn coal into oil for as low as $35 a barrel. There is the Canadian Tar Sands at $35 to $70 with more oil than Saudia Arabia. I heard all this in the 70's and the 80's...........and yet we went back to a glut of oil both times?
We have the FBI and the CIA, and it is now high time for the BICA(Bank and Investments Control Agency).
well, Morgan Stanley, BP, Goldman Sachs, and UBS, each own <2% of ICE. so the implication in the article that ICE is their little baby is intentionally false.
moneycentral.msn.com/o...
The purpose of this manipulation is to keep prices up for Saudi Arabia and oil companies. It is effectively like the deBeers diamond cartel. You do realize that diamonds are abundant on planet earth. The only thing that keeps diamonds at a high price is the deBeers cartel. Even if you discover more diamonds it is to your self-interest to join the cartel to keep prices up. Of course how the cartel manages to keep diamond prices up practically forever surely involves something illegal somewhere.
High prices guarantee high profits for Saudi Arabia and oil companies. That is the purpose of oil manipulation. Somehow Goldman Sucks must get rewared by oil companies/Saudi Arabia et al. I would love to know how.
On Nov 12 09:02 AM Duude wrote:
> So why is the manipulation only to the upside? At some point they'll
> create a glut. I think these firms know how to short oil and realize
> they can make as much shorting if they chose to, unless they're depending
> upon other institutions who are more prone to going long than short.
> But that would actually be even more beneficial to the big boys having
> ready buyers of their shorts.
My question still remains unanswered : Nov 12 9:15.
Solar, electric (coal fired most of it), nuclear, wind, aren't going to plow fields, plant, harvest or transport your food.
Get a grip. The idea is a nice one - the reality is a pipe dream.
Stewardship? Yes!
Research green alternatives? Certainly!
Believe that solar power will run a 5 ton harvester or that our society can go back to oxen and a plow? Fantasy.
On Nov 11 10:43 PM moneyagent wrote:
> The so called oil is used to control the focus of power. Reality
> is oil is no more powerful than a penny stock. Its fascinating to
> watch people give this substance so much power and praise. Energy
> comes in over a million forms, but, like caveman the public views
> oil as the ultimate fire. Weak is the eye that follows the blinding
> light. Green will develop the future. Oil will always be what you
> let it be. If it controls your life then remove it and choose another
> energy source. For all you other ducks keep quacking. Your all fowl.
Fear and lack of courage is what soft living causes, every single time in history......unorganized and cowardly masses so afraid of losing their present quality of life, even as that same quality of life erodes before their very eyes and they perpetually do nothing of significance to prevent it. Pathetic.
The facts are:
There is plenty of oil production now
Iraq is about to come online in a big way with oilfield upgrades
There is record oil in storage
There is oil being 'parked' in barges
The results will be:
Price will correct when the commodity bubble bursts
After dropping into the 20's prices will recover to $50-60
All production costs [except oil sands] will be covered by this range
Oil producers will make a profit but cannot get price back up
[with margins cut, there will be quota cheating]
Why:
We are enterring a period of rampant defalation
Every commodity, finished good and trinket will be sold for cash
Billionaire Harold Hamm, head of Continental Resources, is cranking up capital spending in the hugely productive Bakken in North Dakota because he sees a shortage of oil. I'll take his deep, practical knowledge of world oil markets over conspiracy theory accounts based on hazy trading data any day.
The EIA obtains its data not from traders, but from actual measures of oil production and estimated reserves. They disagree totally with you, and have for several years now. There are some great charts on their website to show their summary of the data.
I'm assuming you aren't crazy enough to claim Hamm and the EIA (plus many others in academia, business and government) are part of your conspiracy, so I'd have to see a compelling explanation of where they are missing something huge before I'd take your conspiracy theory seriously over their data, on the ground savvy, and money.
I don't agree with Rubin's thesis but he was quoted in the article.
On Nov 11 02:06 PM ilovesum wrote:
> So when does the govt or people wake up and do something about it?
>
> Why are we controlled by the needs of the few rich while the majority
> are poor and essentially slaves ? Time for big change .
The article is essentially correct that the real drivers were non-fundamentally set by an unprecedented entrance into this cash market by our friends in New York at the major banks.
At a Congressional Hearing taking aim at the oil companies, perhaps in anticipation of nationalizing them, it was explained by a former Chairman of the CFTC, to a New England Senator, while she looked on glassy-eyed, that Morgan Stanley was the largest holder of physical oil in her state, much of it held in tankers floating offshore. I have been in the financial industry 30+ years. When did MS get into the oil business?
In my opinion and that of many I know in the industry, ICE is a shill for the NY banks. They have helped set it up, funded it, and done their best to drive liquidity to it, largely as a conduit for laundering their OTC activities. It allows them to trade against and extract a spread from their customers that is not available to them in a regulated market as well as giving them a venue a move positions and prices around with no transparency. It is very similar to what their market makers and others do in the OTC stock market with unregulated naked short selling often destroying otherwise viable firms.
I am basically a libertarian and a Capitalist to my bones BUT allowing government sanctioned monopolies who have 'all the (our) money', as the banks (and insurance companies) are and do, to run free through our markets, as they have done since Glass-Stegle was repealed is, like inviting a naked child molester to a 6 year old's birthday party and them going out for a smoke.
MYLINT
On Nov 11 01:53 PM Shaftsinker wrote:
> Fantastic article.
>
> ryanclarke you're buying into the exact hype the author is talking
> about. I work in the industry, and the oil in the oilsands of Canada
> (2nd largest oil reserves in the world) can be extracted at a cost
> of $20-$30/barrel. That's paying Canadian taxes and employing Canadian
> workers.
> Don't you dare tell me oil being extracted in the Middle East at
> a cost of $2/barrel is the reason why oil shot up to $150/barrel.
>
>
> Secondly, did all of his points go over your head? He's talking about
> trades that dramatically articially increased the demand for a product.
> What you're doing is sitting there saying it's alright because there's
> no connection between demand and the price of oil.
>
> You're a classic example of why we let this go on. The blatantly
> ignorant and factually devoid peak oil culture has penetrated the
> mainstream, and consequently when oil was at $150 you and peopel
> like you were saying "I knew this was going to happen" as opposed
> to "What the ****!"
Are oil companies REALLY competing to produce oil and oil products at the cheapest possible price -- or are they enjoying the high prices they are all getting? Not many oil companies have gone out of business lately, have they. That's a sign of something I guess.
In real capitalism, companies go out of business because they can't compete with more efficient or more ruthless companies.
Because of price-fixing -- inflationism -- companies have no problem as margins grow larger and larger, almost effortlessly, and consumers pay the bill, accepting the rising prices as if they were ordered by God -- instead of just fixed by the 'competing' companies.
'Whatever the market will allow'. Yes. Well deflation will change all of that. Suddenly there is price competition.
On Nov 12 09:45 AM User 480819 wrote:
> DUUde:
>
> The purpose of this manipulation is to keep prices up for Saudi Arabia
> and oil companies. It is effectively like the deBeers diamond cartel.
> You do realize that diamonds are abundant on planet earth. The only
> thing that keeps diamonds at a high price is the deBeers cartel.
> Even if you discover more diamonds it is to your self-interest to
> join the cartel to keep prices up. Of course how the cartel manages
> to keep diamond prices up practically forever surely involves something
> illegal somewhere.
> High prices guarantee high profits for Saudi Arabia and oil companies.
> That is the purpose of oil manipulation. Somehow Goldman Sucks must
> get rewared by oil companies/Saudi Arabia et al. I would love to
> know how.
>
> On Nov 12 09:02 AM Duude wrote:
But the bottom line is there is fundamental reasons that the commodities market attracted so many speculators. At the end of day, speculators who play with paper is merely gambling against each other. Only investors who hoard the PHYSICAL commodities, the quantity of which is limited, stands to gain in the long run.
I have very good discussion why that is the case:
seekingalpha.com/autho...
On Nov 11 03:47 PM Mark Anthony wrote:
> I guess to be fair, the consumers should also send a big Thank You
> note to Goldman Saches for knocking price down to as low as $30 per
> barrel, saved consumers quite a bit of money during that few brief
> months.
>
> No one thanks Wall Street speculators for pushing oil down to $30
> and save every one money. Now the prie is pushed to $80, I hear no
> producers thank Goldman Saches for letting them make more profits.
> But when the volatility moves against you, every one blames on the
> speculator.
>
> The fact of the matter is the "round trip trades" does not generate
> net commodity demands, and hence does NOT change the supply/demand/price
> fundamentals in the long run. It generate short term volatilities.
> Volatility works on both ways, it could price too high and could
> push price too low. It forces consumers to pay more at a time and
> pay less at another time. Long term, it cancels out. I as a consumer,
> will accept the volatility and I would not complain when I have to
> pay more, nor would I need to thank any one when I end up paying
> less than I expected.
>
> It's free market principles at work.
>
> On Nov 11 03:00 PM Shaftsinker wrote:
The world consumes between 84 & 85 million barrels every day (86+ before the recession). So, since everyone knows what a 55 gallon steel drum looks like....
Visualize 85 million barrels of oil being consumed every day by converting barrel volumes into 55 gallon steel drums:
* 42 gallons equals one oil barrel
* A 55 gallon steel drum is 3 feet tall by 22 inches wide
* A mile is 5,280 feet
* The circumference of the earth is 24,901 miles
* Speed of sound 768 mph
(85,000,000bbl x 42gal) / 55gal = 64,909,090 fifty-five gallon steel drums being consumed every day
Lay those steel drums end to end to make a pipeline:
(64,9090,090 x 3ft) / 5280ft = a 36,880 mile long pipeline
36,880 miles / 24,901miles = a steel-drum pipeline of oil being consumed every day stretching 1 1/2 times around the earth.
(36,880 / 24hr) / 768mph = Mach 2 or twice the speed of sound the oil would need to flow to replace the volume of oil in this pipeline every 24 hours.
(36,880 x 365days) / 24,901miles = 540, or the times you would encircle the earth each year with 55 gallon steel drums.
On Nov 11 06:50 PM dj10 wrote:
> Re: Mark Anthony's responses.
>
> Most crude oil sold by producers is transacted outside the futures
> market, but those sales are priced in accordance with the futures
> market. (Saudi Arabia, Russia, Kuwait e.g., sell directly to refiners
> and distributors) But If you can manipulate the futures market, you
> can price the actual commodity. The NYMEX or ICE can be a tremendous
> lever in this way.
Why don't we start this by picking a day, say January 10, 2010 as a day of General Strike. Everyone stays home from work. This is a message to Wall Street and Washington that we are not going to take it any more. Until something is done with the thieving on Wall Street and in Washington every 10th of the month (9th or 11th, depending on a weekend) will be a General Strike Day. Call in sick and send a message to our 'rulers'. If one day a month General Strike doesn't work, we can make a more powerful statement.
On Nov 12 09:56 AM bobbobwhite wrote:
> My main concern at this stage in the disintegration of the American
> way of life is why tens of millions of our citizens have not joined
> together in a mass tax revolt. If 50 million people stopped paying
> taxes, what could the gov't do but capitulate?
>
> Fear and lack of courage is what soft living causes, every single
> time in history......unorganized and cowardly masses so afraid of
> losing their present quality of life, even as that same quality of
> life erodes before their very eyes and they perpetually do nothing
> of significance to prevent it. Pathetic.
Aren't we allowed to use the "R" word here ?
On Nov 11 03:28 PM stockferret wrote:
> According to Adam Smith, in a free market each participant will try
> to maximize self-interest, and the interaction of market participants,
> leading to exchange of goods and services, enables each participant
> to be better of than when simply producing for himself/herself. He
> further said that in a free market, no regulation of any type would
> be needed to ensure that the mutually beneficial exchange of goods
> and services took place, since this "invisible hand" would guide
> market participants to trade in the most mutually beneficial manner.
>
>
> How is that working out for ya?
I think you're missing the point.
On Nov 12 09:29 AM William Davison wrote:
> "There is NO shortage of oil. OPEC alone has 6-7 Million barrels
> a day of spare capacity"
>
> OK then just invade the middle east and take their oil then. Sorry
> you tried that already, why do good men have to die for Neo cons
> and their addiction to cheap oil. I supported the Iraq war but I
> will not support any future attempt by US neo cons to take other
> peoples oil, your on your own mate. The Saudis can sell THEIR OIL
> at what ever price they choose and good luck to them, they have the
> good sense to conserve their oil, while you wasted yours.
Is it socialism to eliminate price-fixing among corporations? Is it corporate socialism to allow corporations to fix prices at will and engage in free market fraud?
I'm confused.
On Nov 12 09:15 AM Al Gunnes wrote:
> I thing you confound the word "fraud" with "free market" but I totally
> agree with you, let's nationalize (I mean invade) all the world's
> oil reserves and distribute it to people according to their social
> status, wealth and their commitment to the "Party". What you say?
Traders who short a market rarely manipulate the market shorter -- although this does happen. But I don't think John Paulson manipulated American housing to collapse to gain his 200 Billion. He saw the massive manipulation of prices higher and called them on it.
On Nov 12 09:02 AM Duude wrote:
> So why is the manipulation only to the upside? At some point they'll
> create a glut. I think these firms know how to short oil and realize
> they can make as much shorting if they chose to, unless they're depending
> upon other institutions who are more prone to going long than short.
> But that would actually be even more beneficial to the big boys having
> ready buyers of their shorts.
On Nov 11 07:17 PM derryl wrote:
> Mark Anthony:
>
> It is true, as you say, that speculation in commodities futures is
> a zero sum game. When speculators buy commodities they increase
> demand and thereby increase the price of the commodity. But when
> it comes time for those same speculators to sell their commodities
> they increase supply which puts downward pressure on the price of
> the commodity. The excess demand of speculation on the upside is
> exactly equal to the excess supply of speculation on the downside
> so there should be no net effect on the price of the commodity.
> Some speculators 'win' by selling to other speculators who lose.
> It is precisely a poker game where speculators' money is the pot
> and some win and some lose.
>
> But this is not what is happening anymore. Now we have very deep
> pocketed speculators who keep their money in the futures market.
> They are no longer buying and selling deliveries of oil. They have
> 'securitized' the futures market. Now they buy and sell "contracts",
> not oil deliveries. So they push up the price of real future delivery
> contracts by raising demand, but they never push the price back down
> by unwinding those positions and increasing supply. They just roll
> over their contracts again and again, with GS and friends collecting
> fees on each transaction. So the fee collectors like GS reap gains
> while investors in the GS index fund lose their money to pay Goldman's
> gains. Speculators who buy commodities futures as a hedge against
> currency devaluation may actually come out ahead, if the US$ loses
> 5% and their loss on the futures market is only 2%, for e.g.
>
> Meanwhile the speculative money that is holding demand price at artificially
> high levels means real oil suppliers sell to real oil buyers at the
> inflated price. Oil suppliers get the gain. And that inflation
> is 100% passed on to us, the ultimate consumers of gas and diesel
> and jet fuel. Actually a bit less than 100% is paid by end consumers,
> as refiners have been suffering lower profit margins so they eat
> a share of the cost too.
>
> Oil was pushed down to $30 when GS and the other big speculators
> faced the cash crunch of 2008-09 and had to liquidate their commodities
> positions to cash up and cover losses (i.e. "add capital") in their
> other activities. That is what happens when speculators actually
> sell, the price collapses to (or below) its natural supply-demand
> level. But TARP, etc "recapitalized" the newly converted "bank holding
> company" GS and friends so they're back in business inflating the
> futures markets and sucking money out of the pockets of consumers
> and the smaller scale suckers who try to profit from commodities
> speculation in a field that is owned and operated by GS & Co.
On Nov 12 08:56 AM Back2Black wrote:
> WHERE IS ELIOT SPITZER when we need him?
On Nov 11 07:55 PM Chris Cook wrote:
> @Mark Anthony
>
> My analysis is that the true speculators are the intermediaries who
> are borrowing money from funds (probably captive) and lending it
> to producers. In return, producers are lending - ie selling forward
> oil contracts like 21 day BFOE - to the funds. This is going on OFF
> exchange, but has an effect as and when BFOE cargoes are delivered.
>
>
> WTI has long been a zombie contract leaning on the BFOE price through
> the arbitrage on the ICE platform.
>
> ETFs on the other hand, who are getting the blame, are IMHO the opposite
> of speculators. They are off loading the price risk of dollars and
> taking on energy price risk. Producers hedging are doing exactly
> the opposite - ie they are off-loading energy price risk in favour
> of dollar price risk. IMHO ETFs dealing on-exchange add much needed
> liquidity to the exchanges in their principal role of risk transfer.
> It is the middlemen who have an interest in opacity and volatility.
>
>
> Sooner or later the oil price reaches a point at which demand destruction
> of products blows back to crude oil itself, and the cost of buying
> in cargoes of crude oil to support the oil price becomes unsustainable.
> Then the price rapidly collapses through the need to deleverage,
> as is the case with every bubble.
>
> The futures market is pretty much entirely irrelevant: it is the
> tail, not the dog. The only way of affecting the benchmark Brent/BFOE
> physical market price is by having the capability of making and taking
> delivery of BFOE crudes. Funds categorically do not have this capability,
> and their exchange clearing brokers - unless entirely mad - will
> generally not allow their positions on any deliverable contract (and
> note that the ICE BFOE contract is cash settled) to be held anywhere
> near expiry.
>
> I think that six years spent managing the deliverable IPE Gas Oil
> contract gives this view some authority.
>
> In my view the simultaneous spikes of oil and metals last year,and
> the correlation of oil and other asset prices - eg the Dec WTI and
> S & P demonstrates conclusively that commodity prices have lost
> touch temporarily with the real world price determined by physical
> supply and demand.
>
> The forward curve of commodity prices is mirroring the forward curve
> of the money price (yield curve), and this phenomenon is what you
> get at the 'zero bound' in what Keynes called a 'liquidity trap'.
On Nov 12 09:55 AM John Eickholt wrote:
> Great story, and this story needs to be seen by every American. Fadel
> Gheits knows it true. Why does the person that reports the inventories
> number have to talk to a trader after the numbers. Why is it when
> Phil Flynn went bearish on oil CNBC didn't want him back?
>
> Fadel Gheits is the one guy that CNBC won't bring on.
>
> seekingalpha.com/artic......
>
> FG: Two things. Oil prices have not been driven by supply and demand
>
> fundamentals for years. This was exacerbated by the incredible influx
> of
> money from financial players into the commodity markets over the
> last five
> years and especially oil, which basically created the oil bubble
> that we had
> last year. Supply and demand fundamentals are beginning to play a
> secondary
> role now in oil prices. Financial players have much more clout and
> basically
> manipulate-influence, if not manipulate-oil prices; that is very
> clear.
> That's why we have the investigation by the CFTC and all the hearings.
> I am
> not holding my breath to see any changes because the politically
> motivated
> individuals and the incredible lobbying by financial institutions
> make it
> very, very difficult to regulate or enforce regulations in the books
> to stem
> that incredible increase in financial institution influence on the
> commodity
> prices.
>
> TER: So do you have a view as to where oil is going to go over the
> next 6 to
> 12 months?
>
> FG: I can tell you oil prices will remain inflated and not fully
> reflect
> supply and demand fundamentals. I just got a call from the Kuwait
> National
> Oil Company. They are wondering when this is going to end. I said,
> don't
> hold your breath. It's not going to end. They basically believe what
> I
> believe-that financial players are more in control now than oil companies
> or
> OPEC or anybody else. They play on the perception or the outlook-oh,
> OPEC is
> going to cut production. Okay, then they jack up, they start making
> bets
> that oil prices will go higher. We have not had any supply problems
> with the
> brief exception of the hurricane and, even with the hurricane, the
> fact of
> the matter is that the hurricane impaired our refining capacity more
> than
> oil supply. The Kuwait guy was just telling me that after Hurricanes
> Rita
> and Katrina, everybody said, 'oh, send us more oil.' He said, why
> do you
> need more oil? You don't have the refining capacity to process the
> oil.
> There's no shortage, yet oil prices obviously moved up very sharply
> because
> financial players, again, gave this perception that, my God, we're
> going to
> run out of this or out of that. But in fact, we had a shortage of
> gasoline
> not because we did not have enough oil. It's because we didn't have
> enough
> facilities available to process the oil that we have.
Further, ICE is an independent company set up by a brilliant entrepreneur not , nor never, affiliated with the banks, period. ICE is also a necessary competitior to CME which controls 98% of the US futures market.
On Nov 12 10:23 AM Ruven77 wrote:
> While the futures contracts that ICE trades may be regulated by London,
> I do not believe that their OTC transactions are. And while it is
> true that NYMEX prices soared and fell in line with ICE prices, futures
> prices are derived from expectations of actual supply and demand
> fundamentals of an underlying asset and therefore referred to as
> 'derivitives'.
>
> The article is essentially correct that the real drivers were non-fundamentally
> set by an unprecedented entrance into this cash market by our friends
> in New York at the major banks.
> At a Congressional Hearing taking aim at the oil companies, perhaps
> in anticipation of nationalizing them, it was explained by a former
> Chairman of the CFTC, to a New England Senator, while she looked
> on glassy-eyed, that Morgan Stanley was the largest holder of physical
> oil in her state, much of it held in tankers floating offshore. I
> have been in the financial industry 30+ years. When did MS get into
> the oil business?
>
> In my opinion and that of many I know in the industry, ICE is a shill
> for the NY banks. They have helped set it up, funded it, and done
> their best to drive liquidity to it, largely as a conduit for laundering
> their OTC activities. It allows them to trade against and extract
> a spread from their customers that is not available to them in a
> regulated market as well as giving them a venue a move positions
> and prices around with no transparency. It is very similar to what
> their market makers and others do in the OTC stock market with unregulated
> naked short selling often destroying otherwise viable firms.
>
> I am basically a libertarian and a Capitalist to my bones BUT allowing
> government sanctioned monopolies who have 'all the (our) money',
> as the banks (and insurance companies) are and do, to run free through
> our markets, as they have done since Glass-Stegle was repealed is,
> like inviting a naked child molester to a 6 year old's birthday party
> and them going out for a smoke.
>
> MYLINT
I had the same Idea
On Nov 12 10:50 AM Michael Clark wrote:
> Bobbobwhhite:
>
> Why don't we start this by picking a day, say January 10, 2010 as
> a day of General Strike. Everyone stays home from work. This is a
> message to Wall Street and Washington that we are not going to take
> it any more. Until something is done with the thieving on Wall Street
> and in Washington every 10th of the month (9th or 11th, depending
> on a weekend) will be a General Strike Day. Call in sick and send
> a message to our 'rulers'. If one day a month General Strike doesn't
> work, we can make a more powerful statement.
other than intentional inaccuracies noted earlier, you can add:
*ICE crude futures are cash settled using the NYMEX settlement price
*ICE europe is regulated by the FSA in the UK
*FSA UK provides loads of audit trail data to the CFTC.
read here: www.cftc.gov/ucm/group.../@lrlettergeneral/docu...
Commodity dealers are hard sucking parasites and their effect on the cost of home heating oil and gas (and electricity) could be fatal to many this winter and/or increasingly very soon.
Community buying/producer cooperatives direct trading should replace the existing explotattive and parasitic economic relationships for fossil fuels, agricultural, products, and other "commodities". Citizens' Energy Cooperative which buys its home heating oil from Venezuela may be a good, though small and isolated, example of how an alternative economic system could be structured.
It is my considered opinion that we are in an era of post-peak oil. Oil is a stock resource, therefore the long term scarcity justifies high prices. Also, the demand side management and the environmental costs (including climate change) would justify much higher taxes (at least on gasoline) and caps on its use.
We must make the commitment of reducing automobile use by 80% in the next 20 to 40 years, by rebuilding neighborhoods/villages and reallocating goods and services to those neighborhoods/villages so that almost all can get what they need and reasonably want within walking distance of their homes, and so that a maximum amount of people can work at home and/or within walking distance of their homes.
Such would be a major boom to the building trades and with the proper education and training rectify the terrible structural unemployment situation that now exists in the United States.
ROTHSCHILDS
2) Too few contracts equals a market prime for manipulation; the large number of contracts sited point to a more efficient market. I shudder at the volitility and manipulation potential if the number of contracts could only equal the physical limit.
Anyone really interested in knowing why we are still sending billions of dollars overseas to countries that are not our friends should check out this web site.
www.opensecrets.org/
NG is abundant and very clean, support this plan!
here is more ammo from Morgan Stanley itself saying commodities rally is a bubble. here is a post by Ruchir Sharma who works with Morgan Stanley on Why the oil is disconnected with reality. In five years the average trading volumes in energy futures is 15x the worlds average demand. That was just 4-5x times 5 years ago. Here are the posts
Recovery? Excess liquidity reflating commodity prices
economictimes.indiatim...
Oil and the seven myths
economictimes.indiatim...
Let the Middle East speak :
www.arabianbusiness.co...
It's called providing liquidity!
NEVER engage in a market that is simply one buyer and one seller! Actually that's not even a market.
Where do people come up with this Starbucks fueled (or Tequila maybe) populist delusion to explain the financial markets?
I propose this author gets a permanent ban from posting on SA.
Read more about this at my blog: dhfken-lifeinsuranceco...
Going to war to secure oil is certainly worthwhile when other government arms are manipulating the price of what you are fighting for.
It seems however Obama is looking to take on these cheating bankers/traders. He is also going to take on the private health care companies making money out of other people's misery. Breaking up large banks. Could we be actually seeing government taking back power from the corporate sector. If Obama pulls this off, he will go down as the best USA president in modern times.
I salute you Obama...
Doesn't anyone think this is how the flash trades work?... day in and day out I watch these algo's front run my orders and watch the tape get filled with 100 lot buys and sales. Do you really think those 100 lots are not being traded between themselves just like oil. Incredible how GS is going to destroy capitalism as we know it, and everyone just bends over.
Here is a wiki article you should read as to what the "cost" of extraction of oil from Canadian tar sands "should be" en.wikipedia.org/wiki/...
TO QUOTE FROM THE ARTICLE "This does not include the cost of upgrading the crude bitumen to synthetic crude oil, which makes the final costs C$36 to C$40 per barrel for a new mining operation."
Whether the wiki article is factual or not ... the C$36 cost assumes natural gas supplies are abundant in Alberta because the tar sand has to be "heated" to get the oil out of the sand. If natural gas prices triple the cost to turn oil sand into oil goes up by a significant amount as well.
So let me repeat a concept which you are having a problem with :
The tar sands ARE NOT LOCATED WITHIN THE CONFINES OF THE UNITED STATES. Canadians own the tar sands ... not the U.S. As the Canadians continue to export more commodities to the U.S. than the U.S. exports tech gadgets or polo sweat shirts to the Canadians ... the Canadian loonie will continue to increase in value relative to the U.S. dollar ... which will make their tar made oil even more expensive in terms of U.S. dollars.
And if you still don't "get it." Let me repeat in terms you might understand : A junkie hooked on reefer has been a steady customer of Mr. Pot Dealer for twenty plus years. But the state of Californicate decides pot is indeed illegal after all and sends Mr. Pot Dealer to jail. So the junkie has to find a new dealer because the junkie is never going to give up his pot ... no matter what. The new dealer doesn't live in Californicate ... the dealer lives in SwissCheeseLand. The SwissCheese currency is naturally called the "cheesie," and when junkie tells all his pals he's found a new pusher in SwissCheeseLand, they all line up hoping to pay the same price as the dealer down the street in Californicate used to charge. But Mr. Swiss tells them business costs are expensive as the police have to paid off, of course. And such costs are expensive, as the bosses in SwissCheeseLand can choose to pay off the police with whatever type of cheese they choose to make ... and the police force in CALIFORNICATE can't do a damn thing about it when Mr. Big Cheese tells the junkies he's gonna triple the price because that's what he feels like he should do.
On Nov 11 01:53 PM Shaftsinker wrote:
> Fantastic article.
>
> ryanclarke you're buying into the exact hype the author is talking
> about. I work in the industry, and the oil in the oilsands of Canada
> (2nd largest oil reserves in the world) can be extracted at a cost
> of $20-$30/barrel. That's paying Canadian taxes and employing Canadian
> workers.
> Don't you dare tell me oil being extracted in the Middle East at
> a cost of $2/barrel is the reason why oil shot up to $150/barrel.
>
>
> Secondly, did all of his points go over your head? He's talking about
> trades that dramatically articially increased the demand for a product.
> What you're doing is sitting there saying it's alright because there's
> no connection between demand and the price of oil.
>
> You're a classic example of why we let this go on. The blatantly
> ignorant and factually devoid peak oil culture has penetrated the
> mainstream, and consequently when oil was at $150 you and peopel
> like you were saying "I knew this was going to happen" as opposed
> to "What the ****!"
When the price of oil goes up or down it creates a cascading effect which impacts the higher-cost producers. In otherwords, there is no free lunch. Just looking at the global capacity doesn't tell you jack about whether it is actually cost effective to utilize that entire capacity.
The real winners are not the investment houses but the oil and gas producers themselves, because they can sell those future contracts against resources that they can just leave in the ground until the contract date comes up. In otherwords, futures markets represent the ultimate form of resource storage (leaving it in the ground), and the ability for producers to utilize that futures market is based on the transport volumes they can achieve for the commodity in question.
The type of speculation we see by investment houses tends to be counteracted by above-ground inventory which has its limits. The investment houses and speculators are not lining up inventory but buyers of the actual commodity have to. Once the inventory becomes full (as it is becoming today), speculative bubbles tend to collapse.
But if you are looking for prices to drop back to $35 you are in for a rude awakening. I really, really doubt prices will drop below $50 and frankly as long as the dollar is as weak as it is verses other world currencies commodities prices are likely to remain high and get higher, even without taking speculation into account.
-Matt
The difference is there is no tax to pay when people do not have an income. You only pay a tax when you have income. So in that sense the people are not cornered.
But in the case of the credit card industry. They squeeze people hardest when they are hardest hit. The next day after you lose your job, they bump up your credit card interest rate to 30%+ and tell you to immediately pay a larger monthly bill. What do you think will happen when people are cornered? They revolt!
People are not revolting against the federal government because they have not been cornered yet. Revolution happens only when people are absolutely cornered and have no other choice. That's the nature how things work.
Until the people wake up, nothing is going to change. It takes a much bigger shock and pain to wake the American people up.
On Nov 12 09:56 AM bobbobwhite wrote:
> My main concern at this stage in the disintegration of the American
> way of life is why tens of millions of our citizens have not joined
> together in a mass tax revolt. If 50 million people stopped paying
> taxes, what could the gov't do but capitulate?
>
> Fear and lack of courage is what soft living causes, every single
> time in history......unorganized and cowardly masses so afraid of
> losing their present quality of life, even as that same quality of
> life erodes before their very eyes and they perpetually do nothing
> of significance to prevent it. Pathetic.
Perhaps better send the link to Michael Moore than the Representatives of the People. Or better yet, all the under 30, or even better; 20 year olds you know.
On Nov 12 01:15 PM singularityjumper wrote:
> WTF?
>
> It's called providing liquidity!
>
> NEVER engage in a market that is simply one buyer and one seller!
> Actually that's not even a market.
>
> Where do people come up with this Starbucks fueled (or Tequila maybe)
> populist delusion to explain the financial markets?
>
> I propose this author gets a permanent ban from posting on SA.
People said it didn't matter
When insane McCarthyite nonsense is taken seriously and given airtime...
People said it didn't matter
When the Middle East gets incinerated in a nuclear armageddon...
People said it d--------------------...
And I do mean fantasies - not facts...for instance, spare OPEC capacity is located in one country - Saudi Arabia only, and their spare capacity is at most 2 million barrels and that's if you believe their numbers.
Hey Philip, if you interested in manipulations that occur every day involving Goldman and the boyz and involving tens of trillions of dollars over the years, look no further than the US stock market! The commodities markets are no more than a 'hobby' for them.
Assuming a common rule is reached between biggest oil consumption countries for regulation of ICE or any other similar body can restore world economy into a more rational shape?.
Regards
China sold 1 million autos in the last report.
China is growing 8.5% "official rate"
China is buying whatever they can in the commodities market and commodity investments to grab as much as they can NOW.
Many countries in South America and Europe ARE GROWING RIGHT NOW, Peru, Brazil Chile, Germany, France, Denmark, New Guinea, Australia....etc.
Having barges with oil means perhaps one day of worldwide consumption
Iraq is increasing volume..Just to compensate the loss of production of Mexico, Norway and England.....Remember that news always reports the new discoveries very seldom the shutting down productions.
Americentric is not working anymore and that is specially true with oil.
Regards.
On Nov 12 09:59 AM jbde wrote:
> Don't get me started on GS [so I will not]
>
> The facts are:
> There is plenty of oil production now
> Iraq is about to come online in a big way with oilfield upgrades
>
> There is record oil in storage
> There is oil being 'parked' in barges
>
> The results will be:
> Price will correct when the commodity bubble bursts
> After dropping into the 20's prices will recover to $50-60
> All production costs [except oil sands] will be covered by this range
>
> Oil producers will make a profit but cannot get price back up
> [with margins cut, there will be quota cheating]
>
> Why:
> We are enterring a period of rampant defalation
> Every commodity, finished good and trinket will be sold for cash
Is it possible that GS is the "point man" for a cartel of big oil producers that are universally agreeing, behind closed doors, to withhold production / selling in a certain range of prices? That is possible. But in this case it is really "the cartel" that is the culprit of higher prices ....not GS. They would be just a pawn in the grand scheme of things.
On the other hand, as was mentioned above, commodity speculating is a zero sum game, and a player that is capable of intelligently "painting the tape" is surely at an advantage over another who doesn't have the resources to participate this way. Since ALGO trading is a major component of trading volumes, and computers are generally reacting to tape related info, it stands to reason that some of these computers can be duped if you present with the right "tape related" picture.
It is also worth noting that crude trading doesn't exist in a vacuum. There are many correlated instruments (other commods, the shares of oil producing and drilling companies etc.) that also could be influenced by "painting the tape" and artificially manipulating prices.
To summarize, I wouldn't bet against the fact that GS has a hand in controlling oil prices on a short-term basis, but the big loser is not "the American consumer," rather it is the speculators who are trying to match wits with GS on an unfair playing field.
That was the other part of this discussion that I wanted to address.
You did so, quite eloquently.
Thank you.
In Peace, Friendship, Community, Cooperation, and Solidarity,
Mike Morin
Eugene, OR, USA
On Nov 11 01:32 PM ryanclarke wrote:
> Sir, while I agree 100% with your assertion oil prices are controlled
> ... or manipulated ... on a short term basis by both big oil and
> big banks ... I DISAGREE 100% with your assertion that there is no
> shortage of oil. I'll go as far to say only someone who has absolutely
> no understanding of world economics or history would say ... "there
> is no shortage of oil." There is a shortage of oil in the U.S. for
> a very simple reason. The resource has been "depleted" within U.S.
> boundaries and even if a huge NEW oil field was found underneath
> Oklahoma ... cities would have to be destroyed in the process to
> "dig up the oil." The fact is the "easy oil to extract" which is
> "easy to make into gasoline" is MOSTLY GONE. By "easy oil to extract"
> I mean oil which is a few hundred feet ... at the most ... under
> the ground as well as under a great deal of pressure so that it flows
> to the surface with little effort. Such oil is LIGHT and pours with
> ease unlike the gooey syrup the Saudis are currently attempting to
> extract from beneath the desert within the confines of their country.
> Such HEAVY oil is extremely expensive to extract ... which is why
> the LIGHT oil in Saudi land was extracted first. The same goes with
> the heavy black sludge Chavez owns ... most big oil players have
> given up on Chavez oil as an "economical" choice of extraction. The
> fact is what LIGHT oil is left to be extracted is 10,000 feet under
> the sea ... and if you've ever tried to work on an oil rig in the
> middle of the Gulf of Mexico in the middle of a hurricane you might
> understand why extraction costs would be EXPENSIVE. As the U.S. does
> not currently own the land the Saudis do, nor does the U.S. own the
> sea the Brazilians do, nor does the U.S. own the land the Russians
> do ... which is where what remains of the LARGE LIGHT OIL fields
> which have not been depleted ... those countries can charge whatever
> they like for the product you need in order to drive in a car to
> get a sandwich at the 7-11 when you are hungry. In summary, if you
> don't like the price of oil ... perhaps you should move to Iraq and
> help them get it out of the ground ... or perhaps you should tell
> the U.S. tech companies to double or triple the price of computing
> equipment sent to Russia, Saudi Arabia, etc. to make up for the increase
> in oil EXTRACTION costs.
ICE Discussion (Not Nymex or domestic issues below)
I swear I will pull out my hair if anyone else compares the issue of speculators making money as a zero sum game. A zero-sum game implies that only the two parties you discuss in a typical transaction affect one another, but this is not how it works.
Round-Trip selling makes BOTH SIDES money. The original person selling it sold an item they ACTUALLY possess for X. The buyer sold it back to them for X+Y.
The buyer made money by selling it for more than they paid. The Seller stayed even in THIS ONE TRANSACTION by the value of what they possess RISING to X+Y. (even if it didn't raise that much, it WILL by other sellers transactions)
Some OTHER seller will then do the same thing and change the value of X+Y to X+Y+Z. And so it continues. The Buyers all make money and that is easy to see, but the sellers make money by each of them creating a transaction that makes the value of everyone's goods rise!
It is the value of the goods in possession rising that is the insidious part!! Even if the value doesn;t rise to X+Y when I buy it back, if enough sellers do it eventually it will ALWAYS be more.
THIS IS SPECULATION AND FRAUD. THIS IS NOT A ZERO SUM GAME.
It is NOT a zero sum game because there are multiple instances by multiple participants. A single transaction is not enough to determine the value of the combined transactions!
Damn this is so easy to figure out. Stop making it difficult. EVERYONE is making more money EXCEPT the consumer and a lot of the workers.
And your government can do NOTHING about it. They are literally PAID to make it continue and both Democrats and Republicans support it; regardless of what they say.
You want to do something about it, it will take gunpowder not words or ink. The rich don't fear the poor, they only fear violence and incarceration. And from behind their walls, they barely fear those things.
They know that there will not be a revolution strong enough to overcome this. Give up. Eventually we will be their slaves again. If you don't consider yourself one now.
You make an interesting proposition, but I think there are a few flaws with your reasoning. First, individual speculators CAN make profits on commodity futures. For example, when oil prices were very low they could have gone long a long-term futures contract and sold it when the price of oil advanced dramatically. When the price of oil was very high ($130) they could have shorted the long-term futures contract and then closed their position after oil had dropped to $50/ barrel. Yes, they would be taking their profit from other speculators, but so what? They are still making a profit. They do NOT need to continually roll their positions or always be invested in a single commodity; jusy buy low and close the contract when it is high.
Trying to take physical delivery and storage of most of the hard assets is insane. Furthermore, have you ever actually been able to SELL your telerium? Why don't you try it sometime? I've got bad news for you. Most producers who need a commodity only buy it from certain suppliers OR they buy futures contracts and take actual delivery when they need it. Intel will NOT be buying telerium in small quantities from an individual investor like you, unless you offer it to them at a big discount to the market price! Why don't you actually try to sell your telerium hoarde to Intel sometime? You will not be able to. They will laugh in your face. So all your telerium profits are imaginary since you can't actually sell the stuff to anybody and you are not a computer chip manufacturer yourself. You wasted your money on a bunch of junk that you can never sell!!!
On Nov 11 02:20 PM Mark Anthony wrote:
> Philips:
>
> I disagree with most of what you say. Yes there is speculation and
> deliberate manipulation in the commodities futures market. But NO,
> there is no scam here. It's part of market volatility as a result
> of free market principles at work. Some speculators make money but
> there are also some speculators lose money at the same time.
>
> Peak oil is real. Oil price is going to go much much higher. If you
> think oil price has been bumped up artificially and it is going to
> crash down, well, you are WELCOME to speculate the opposite way and
> enter a short position against the oil bull speculators. You might
> even make money if you speculate right on the bearish side.
>
> Both you and I agree with one thing, the speculators in the commodities
> futures market never actually take delivery so there is never actual
> physical demand.
>
> But exactly because no physical commodities are involved, speculators
> have NOT looted the consumers of physical commodities, they have
> merely looted each other's pocket. It's either bull speculators take
> money out of bear speculator's pocket, or vise versa. It's a gamble
> between two groups of speculators, One group write future contracts
> they they know they could never deliver the physical stuff, another
> group purchase future contracts that they know they will never ask
> for delivery of the nasty substances. It's a zero sum-gamble and
> fist fight between speculators and speculators.
>
> Let me put this way. If I today pay $6 a gallon gasoline versus $3.
> As a consumer I paid extra. But I bought the physical thing. My money
> did NOT pay into Goldman Saches's pocket, as they did not sell gasoline
> to me. My money is paid to the producers who produced and supplied
> that gallon of gasoline to me.
>
> The only time I paid money to the Wall Street, is when they actually
> HAVE interacted with the physical commodities. If Goldman Saches
> has hired some oil tankers to stockpile oil at $30 and then sell
> them at $80. I pay the price for $80 oil and the original oil producer
> get paid only $30, and Goldman Saches, as a middle man, get pockets
> the difference.
>
> If they have not hires a oil tankers. Then the oil transaction is
> directly between the oil producers and me, and gain and loss is between
> me the consumer and the producers, not a penny of that money enters
> Goldman Saches' pocket. If they pocke some money, it's because they
> bet bullish on the paper futures market, and you, Philips Davis,
> betted bearish and you lose your betting money to Goldman Saches.
>
>
> Please read here why the only sensible way of investing (versus gambling)
> in commodities, is to physically HOLD the stuff:
> seekingalpha.com/autho...
>
> If you don't hold it, you don't have it.
>
> When lots of money chases a narrow market of commodities, the end
> result is extreme volatility. But unless physical possession is taken,
> it does not affect physical demand and does not affect long term
> prices.
>
> For example you can "invest" a billion dollars or a trillion dollars
> in the global palladium market. But there are only less than a million
> ounces available for investors to buy. Only those who bought the
> physical ounces will rip long term profit at the end.
> seekingalpha.com/autho...
Thinking that the government will spend our way out of this recession is the equivalent of thinking that a drunk can drink his way out of a bad habit.
If you think oil (priced in USD) is expensive now....just wait.
There are alternatives to oil, and if the cost of oil is too high, then anyone is welcome to use solar energy instead. Oil really is a limited resource, and the price will go up regardless of manipulation.
Even if higher prices are the result of manipulation and not the evaporation of the excess oil supply (see chart near end of actual article), this manipulation only works if we keep buying gasoline and other oil byproducts at high rates. O/w the volume of sales go down and the producers won't be happy.
If we worked to reduce our gallons of gasoline consumed and developed functional alternatives (including nat. gas powered vehicles), this wouldn't happen. We don't have the capability to drill enough of our own oil - off-shore and ANWR both will add about 3% of our needs a decade after being green-lighted, hardly an end-all solution. Oil shale won't be productive as it has an EROEI of about 1:1 (same as corn-based ethanol). Hydrogen fuel cells are still way too expensive, but all other solutions need to be pushed thru, for our national security. (If I was president, this would include removing large SUVs from people commuting to desk jobs).
It will take a decade or more for real change to occur, and by then we'll really be in peak oil, so it's best for our economy to get used to high prices now.
Clearly you do not understand commodities investment and you do not even understand the comments I posted previously.
It is not insane to labor and sweat to take physical delivery and store the actual commodities. I bought tellurium from ASARCO. I am one of the lucky one who could buy, before that opportunity is shut. I am not going to sell to Intel or any one, until the industrial shortage grow to the extreme that a couple dozen industrial users fly over and line up at my front door to beg me for that few hundred kilograms of tellurium. The whole point is if an industrial commodity run into severe shortage, you really can NOT expect to buy from regular suppliers, nor can you buy paper contract and expect it to be delivered. You can write as many paper contracts as you have paper, but the physical commodity is limited.
It's like the music chair game. Every one dancing around assuming there will be that one chair belong to himself when the music stops. Every one laughs at me who sit there refuse to dance. But at the end of day I am the one knowing I have a guaranteed chair, having sit there the whole time and never moved my butt.
Speculators who play with paper merely pocketed money from each other's pockets. It's zero sum. Was Goldman Saches and other big Wall Street players stupid when they spend money and actually hired giant oil tanks to store the physical oil, when oil was at $30 a barrel? Wouldn't it be easier they just punch a few computer buttons and buy some futures contracts? Why did they bother with all the physical hassle? Because that is the only way you can actually make some money.
I keep hearing radio ads how you can make money opening up an internet store. You do not need to handle the physical goods, you don't need to manage your web site or interact with customers. You don't need to do anything. You just receive a big check every month. It's get rich quick without any labor. A lot of people actually believe that. You are probably one of them.
Again, hoarding the real stuff is the only way to profit from a commodities boom. I have learned some lesson from UNG:
seekingalpha.com/autho...
On Nov 12 06:12 PM Stonebridge wrote:
> Mark Anthony :
>
> You make an interesting proposition, but I think there are a few
> flaws with your reasoning. First, individual speculators CAN make
> profits on commodity futures. For example, when oil prices were very
> low they could have gone long a long-term futures contract and sold
> it when the price of oil advanced dramatically. When the price of
> oil was very high ($130) they could have shorted the long-term futures
> contract and then closed their position after oil had dropped to
> $50/ barrel. Yes, they would be taking their profit from other speculators,
> but so what? They are still making a profit. They do NOT need to
> continually roll their positions or always be invested in a single
> commodity; jusy buy low and close the contract when it is high.
>
>
> Trying to take physical delivery and storage of most of the hard
> assets is insane. Furthermore, have you ever actually been able to
> SELL your telerium? Why don't you try it sometime? I've got bad news
> for you. Most producers who need a commodity only buy it from certain
> suppliers OR they buy futures contracts and take actual delivery
> when they need it. Intel will NOT be buying telerium in small quantities
> from an individual investor like you, unless you offer it to them
> at a big discount to the market price! Why don't you actually try
> to sell your telerium hoarde to Intel sometime? You will not be able
> to. They will laugh in your face. So all your telerium profits are
> imaginary since you can't actually sell the stuff to anybody and
> you are not a computer chip manufacturer yourself. You wasted your
> money on a bunch of junk that you can never sell!!!
I like the way you think bro.
The US consumes/consumed 20 million total barrels of oil per day. The US highway transport system consumed 10 million of that 20 million every day. So, 10 million barrels went to market use other than cars, trucks, SUVs, etc.
But the US only produced 5.1 million barrels per day. That means the US needed to import about 15 million barrels every day.
All things being equal, if all roadway driving was outlawed, all highways vacated, the US would eliminate half its oil consumption.
But since the US would still be consuming 10 million barrels per day, while only producing 5.1, it'd still have to import half its daily oil needs.
I'm all in favor of drilling off the coasts (why should everyone else bail out California when they have Santa Barbra's field offshore as a source of revenue Californians refuse to utilize?) and in places like ANWAR. But if anyone believe these source will have much effect on US imports and meeting future consumption needs I believe they don't understand how serious the energy crisis actually is.
On Nov 12 10:41 AM oilproducer wrote:
> According to the IEA, at a decline rate of 6.7% annually the world
> needs bring online the equivalent of 4 new Saudi Arabias by 2030
> just to keep production at current capacity. That's a new Saudi Arabia
> every 5 years. To offset this decline rate and meet expected increasing
> demands from developing counties in additon to OECD countries 6 new
> Saudi Arabian equivalents must come on line by 2030. That's a new
> Saudi Arabian equivalent every 3.5 years. Source to IEA World Energy
> Outlook 2008 report: oildepletiondebate.blo...
>
>
> The world consumes between 84 & 85 million barrels every day
> (86+ before the recession). So, since everyone knows what a 55 gallon
> steel drum looks like....
>
> Visualize 85 million barrels of oil being consumed every day by converting
> barrel volumes into 55 gallon steel drums:
> * 42 gallons equals one oil barrel
> * A 55 gallon steel drum is 3 feet tall by 22 inches wide
> * A mile is 5,280 feet
> * The circumference of the earth is 24,901 miles
> * Speed of sound 768 mph
>
> (85,000,000bbl x 42gal) / 55gal = 64,909,090 fifty-five gallon steel
> drums being consumed every day
>
> Lay those steel drums end to end to make a pipeline:
> (64,9090,090 x 3ft) / 5280ft = a 36,880 mile long pipeline
>
> 36,880 miles / 24,901miles = a steel-drum pipeline of oil being
> consumed every day stretching 1 1/2 times around the earth.
>
> (36,880 / 24hr) / 768mph = Mach 2 or twice the speed of sound the
> oil would need to flow to replace the volume of oil in this pipeline
> every 24 hours.
>
> (36,880 x 365days) / 24,901miles = 540, or the times you would encircle
> the earth each year with 55 gallon steel drums.
Interesting. So what happens if I buy a huge amount of front month crude contracts (greater than the capacity of 42m at Cushing that you suggest) and DEMAND delivery on the stated date as per the specifications of the contract?
Thanks,
The Clock
On Nov 12 06:01 PM ilene wrote:
> List of articles in which Phil and others, such as JD at Peak Oil
> Debunked, discuss how the oil futures OTC markets can be used to
> manipulate the price of oil.
>
> LINKS having problems: Go here for all the active links to the following
> list of articles:
>
> philsbackupsite.wordpr.../
>
>
> Oil’s Slick Moves in Washington
>
> USO Oil Fund – All of the Drops, Only Some of the Gains
>
> So You Want to Be an Oil Speculator?
>
> Oil Manipulations Exposed
>
> FUTURES PRICES DETERMINE PHYSICAL OIL PRICES
>
> The After-Hours Oil Scam
>
> SPECULATION FIGHT: JUST WARMING UP
>
> Attack on Prosperity and How Speculators Are Causing the Cost of
> Living to Skyrocket – www.spiegel.de/interna...
>
>
> The Other Crime of the Century: 2008’s Short Squeeze in Oil
>
> Speculators and Oil
>
> Future Prices: www.philstockworld.com.../
>
>
> See also Michael Master’s testimony before the Committee on Homeland
> Security and Governmental Affairs hsgac.senate.gov/publi...
>
>
> This post is from May of 2008. Details on the manipulation works
> included.
>
> Oil Manipulations Exposed
> philsbackupsite.wordpr.../
>
>
> Excerpt from philsbackupsite.wordpr.../
>
>
> Many traders have moved to the unregulated over-the-counter exchanges
> that do not require companies like ExxonMobil or Goldman Sachs &
> Co. to disclose information about trades. “The lack of information
> on prices and large positions in OTC markets makes it difficult in
> many instances, if not impossible in practice, to determine whether
> traders have manipulated crude oil price,” said Tyson Slocum, research
> director at Public Citizen.
>
> EXCUSE THE MESSY ARTICLE BUT I FIGURED IF ANY OF YOU ARE BORED YOU
> MAY WANT TO COMMENT ON MY ARTICLE IN PROGRESS – ANY SUPPORTING LINKS
> WOULD BE GREAT. Have a good day, Phil
>
> I don’t know a good site for tracking NYMEX contract volume from
> open to close but here is the flaw in A’s logic (and User 198.. is
> close to the truth of it) – There is currently an “open interest”
> on the NYMEX for 378,974 contracts, representing 1,000 barrels each,
> that is the “demand” for July.
>
> At the peak of June trading there were close to 450,000 open contracts
> but the NYMEX allows traders to “roll” open contracts to longer months
> WITHOUT PENALTY and by the close of the June contracts, less than
> 30,000 contracts (30M barrels) were actually finalized for delivery.
> The other 420M barrels that were, at some point, contracted to be
> delivered in June, were “rolled” into July, August, Sept. contracts.
>
>
> You can track this nonsense here on a daily basis:
>
> futures.tradingcharts….
>
> Notice how there are 378,974 barrels “ordered” for July and 91,509
> for Aug and 94,177 for Sept and 49,177 for Oct. I will tell you for
> a fact, right now, that on June 24th (close of July trading) there
> will be LESS than 40,000 contracts accepted for delivery. All but
> 40M of the now 378M barrels that could be delivered to the US PER
> THE EXISTING CONTRACTS will be cancelled by these evil, manipulative
> bastards in oder to create an artificial shortage of oil each month
> while driving up the apparent demand for the next month by rolling
> the contracts forward.
>
> That’s how the scam works.
>
> Also, note that the “front month” contracts, the one they print on
> CNBC etc., rose $1.38 today, but longer contracts were negative.
> The Dec 2015 contracts that they couldn’t stop talking about and
> pointing to just 2 days ago when they crossed $140, have quickly
> and quietly dropped to $132.77 just 48 hours later.
>
> futures.tradingcharts….
>
> It’s very easy for the oil apologists to point to all sorts of abberant
> statistics to try to confuse you. China demand is a classic example
> – it’s up 40% in the past 5 years. What they don’t tell you is that
> that 40% was a rise from 5Mbd to 7Mbd but Chinese production went
> from 1.6Mbd to 4.1Mbd during the same amount of time causing them
> to import 500Kbd LESS than they did in 2003.
>
> No, it’s much better to scare you by saying 40% even though that
> 40% is about how much fuel we would save in America if we simply
> inflated our tires properly (10% x 20Mbd).
>
> Mark Twain said “There are three types of lies: Lies, damn lies and
> statistics.” Always be wary of people who throw them around without
> letting you take a look at the sources for yourself. It’s hard to
> pick up in the text on Seeking Alpha but I try very hard to have
> links to all my stats. When CNBC shows you the Dec 2015 contract
> one day to “prove a point” and then doesn’t show it again, you need
> to be suspicious.
>
> Just ponder that those 378,974 contracts were traded on the NYMEX
> today 425,099 times. That’s a churn rate of 115%! The net change
> in price was 1% and the net change in open interest was less than
> 1%. What would you think of a stock or option contract where the
> entire float turned over in one day? This is what goes on EVERY SINGLE
> DAY at the NYMEX.
>
> 425,099,000 barrels of oil were traded today, readily available to
> any trader who wants them delivered in July, with another 136,725,000
> August barrels traded and another 73,297,000 September delivery contracts
> written, yet in not one of those months will more than 42M barrels
> ever be delivered because that is the transfer capacity at Cushing,
> OK.
>
> So the ENTIRE thing is a joke. People are ordering barrels they don’t
> want with contracts written for a place that will never accept delivery
> AND, if anything actually happens to disrupt supply, there is a loophole
> called “Force Majeure” which allows the contracts to be cancelled
> by the shipper due to “supply distruptions” so they are not even
> buying insurance.
>
> The only thing they are insuring is that they will bleed you dry
> by forcing you to pay $130 a barrel for something that has a global
> average production cost of $42 a barrel. This is nothing less than
> the single largest con in human history and your “reliable sources”
> are a government that was elected thanks to hundreds of millions
> of Petrodollars of campaign contributions and a media that is owned
> by companies that either are energy companies or accept millions
> of dollars from energy companies.
I can tell you why Goldman took delivery of crude instead of "punching computer buttons" ...not because they wanted the crude, but rather because they had to in order to take advantage of the time-spread anomaly that was taking place.
I don't have the exact info in front of me (my database in presently inaccessible ...maybe someone can supply), but at the time that GS must have taken delivery, there was a HUGE spread between front month crude and three months to six months out (discount to the front).....probably the biggest % spread that I have seen in my 15 years of trading. Those who had the resources to buy, store, and deliver in the future were in a very unique position to make money in an arbitrage way (they could have locked in their profits with no risk by selling future months simultaneously). If they let their position ride by remaining naked long ...that was a second trade. But the physical delivery and carry part of the trade was an arb, and something that they would do at $80 per barrel, as well, if they could find another opportunity to buy the front month at a similar discount.
Clock
On Nov 12 06:59 PM Mark Anthony wrote:
> Stonebridge:
>
> Clearly you do not understand commodities investment and you do not
> even understand the comments I posted previously.
>
> It is not insane to labor and sweat to take physical delivery and
> store the actual commodities. I bought tellurium from ASARCO. I am
> one of the lucky one who could buy, before that opportunity is shut.
> I am not going to sell to Intel or any one, until the industrial
> shortage grow to the extreme that a couple dozen industrial users
> fly over and line up at my front door to beg me for that few hundred
> kilograms of tellurium. The whole point is if an industrial commodity
> run into severe shortage, you really can NOT expect to buy from regular
> suppliers, nor can you buy paper contract and expect it to be delivered.
> You can write as many paper contracts as you have paper, but the
> physical commodity is limited.
>
> It's like the music chair game. Every one dancing around assuming
> there will be that one chair belong to himself when the music stops.
> Every one laughs at me who sit there refuse to dance. But at the
> end of day I am the one knowing I have a guaranteed chair, having
> sit there the whole time and never moved my butt.
>
> Speculators who play with paper merely pocketed money from each other's
> pockets. It's zero sum. Was Goldman Saches and other big Wall Street
> players stupid when they spend money and actually hired giant oil
> tanks to store the physical oil, when oil was at $30 a barrel? Wouldn't
> it be easier they just punch a few computer buttons and buy some
> futures contracts? Why did they bother with all the physical hassle?
> Because that is the only way you can actually make some money.<br/>
>
> I keep hearing radio ads how you can make money opening up an internet
> store. You do not need to handle the physical goods, you don't need
> to manage your web site or interact with customers. You don't need
> to do anything. You just receive a big check every month. It's get
> rich quick without any labor. A lot of people actually believe that.
> You are probably one of them.
>
> Again, hoarding the real stuff is the only way to profit from a commodities
> boom. I have learned some lesson from UNG:
> seekingalpha.com/autho...
for most of the 20th Century. Now they have re-asserted.
So don't believe all you hear. Generally oil prices are affected by supply and demand at any given time. and China (new article out today about increasing oil consumption) is grabbing up all the oil areas it can find worldwide, because they see severe short term shortages looming. Because the U.S. is not exploring aggressively on shore here, we will be paying $5.00 a gallon for gasoline within several or so years from now and oil demand will rise far greater than most so called experts believe including the IEA. Much of the blame can be placed at the feet of the U.S. Government which discourages exploration in the United States. The problem is that everything requires energy and with the advancement of laptop computers, cell phones, and available communications, we will see an accelerated economic growth that will absorb every form of energy we can get our hands on, as new products and services are created worldwide. Once people have knowledge they will want a better life and a better life must have sufficient amounts of energy. You will not be able to control economic growth as people become more knowledgeable and able to communicate across national borders. While alternatives will play a role they cannot fill or even begin to fill the need for oil and natural gas, so be ready for much higher prices. Eventually in thirty to fifty years as deeper and more exploration takes place we will find enough oil to meet demand and probably have substantial excess capacity once prices rise high enough to justify exploration costs. Dr. Charles Laser Deerfield Beach, Florida
For some good reading on this subject check out this site.
Global Research.
www.globalresearch.ca/...
Also read more about it at this site:
losangeles.injuryboard...
Congress needs a total reform with no more then two terms just like the president. Lobbyist should be banned from the Halls of Congress forever.
They (Congress) are wrangling a Health Bill reform today, but you can be sure it does not come anyway near the health package they receive. If we as Americans could stop sending $25-35 Billion a month to oil producing countries that are not our friends, then we could rebuild out economy. The cost of fuel is choking our country and the world. And we are not in a recession, we at the doors of another Great Depression.
losangeles.injuryboard...
Shortly before departing for the August recess, the Senate confirmed Walter Lukken and Sharon Brown-Hruska as CFTC Commissioners. Lukken was an aide to Senator Richard Lugar (R-Ind.) on the Senate Agriculture Committee and helped draft the Commodity Futures Modernization Act of 2000. Brown-Hruska, an economist, worked in the CFTC’s division of economic analysis when Wendy Gramm was the agency’s chairwoman. Brown-Hruska currently teaches finance at George Mason University.
Let's take two hypothetical traders, A and B. Both have full visibility to all bid and ask prices. Let's say a particular time the last trade was 80 and all bid and ask orders are between 79 and 81. A and B can agree that one will put in a large order to buy stop at 81.50 and the other will put in a sell limit order for the same quantity at the same price. The trade will clear at 81.50. Neither order will execute below 81.50. Immediately after the trade clears, they can (instantaneously) place the same orders, but reversed. Another large trade clears at 81.50 and a new market level is established. Both A and B have exactly returned to their original positions, but the market price has moved 1.50. Other traders will be adjusting bid and ask orders to the new reality.
A and B can repeat this many times with small moves each time. If 100 round trip trades are executed with 1.50 moves each time, the market moves $150. Of course, there will be independent market movement and some of that will be down, so it might take 1000 ten cent manipulations to move the market $50 up if between manipulations the net slippage was $50.
A and B are not making the bulk of their money on the overall move. They are making it on each manipulation. Prior to each rigged round trip, they can accumulate current and futures contracts and/or options and then dump them after the manipulated move.
Is it trading genius that Goldman Sachs had only one losing trading day in the third quarter? I have just described one form of genius.
You don't have to buy everything to own the market. You can simply keep taking money from the other owners.
On Nov 12 06:15 PM markbuti wrote:
> FYI... there's an even bigger scam being carried out by the US government,
> Fed Rsrv & treasury.... the national debt is ballooning.....
> (around $12 trillion).... the dollar is being devalued.
>
> Thinking that the government will spend our way out of this recession
> is the equivalent of thinking that a drunk can drink his way out
> of a bad habit.
>
> If you think oil (priced in USD) is expensive now....just wait.
On Nov 12 01:15 AM ebworthen wrote:
> This will end in a World War, period.
On Nov 12 06:15 PM markbuti wrote:
> FYI... there's an even bigger scam being carried out by the US government,
> Fed Rsrv & treasury.... the national debt is ballooning.....
> (around $12 trillion).... the dollar is being devalued.
>
> Thinking that the government will spend our way out of this recession
> is the equivalent of thinking that a drunk can drink his way out
> of a bad habit.
>
> If you think oil (priced in USD) is expensive now....just wait.
My wife and I tried an experiment. She handed me a bottle of wine and I handed her $50. Then we reversed that and she got the wine and I got the cash. So far we have done this over 200 times and can see no increase in either the quantity of wine or the quantity of money. I suppose it is because we must have overlooked some secret factor. While we were doing this a neighbor dropped by. She could not believe that we were continuing to pay $50 for a bottle of Gallo that she had purchased one just like it for $8.99 at the liquor store last week. I suppose she is more capable of purchasing wine than VLO is when purchasing a boat load of crude oil to refine into gasoline.
I always wonder why these masters of Oil Prices ever let that price slip from $140 to $40. Maybe flash trading gave them profits on that too while the value of their inventories were declining. I look foreward to seeing the conspiracy theory on that.
On Nov 11 02:20 PM GigMaster wrote:
> I realy hate it when some ignoramus labels the kind of activity described
> in the article as capitalism. This is not capitalism. It is fraud
> and theft enabled by our corrupt politicians. The same way the sub-prime
> scam was fraud and theft.
> Capitalism and truly free markets have allowed more people to live
> in freedom and comfort than any other system ever previously devised.
> To condemn capitalism on the basis of these thefts is total ignorance
> that plays right into the politicians hands. They use your ignorance
> to grab even more power to "regulate" in favor of their friends.
>
> By definition, a falsley manipulated market is not a free market.
> WISE UP!!
On Nov 12 11:25 AM User 357490 wrote:
> Wow !!!
> I had the same Idea
What do you say about a General Strike Day. Everyone stays home from work, buys nothing, drives no where, enjoys their family...?
The mass needs to begin to rise up and be heard.
On Nov 12 11:57 PM John Lounsbury wrote:
> There have been commenters who felt that no two large traders could
> establish an artificially higher price in a public exchange. It can
> be done very easily and here is an example:
>
> Let's take two hypothetical traders, A and B. Both have full visibility
> to all bid and ask prices. Let's say a particular time the last trade
> was 80 and all bid and ask orders are between 79 and 81. A and B
> can agree that one will put in a large order to buy stop at 81.50
> and the other will put in a sell limit order for the same quantity
> at the same price. The trade will clear at 81.50. Neither order will
> execute below 81.50. Immediately after the trade clears, they can
> (instantaneously) place the same orders, but reversed. Another large
> trade clears at 81.50 and a new market level is established. Both
> A and B have exactly returned to their original positions, but the
> market price has moved 1.50. Other traders will be adjusting bid
> and ask orders to the new reality.
>
> A and B can repeat this many times with small moves each time. If
> 100 round trip trades are executed with 1.50 moves each time, the
> market moves $150. Of course, there will be independent market movement
> and some of that will be down, so it might take 1000 ten cent manipulations
> to move the market $50 up if between manipulations the net slippage
> was $50.
>
> A and B are not making the bulk of their money on the overall move.
> They are making it on each manipulation. Prior to each rigged round
> trip, they can accumulate current and futures contracts and/or options
> and then dump them after the manipulated move.
>
> Is it trading genius that Goldman Sachs had only one losing trading
> day in the third quarter? I have just described one form of genius.
>
>
> You don't have to buy everything to own the market. You can simply
> keep taking money from the other owners.
This is why I'm saving to buy a small ranch. I will sit on my front porch drinking my lemonade and enjoying the fresh air and listening to my transistor radio. Gas can cost whatever, income taxes can be whatever, the dollar can be worth whatever. I'll have my garden, a few head of cattle and a well. It won't matter to me if we're on the gold standard, oil standard, euro standard.
Just relaxing and enjoying the fresh air.........
oil fell from 140 to 40 when GS had other financial commitments to meet & liquidation of part of the portfolio of futures was required.
just as trees don;t grow to the sky, bubbles don't expand to occupy the entire volume of the solar system.
GS & their partners in crime ran their air compressors full blast (40/1 leverage) & made a biggg bubble.
in a game of musical chairs, when the music stops there is always some poor schmo who can't find a chair.
don't cry for GS, some other schmo got vaporized, not GS.
> jack
Obama was a total dark horse candidate who somehow captured the imagination of the nation - never mind the big money that was spent to get him to where he is today. He was outspending the Republican 3 to 1 in some states. Then I was honestly shocked to read that McCain had more small contributions than Obama. That seemed to be impossible given the story line in the press. Something like this sure would explain a lot. OK, it would explain everything. I guess I will step just a bit farther out on the conspiracy limb to comment that a wise, successful and very old stock market player I know believes that the fall crash was manipulated just a bit to hit before the election all but insuring a Democrat victory. I though he was nuts.
please check my comment score as a Seeking Alpha contributor, and you will see I don't participate this way often.
My congratulations on your journalistic instincts, and in particular I love the "Madoff Unit" notion.
It may be necessary to encourage the emotionally- and informationally-challe... travelers at Seeking Alpha, and you clearly have done that. But I am impressed that among all the chaff there are a few (and I have not read all 180 comments) that speak from personal depth of experience and motivation, rather than corporate posturing. Their comments bring a broader reality to the oil pricing picture.
What everyone should recognize is that front-month trading in any of the commodity casinos has very little connection to the ongoing consumer costs of commodities except by coincidence, or by rare instances of Madoff-scale fraudulent market manipulation.
The Sumitomo copper case, and perhaps the 2007-8 Crude Oil bubble may be such instances. But there are considerable differences between copper and oil markets.
As a young, naieve Wall Street analyst in a personal interview with the treasurer of Kennecott Copper I once asked if they ever had any industry credit problems. The reply: "Peter, there are only 94 buyers of raw copper in the world. No, we never have any credit problems." Copper, even in Sumitomo"s 2003 time is a much smaller, easier game than Crude Oil.
The worldwide energy industry uses Comex WTI (and ICE Brent) to establish fair market pricing for volume transaction negotiations between producers and consumers of energy fuels. But not the front month, unless some emergency forces the use of the exchange's necessary discipline of delivery to aid other settlement means. As you point out, that capacity is extremely limited.
Industry practice is to use June and December contracts as pricing references in contractual negotiations. They tend to be driven by realistic continuing world supply and demand conditions, not transient financial engineering in markets of the moment.
We produce price range forecasts for Comex Crude contracts, based on what hedgers in those contracts are willing to pay to protect themselves against adverse price moves they believe could realistically happen.
Their daily forecasts over the past 2 1/2 years for the December 2009 contract clearly shows the industry's appraisal of the artificiality of the time. That contract, and all others, have spiderweb connections through arbitrage. Financial industry speculators were able to jack up prices, unrealistically in the energy industry's view. And as unrealistically depressed, viewed in the blowoff decline.
But for the time being some of that cost got passed on to consumers. Industry practice of relying on the markets carried everyone along, in both directions. That is perhaps not a bad thing, since the experience should damp future excesses.
Now the December 2009 contract is the front month and has lost its industry pricing role, passed instead to the June 2010 contract. The current June settlement price is high in its forecast range at present. Anyone interested in seeing these forecast histories may request free copies from Institutional-Insights...
Peter F. Way, CFA
Of course there are commodity speculations and those who can do their best manipulating the market, but it is the nature of what markets are. Same things (and much worse) happen with all other trades of virtual assets. What about carry trades, currencies manipulations, mortgage based securities, all kind of derivatives, etc, etc, etc.
On the other hand this article is full with unjustified proclamations.
For example, look at this: "There is NO shortage of oil. OPEC alone has 6-7 Million barrels a day of spare capacity..." Where did he get it from? In fact, when oil priced reached $105-$110/bbl EVERY oil producing countries tried to increase production. (That's because at this price level heavy oils, oil sands, etc. developments turn profitable, thus adding these to the proved reserves.) ALL of them failed. They could not increase the supply by even 2Mbbl. It took global crisis to crash oil prices not the increase in supply.
Today (at almost $80/bbl) it makes no economic sense to develop these resources. Companies involved sell their reserves to Exxon. Exxon proved reserves increase, but total proved reserves decrease drastically. This simply means that in long terms $80/bbl is unsustainable. We need oil prices that would support enough R&D to keep proved reserves at least flat, which is about $125/bbl in today dollars. And that's what it gonna be when (and if) we get out of the crisis. May be those who invest in oil futures are too optimistic about the economy, but that's pretty much all you can blame them for.
Some statements are laughable, like: "Before ICE, the average American family spent 7% of their income on food and fuel. Last year, that number topped 20%." Yea, sure, but "the average American family" spends more than 30% on housing, while housing is cheaper and easier to produce than either energy or food, and existing housing supply in America in practically unlimited.
The article is saturated with such manipulative arguments. "Maybe when they are charging you $80 a gallon for water..."
Nobody charges $80 per gallon of oil (or gas or whatever). It's $80 per Barrel. Lots of us pay $1 per a quart of bottled water (which is just some filtered water). How much is it per barrel? What about a can of liquid junk we keep buying? And try to buy a bottle of water inside any airport.
Again, look at this: "Search on the word "credit crisis" ".
Come on, "credit crisis" is not a WORD, it's a combination of words. Even more, when you search for it in quotes, you search for exact appearances of this phrase. No wonder you gonna get much less results than searching for a single word "oil".
All the examples above (and I have more of them) clearly show that the author is not interested in any objective arguments. His mission is to manipulate readers' minds. I have not enough information to judge his claims about manipulations of commodities markets, besides that most of his arguments are visibly incomplete. However, his common sense statements clearly allow no credibility to what he says.
On Nov 11 10:41 PM Dean M wrote:
> I wish oil would go to $1000/bbl so we could get rid of it once and
> for all in this country and let Ahmedinejad and Chavez drink it.
If the US opened up the north slope we would easily exceed the US peak from 40 years ago. That was caused by a change in US government policy to not drain the US first.
We have enough oil for 200 years, and anyone that thinks we will be powering our anti-gravity flying cars with oil is an idiot.
You must have overlooked the fact that at some point the values of whatever the positions were must have declined. They cannot both own it to create the hypothetical bubble and also profit when the value declines. How does that work, exactly?
On Nov 13 10:00 AM john s. gordon wrote:
> augus -
> oil fell from 140 to 40 when GS had other financial commitments to
> meet & liquidation of part of the portfolio of futures was required.
>
> just as trees don;t grow to the sky, bubbles don't expand to occupy
> the entire volume of the solar system.
> GS & their partners in crime ran their air compressors full blast
> (40/1 leverage) & made a biggg bubble.
> in a game of musical chairs, when the music stops there is always
> some poor schmo who can't find a chair.
> don't cry for GS, some other schmo got vaporized, not GS.
You need to find a neighbor that believes your $50 trades are real.
On Nov 13 12:44 AM Augustus wrote:
> Is this supposed to be serious? These firms trade volumes of oil
> back and forth at the same price each time and profit from it. Does
> it have anything to do with Flash Trading?
>
> My wife and I tried an experiment. She handed me a bottle of wine
> and I handed her $50. Then we reversed that and she got the wine
> and I got the cash. So far we have done this over 200 times and can
> see no increase in either the quantity of wine or the quantity of
> money. I suppose it is because we must have overlooked some secret
> factor. While we were doing this a neighbor dropped by. She could
> not believe that we were continuing to pay $50 for a bottle of Gallo
> that she had purchased one just like it for $8.99 at the liquor store
> last week. I suppose she is more capable of purchasing wine than
> VLO is when purchasing a boat load of crude oil to refine into gasoline.
>
>
> I always wonder why these masters of Oil Prices ever let that price
> slip from $140 to $40. Maybe flash trading gave them profits on that
> too while the value of their inventories were declining. I look foreward
> to seeing the conspiracy theory on that.
Despotism = 20 Years
Communism = 40 Years
Democracy = 200 Years
Democracy always becomes either Despotism or Communism after the 200 years. The reason the fatality sequence is much shorter for Despotism or Communism is because of the rate of theft of the people's wealth. The USA is Fascist and sliding into Communism which means the rate of theft will accelerate. How wishes to disagree with me on the rate of theft to the population over the last decade? Anybody whom wants to can come to my site, I love a great contrarian debate. But bring facts, not propaganda and prepare for me to smack you upside the head with logic and quantified data.
Also, why we are at it, offer a better government type and we will all be listening! Until then, please stop the propaganda comrade.
I recommend we evolve from Capitalism to Open Office government types which would increase the representation of the USA from 500 little comrades to 5,000 representatives we are supposed to have with a population of 300 M.
The Founding Fathers set the USA up for such to occur. Now with the Internet, the cost of buildings and centralized bureaucracy could go down to next to nothing. Politicians might enjoy being closer to home instead of hiding from angry constituents.
Check out Jake Towne's Open Office plank at TowneforCongress.com . He built his plank off of a spec I built two years ago. Either evolve or get crushed by the coming wave. Communism isn't the future buddy, it's the past.
On Nov 11 03:28 PM stockferret wrote:
> According to Adam Smith, in a free market each participant will try
> to maximize self-interest, and the interaction of market participants,
> leading to exchange of goods and services, enables each participant
> to be better of than when simply producing for himself/herself. He
> further said that in a free market, no regulation of any type would
> be needed to ensure that the mutually beneficial exchange of goods
> and services took place, since this "invisible hand" would guide
> market participants to trade in the most mutually beneficial manner.
>
>
> How is that working out for ya?
On Nov 11 04:23 PM john s. gordon wrote:
> after reading the above concerning secret round-trip trading in offshore
> exchanges to maximize revenue for those who control the futures markets,
> it is easy to see the potential for abuse if cap & trade (CO2)
> legislation ever becomes law. it will make the enron scam look like
> chump change.
Another example of the effects of speculators in the crude oil commodities market was the “ Rogue Trader” who with a 16 million barrel order of crude, pushed up the price of crude oil $4 in the blink of an eye. (that’s just twice the amount of oil Saudi Arabia’s daily production) So one can keep believing in the supply and demand theory, or take off the blinders.
This is possible but impossible to prove. Your inflammatory comments might have a solid base but your conclusions are ridiculous and obviously aimed at getting you page views from the masses who will agree because they can't think better
OK. Freedom means choice.
As things stand now, consumers have no choice. They have to use petroleum, or ride bikes.
If we mandate that all cars sold in the US must be diesel/natural gas or Flex Fuel/natural gas bi-fuel capable the government does not have to tell anyone what to do---it is only making consumer choice available.
Petroleum can still be used just as it always has. Or consumers can choose to use biofuels, or natural gas. They can drive on 100% petroleum, a mix of petroleum, biofuels and/or natural gas, or they can drive completely petroleum free with biofuels and natural gas.
What is wrong with having a choice? Freedom is choice. You can't have a free market without choice.
And if we have a truely free market with viable choices to run our vehicles on----there is very little possiblity to manipulate the market prices. Consumers would simply choose whichever is cheapest or suits their individual preferences. Some people would probably use petroleum no matter what, others would use a more environmentally friendly choice. Everyone can have what they want.
Brazilians have a choice.
Fiat Siena Tetrafuel can run on four fuel types
green.autoblog.com/200.../
Do you really think that it is ok to use leverage to manipulate supply in a commodity that has NOTHING to do with your business?
Do you know anything?
On Nov 11 02:44 PM Mark Anthony wrote:
> Philip:
>
> Further, on the issue of Wall Street bankers stockpiled 125M barrels
> of oil you think that skewed the global oil supply and demand. The
> opposite is true. They did not skew the true supply/demand, they
> help to restore the true supply/demand picture.
>
> How could you blame they for stockpiling 125M barrel of oil and seek
> profit from it. Sure no one wants that 125M at $30 a barrel. So they
> buy since no one else wants it, what's wrong with it? And later,
> the same oil that no one wants at $30, now some one wants to have
> at $80, so they sell, what is wrong with it? It's free market principle
> at work. Thanks to the 125M hoarding, the price of oil did not drop
> below $30, and because of availability of this 125M precious hoarded
> up, there is now extra supply so that oil has not raise to more than
> $80 yet.
>
> It's free market principle at work. Buy when no one wants it, and
> sell when every one wants it. That's how things work and how one
> can make money, LEGALLY. The world is an idiot that it does not want
> that 125M at $30, and then wanted to pay $80 a couple of month later.
> Some one has to make that money and restore some sanity.
Having said that, it would only be temporary as another clone of ICE would emerge.
johnathanvrozos.com
By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.
To see how your Representative is doing in relation to Oil and gas lobbyist in 2009, go to
www.opensecrets.org/in...
The current level of employment in the United States has now returned to the levels of June 2000. Enough said.
There are more apartments for rent today then in the last 20 years.
America is losing about 250,000 jobs a month.
A record 19 million U.S. homes stood empty at the end of 2008...
American families are putting school supplies on lay-way.
and Congress needs term limits.
The highest unemployment since 1986.
And diesel inventories are already at a 25-year high inventory level per last Wednesday's DOE report.
Refineries are running at a near all time operating low at 80 %.
It still costs refiner’s on average about 20 to 30 cents per gallon
Diesel fuel is a by-product from making gas, yes a waste product so why is that so expensive?
The dollar is down in value, around .19 cents today, we can not keep printing money.
Rebel attacks in Nigeria.
Unprecedented maintenance issues at the refineries.
Rough seas at the Mexican ports.
Fog at the Houston port.
Pipeline interruption’s ANYWHERE in the oil producing countries.
Problems getting the right summer mix in gasoline.
Problems getting the right winter mix in gasoline.
Instability in Iran.
Rogue Traders
Demand is running ahead of supply.
Hurricane season.
This list just keep growing and growing.
China’s growing car population and government backed stimulus economy.
India producing 50,000 cars a year, and using the lottery to give them out.
Hurricane Bill came close to off-shore platforms off the Canadian coast.
Hurricane Ida threatens gulf coast.
The Peak Oil Theory.
The dollar is down seems to be the only reason they have left for oil rising today.
What’s amusing to me is to see these forces play out in this article and the responses to it. Indeed, as oil is / can be replenished, then the only other way to attempt to grasp and control access to the divine is to tax the actual burning of the flame, via carbon credits. Personally, I find this gesture as a direct attack on the sovereignty of the individual, particularly the citizens of the US. We owe it to ourselves to resist any attempt made to subjugate this element of our freedom to any force, particularly an economic one without geographic constraints. These bankers without borders are a plague in need of divine eradication. imho
that makes perfect sence given all the guru's known to investing are also long oil and few were long oil in 2000.
$wtic hasnt been acting /charting in a normal fashion of late, i kept running across oil stocks to short,,, which didnt make any sense to me at the time,, so i just bought way out puts and 'forgot about it',,,,but now i do wonder if major players as noted in Mr. Davis' report here concerning ICE volume flow is now being unwound at the time of the year to do so with the most bidders possible. meaning GS or whoever may be OUT of the oil run up and ICE/CME are the benefactor either way because they only facilitate the transactions not hold as inventory the underlying products/commodites.
i am not a fan of GS,,,but Mr. Davis story had be thinking all day,,,,i took a gamble and bought GS near close, posted at 175.75 in real time on the net and i am long ICE,,,,,i will look for more puts in selected oil companies (i wont aim for xom because of the Ceo Tillerson honesty aspect)
my point to posting to you Mr Gould instead of Mr. Davis, is because if all of this comes to fruitation, you will be the sheeple with your conspiracy theory remark and Mr Davis will be more respected for his 'eyes wide open' thinking.
On Nov 11 07:56 PM Denis Gould wrote:
> I thought conspiracyplanet.com was blocked by our IT firewalls
On Nov 11 02:20 PM Mark Anthony wrote:
> Philips:
>
> I disagree with most of what you say. Yes there is speculation and
> deliberate manipulation in the commodities futures market. But NO,
> there is no scam here. It's part of market volatility as a result
> of free market principles at work. Some speculators make money but
> there are also some speculators lose money at the same time.
>
> Peak oil is real. Oil price is going to go much much higher. If you
> think oil price has been bumped up artificially and it is going to
> crash down, well, you are WELCOME to speculate the opposite way and
> enter a short position against the oil bull speculators. You might
> even make money if you speculate right on the bearish side.
>
> Both you and I agree with one thing, the speculators in the commodities
> futures market never actually take delivery so there is never actual
> physical demand.
>
> But exactly because no physical commodities are involved, speculators
> have NOT looted the consumers of physical commodities, they have
> merely looted each other's pocket. It's either bull speculators take
> money out of bear speculator's pocket, or vise versa. It's a gamble
> between two groups of speculators, One group write future contracts
> they they know they could never deliver the physical stuff, another
> group purchase future contracts that they know they will never ask
> for delivery of the nasty substances. It's a zero sum-gamble and
> fist fight between speculators and speculators.
>
> Let me put this way. If I today pay $6 a gallon gasoline versus $3.
> As a consumer I paid extra. But I bought the physical thing. My money
> did NOT pay into Goldman Saches's pocket, as they did not sell gasoline
> to me. My money is paid to the producers who produced and supplied
> that gallon of gasoline to me.
>
> The only time I paid money to the Wall Street, is when they actually
> HAVE interacted with the physical commodities. If Goldman Saches
> has hired some oil tankers to stockpile oil at $30 and then sell
> them at $80. I pay the price for $80 oil and the original oil producer
> get paid only $30, and Goldman Saches, as a middle man, get pockets
> the difference.
>
> If they have not hires a oil tankers. Then the oil transaction is
> directly between the oil producers and me, and gain and loss is between
> me the consumer and the producers, not a penny of that money enters
> Goldman Saches' pocket. If they pocke some money, it's because they
> bet bullish on the paper futures market, and you, Philips Davis,
> betted bearish and you lose your betting money to Goldman Saches.
>
>
> Please read here why the only sensible way of investing (versus gambling)
> in commodities, is to physically HOLD the stuff:
> seekingalpha.com/autho...
>
> If you don't hold it, you don't have it.
>
> When lots of money chases a narrow market of commodities, the end
> result is extreme volatility. But unless physical possession is taken,
> it does not affect physical demand and does not affect long term
> prices.
>
> For example you can "invest" a billion dollars or a trillion dollars
> in the global palladium market. But there are only less than a million
> ounces available for investors to buy. Only those who bought the
> physical ounces will rip long term profit at the end.
> seekingalpha.com/autho...
Great example. And by-the-way, this is probably one type of manipulation that GS, JPM, and the TPTB have been doing since continually ramping the markets since March/09.
By way of actual trading experiences, we can confirm that your example has actually happened to us. The details were as follows:
- happened to us somewhere back in about May/June/09
- had been tracking INTC for many days all day long. On the day we went to buy, INTC had been trending down all day. Bid/ask was at something like $15.73/$15.74 and had been selling off and trending down minute by minute. It was within the last hour of trading. We has a limit order to buy at $15.71 Magically, out of the blue, within the last 5 minutes or so a bid of $16.05 appeared and immediately ramped the share price up over $0.25 and then magically a bunch of bid/ask orders appeared over the last few minutes and drove the price up to about $16.25. We checked the news on INTC for days afterward and nothing ever showed up in the way of news or announcements to indicate a sudden reversal. was warranted. It was pretty clear than manipulation had occurred.
- Ask yourself, why would any legitimate buyer suddenly, in last few minutes of trading, initiate a buy order far in excess of the last ask price (without any breaking news)? Any legitimate buyer would simply initiate a market order and buy at the ask price. The only logical explanation was the TPTB intentionally used artifical bid prices to manipulate the price up.
- somewhat similar experience also happened on MGM stock we wanted to buy. Had been tracking MGM for many days as MGM was trading in those days in the $3-4 range and falling. We waited on the trade day, until the last 60 seconds before close. MGM was listed as bid ask of something like $3.15/3.14. We hit the market order button and the trade was filled at $3.30 with 30 seconds to go. 15 seconds later, just at close, MGM traded again at $3.03. Needless to say we were pretty annoyed. Actually called both our broker and the SEC to complain about the transaction. Again a pretty clear example of gross manipulation of trading transactions. But, at least we had the last laugh on that one as we subsequently sold all the MGM stock some months later at about $13/share.
When you combine several actual trading transactions with the dozens and dozens of "late day spikes" since March/09 in the key index averages (that have turned sell-offs into support and restoration of the rally) ..... there is absolutely zero doubt in our minds that market manipulation and artifical pricing backed by very large funding have been the primary forces behind a large part of the March-November sustained uptrend.
On Nov 12 11:57 PM John Lounsbury wrote:
> There have been commenters who felt that no two large traders could
> establish an artificially higher price in a public exchange. It can
> be done very easily and here is an example:
>
> Let's take two hypothetical traders, A and B. Both have full visibility
> to all bid and ask prices. Let's say a particular time the last trade
> was 80 and all bid and ask orders are between 79 and 81. A and B
> can agree that one will put in a large order to buy stop at 81.50
> and the other will put in a sell limit order for the same quantity
> at the same price. The trade will clear at 81.50. Neither order will
> execute below 81.50. Immediately after the trade clears, they can
> (instantaneously) place the same orders, but reversed. Another large
> trade clears at 81.50 and a new market level is established. Both
> A and B have exactly returned to their original positions, but the
> market price has moved 1.50. Other traders will be adjusting bid
> and ask orders to the new reality.
>
> A and B can repeat this many times with small moves each time. If
> 100 round trip trades are executed with 1.50 moves each time, the
> market moves $150. Of course, there will be independent market movement
> and some of that will be down, so it might take 1000 ten cent manipulations
> to move the market $50 up if between manipulations the net slippage
> was $50.
>
> A and B are not making the bulk of their money on the overall move.
> They are making it on each manipulation. Prior to each rigged round
> trip, they can accumulate current and futures contracts and/or options
> and then dump them after the manipulated move.
>
> Is it trading genius that Goldman Sachs had only one losing trading
> day in the third quarter? I have just described one form of genius.
>
>
> You don't have to buy everything to own the market. You can simply
> keep taking money from the other owners.
www.nytimes.com/2009/1...
The observable fact is that an under regulated market invites scams and is notoriously unstable. Haven't you noticed?
On Nov 11 03:28 PM stockferret wrote:
> According to Adam Smith, in a free market each participant will try
> to maximize self-interest, and the interaction of market participants,
> leading to exchange of goods and services, enables each participant
> to be better of than when simply producing for himself/herself. He
> further said that in a free market, no regulation of any type would
> be needed to ensure that the mutually beneficial exchange of goods
> and services took place, since this "invisible hand" would guide
> market participants to trade in the most mutually beneficial manner.
>
>
> How is that working out for ya?
" Recovery? Excess liquidity reflating commodity prices"
economictimes.indiatim...
On Nov 12 12:34 PM Djvu wrote:
> Hi Philip,
> here is more ammo from Morgan Stanley itself saying commodities rally
> is a bubble. here is a post by Ruchir Sharma who works with Morgan
> Stanley on Why the oil is disconnected with reality. In five years
> the average trading volumes in energy futures is 15x the worlds average
> demand. That was just 4-5x times 5 years ago. Here are the posts
>
> Recovery? Excess liquidity reflating commodity prices
> economictimes.indiatim...
>
> Oil and the seven myths
> economictimes.indiatim...
there have been some interesting points here some informative points here and of course some irrational points in this discussion
Every market in the world will probably at one time or another be mainpulated
The key is to let Mr Market SERVE YOU not guide you.
If you were rational enough to be long oil under 60 dollars and short it over 100 then you may have had some rough patches but long term you did fine
Senior Energy Advisor at MISI
Financial Sense interview
www.netcastdaily.com/b...
Dr Hirsch Power Point presentation referred to in the interiview
www.financialsense.com...
Dr. Hirsch biography
www.financialsense.com...
Senior Energy Advisor at MISI
Dr. Robert L. Hirsch is a Senior Energy Advisor at MISI and a consultant in energy, technology, and management. His primary experience is in research, development, and commercial applications. He has managed technology programs in oil and natural gas exploration and production, petroleum refining, synthetic fuels, fusion, fission, renewables, defense technologies, chemical analysis, and basic research.
Previous management positions include:
Senior Energy Program Advisor, SAIC (World oil production)
Senior Energy Analyst, RAND (Various energy studies)
Vice President of the Electric Power Research Institute (EPRI).
Vice President and Manager of Research and Technical Services for Atlantic Richfield Co. (Oil and gas exploration and production).
Founder and CEO of APTI, a roughly $50 million/year company now owned by BAE Systems. (Commercial & Defense Department technologies).
Manager of Exxon’s synthetic fuels research laboratory.
Manager of Petroleum Exploratory Research at Exxon.(Refining R & D).
Assistant Administrator of the U.S. Energy Research and Development Administration (ERDA) responsible for renewables, fusion, geothermal and basic research.(Presidential Appointment).
Director of fusion research at the U.S. Atomic Energy Commission and ERDA.
Hirsch has served as a consultant and on advisory committees for government and industry. He holds 14 patents and has over 50 publications in the energy field. He is past Chairman of the Board on Energy and Environmental Systems of the National Research Council, the operating arm of the National Academies, has served on a number of National Research Council committees, and is a National Associate of the National Academies. In recent years, he has focused on problems associated with the peaking of world conventional oil production and its mitigation.
> If we became more independent in production here in the US it would
> be far more difficult to manipulate...
You are assuming of course that there is a will to comply with lawfull / "morally" appropriate conduct which has not shown itself to be production currently and has itself evidently achieved "peak" status.
Mark Anthony wrote:
"But the bottom line is there is fundamental reasons that the commodities market attracted so many speculators. At the end of day, speculators who play with paper is merely gambling against each other. Only investors who hoard the PHYSICAL commodities, the quantity of which is limited, stands to gain in the long run."
I watch the price of gasoline move with the market. The paper players run the price up or down and we pay for it at the pump.
The price at the pump does not reflect supply & demand it is the result of the speculation. What am I missing?
"But this is not what is happening anymore. Now we have very deep pocketed speculators who keep their money in the futures market. They are no longer buying and selling deliveries of oil. They have 'securitized' the futures market. Now they buy and sell "contracts", not oil deliveries. So they push up the price of real future delivery contracts by raising demand, but they never push the price back down by unwinding those positions and increasing supply. They just roll over their contracts again and again, with GS and friends collecting fees on each transaction."
This situation exactly describes the natural gas market. According to your analysis, the price of natural gas, whose futures market is dominated by UNG, should be through the roof. But it's not.
On Nov 11 10:41 PM Dean M wrote:
> I wish oil would go to $1000/bbl so we could get rid of it once and
> for all in this country and let Ahmedinejad and Chavez drink it.
On Nov 11 03:47 PM Mark Anthony wrote:
> I guess to be fair, the consumers should also send a big Thank You
> note to Goldman Saches for knocking price down to as low as $30 per
> barrel, saved consumers quite a bit of money during that few brief
> months.
>
> No one thanks Wall Street speculators for pushing oil down to $30
> and save every one money. Now the prie is pushed to $80, I hear no
> producers thank Goldman Saches for letting them make more profits.
> But when the volatility moves against you, every one blames on the
> speculator.
>
> The fact of the matter is the "round trip trades" does not generate
> net commodity demands, and hence does NOT change the supply/demand/price
> fundamentals in the long run. It generate short term volatilities.
> Volatility works on both ways, it could price too high and could
> push price too low. It forces consumers to pay more at a time and
> pay less at another time. Long term, it cancels out. I as a consumer,
> will accept the volatility and I would not complain when I have to
> pay more, nor would I need to thank any one when I end up paying
> less than I expected.
>
> It's free market principles at work.
>
> On Nov 11 03:00 PM Shaftsinker wrote:
The government folks + the bankers DON"T care about the general populous as they have 3 VERY large underground cities fullly stocked to escape to when the economy implodes . UTAH is main site . Yes , I heard this from an "insider " . They could care less re the shoeple !
"Maybe when they are charging you $80 a gallon for water and ten cents a breath you’ll want to do something about it."