Oil Price Speculation Truth Begins to Leak into Mainstream Media

Washington Post, Staff Writer David Cho, has written an article on Thursday, August 21, 2008; Page A01, titled... A Few Speculators Dominate Vast Market for Oil Trading

It will be the first of many reports from newspapers and blogs that want to report truthful facts rather than manipulated propaganda fed by devious sources. It will endorse the articles I have been writing for the past two years on how the public has been hoodwinked by clever fallacies that hide true facts.

It takes time to take a misrepresentation of authentic facts, turn it into propaganda and then hear prestigious and distinguished voices talk their truth which has grown out of the original fallacy. History is littered with examples of how cults, religions, financial skullduggery and political parties succeeded in fooling most people, for a period of time. There are numerous other past examples in many areas of mortal existence that brought misery and suffering to humanity.

In the past twenty years many financial markets have brought agony and distress to millions of people who bought into the notion 'It is different this time.' The fact is it is never different, rather, the intellectual cleverness of a few experts managed to convince the majority of investors to follow what seemed to be financial reason and logic. Certainly, it is very hard for the average person to question folks who are well respected leaders in their field of expertise.

So how can anyone determine what is truth and what is just propaganda dressed up by people with the mastery to induce people to follow their advice? Even many experts have been hoodwinked into believing oil prices should go to $200.00 if oil supply keeps outstripping demand.

The dot com boom and bust, the housing boom and bust are two up-to-date examples of how people got sidetracked. Now we are at the pinnacle of the oil boom and the bust is yet to materialize. All fallacies in the monetary world depend of fear and greed to feed their audience. That is why greed makes for strange bedfellows. The are a few select groups who are making piles of money while economies all around the world are facing increasing hardship.

The experts and speculators will argue we need free markets and any interference will take away free trade. Well, in many cases they may be correct, however, when it comes to essential commodities of food and energy they are completely out of order.

The criteria they base their rationale on is, supply outstripping demand, so prices have to rise. Well, under the present method of commodity pricing they have a point. But the question nobody is addressing is, how fair and proper is the commodity market system at balancing the scales of what is deemed to be ethical and moral.

At the end of World War Two, in the UK, people were given ration books so that nobody went hungry. Everyone got their fair share and there was no price gouging. If we do have a future shortage of oil, (which may be twenty years from now if no new discoveries are made) then hiking the prices will not stop it. It will only make the speculators rich and the rest of the world poorer in wealth and spirit.

Just for clarity for the folks who state there is no excessive speculation in oil, any futures contract in the oil market, no matter where is comes from, is a speculation on future prices and in truth, can only be classed as a speculation. Essential commodity markets require new legislation and here are some home truths that are not spun from greed and fear:

1. There has been no shortage of gas at any filling station for the past 10 years yet prices are up 1200% because of futures trading going out more than eight years. Even the Saudi oil minister has recently stated the price of a barrel of oil should be no more than $70.00. Demand from China and India is still far less than that of the USA. The Chinese stock market is down 50% signifying a sharp slow down. This news still is not enough to stop the wild speculators hiking the oil prices.

2. When hurricanes hit Florida many gas stations are closed and there is a real shortage of gas for a few days. However, if a gas station increases its prices it will be prosecuted for price gauging. Therefore, if we take the experts argument that there is a shortage of oil then that still does not give anyone the right to profit from the shortage as this is deemed to be prices gauging. How can the USA governments have double standards and prosecute gas station owners who price gauge and not treat commodity markets in the same manner?

3. Oil is an essential commodity for every day living in the same way as water is an essential commodity. It makes no sense to trade water so why leave oil in the hands of anyone who wants to make a quick buck gambling on prices.

4. Pension and hedge fund managers have invested billions of dollars in oil futures. The futures markets are very volatile, thus, no place for pension funds to risk the money for people who trust them to build future wealth. The fiduciary duty of a pension fund manger is to find reasonable returns with low risk and the commodity markets is not that place.

5. If the price of oil was regulated between $40.00 - $80.00 a barrel, the price could go up and down on supply and demand. This would be fair to everyone, for even when supply was plentiful, the price would not drop below $40.00 which will still give a fair profit to most oil related industries. When oil is in short supply the price would be limited to a ceiling of $80.00 which is more acceptable to world economies.

6. There is a moral issue that greed cannot come before people's basic needs ... No right-minded, ethical, principled government can allow starvation and financial ruin because of a system of trading that is completely out of control.

7. The price of a barrel of oil affects transport, food supply, industrial production and every part of modern day living. If terrorists or rogue governments wanted to devise a plan to destroy the world economies what better way than finding a method to allow oil to trade at $140.00 a barrel. Why play a game that makes terrorists and rogue countries happy?

8. Goodwill to all people is the credo every democratic country is built upon. $140.00 a barrel oil delivers no goodwill. It only brings hardship and political uneasiness.

9. Noble deeds and fair dealing is the hallmark of success for every truly prosperous person. Since the world is made-up from people, where are the noble deeds and fair dealing in the commodity pits.

10. We are all put on earth to help each other succeed in the pursuit of freedom, liberty and happiness. There is no freedom when people are slaves to greed. There are only liberty takers when oil trades over $80.00 a barrel. And finally financial hardship brings misery and discontent.

The time for change in essential commodity trading is now. To quote a few voices from the past...

"Experience demands that man is the only animal which devours his own kind, for I can apply no milder term to the general prey of the rich on the poor"_Thomas Jefferson

"For greed all nature is too little."_Seneca

"He who is greedy is always in want."_Horace

"What shall it profit a man if he gains the whole world but loses his soul."_Jesus Christ

"Cultures suffer because they journey through life in differing circles with only the surface connecting the wheels."_ Michael Levy

Stock position: None.

Comments

[annyone:]

BS.....look at your point # 2 do you even understand basic difference in wholesale and retail market, you sure heard of FUTURE but nave no clue whats its about...

2008 Sep 23 08:15 AM

[A:]

You are a moron

2008 Sep 23 08:21 AM

[gebby:]

oil demand and production rate are real. with short term manipulation of the market possible. as in all markets. i would not bet oil prices can come down precipitously. oil futures were squeezed higher by 25 dollars because of speculators selling future contracts. seems oil should be priced around 100-130 per barrel before trending higher still.

2008 Sep 23 08:39 AM

[cinefoz:]

Of course, the oil commodity business is rigged. It's amazing how many people rush to the defense of oil thieves. The concepts of supply and demand applies to more than the one dimensional examples in text books. There is a supply an demand equilibrium for oil and the volume of money trading it. There is a supply and demand equilibrium for the amount of theft and the willingness of people to tolerate it. There is a premium paid to people who know clever ways to steal, as opposed to street thugs.

2008 Sep 23 09:02 AM

[phillips49:]

Absent credible facts and data, this article is SPECULATION.

2008 Sep 23 09:05 AM

[mangolfer:]

Good points made here. Since Katrina the U.S. public has been getting the shaft. I've been shorting oil through ETF's since July and making a ton while paying less at the pump almost everyday. Makes me feel pretty good screwing them for a change.

2008 Sep 23 09:10 AM

[J.J. Rendina:]

Sounds like Mr. Levy was educated at the O'Reilly & Dobbs School of Economics

2008 Sep 23 09:24 AM

[Umm, yeah:]

Um.... ok, Mr. Mystical Poet... how do you plan on getting the rest of the world to agree to 'regulating the price of oil to $40-80/barrel?

And while you're at it, let's 'regulate' the price of gold to $10, the price of silver to $1, and my salary to $1M/year?

2008 Sep 23 10:01 AM

[Gyoza Mimi:]

This is rather a very naive article. I am even inclined to call it stupid.

Regulated oil between $40-80 - at that price tar sand will become unprofitable, and oil will stop flowing from Canada. Instant drop in supply, how will you compensate for that?

Regulated oil at $40-80. Do you own it, or are you implying that the US should embezzled oil of others and control distribution? Else, how will you control it? Come to Venezuela and say "we will not pay more than $40, because we think it is fair"? Please do, let's see how that flies.

Moral issue. There is a moral issue that greed cannot come before people's basic needs. There is a moral issue that you make more money than some poor souls in Africa. Please sell your car and live in a tent, because your excesses should not come before ba

2008 Sep 23 10:12 AM

[Gyoza Mimi:]

This is rather a very naive article. I am even inclined to call it stupid.

Regulated oil between $40-80 - at that price tar sand will become unprofitable, and oil will stop flowing from Canada. Instant drop in supply, how will you compensate for that?

Regulated oil at $40-80. Do you own it, or are you implying that the US should embezzled oil of others and control distribution? Else, how will you control it? Come to Venezuela and say "we will not pay more than $40, because we think it is fair"? Please do, let's see how that flies.

Moral issue. There is a moral issue that greed cannot come before people's basic needs. There is a moral issue that you make more money than some poor souls in Africa. Please sell your car and your posh house, live in a tent and ride a bicycle, because your excesses (like stereo in your car) should not come before basic needs of the African population.

Demand from China and India is still far less than that of the USA. Dude, if you have 100% of the product fully consumed as it is, then you don't need to increase demand to 200% for a stiff competition to begin. A simple 5% rise in demand will throw the balance off and create upward pressure on the prices.

I am sorry, but this whole article is plain stupid.

2008 Sep 23 10:16 AM

[Gyoza Mimi:]

I love you too! Group hug, everybody.

2008 Sep 23 10:24 AM

[Gyoza Mimi:]

I love you too. Group hug, everybody.

Why can't we be friends, why can't we be friends

2008 Sep 23 10:25 AM

[Jason Rines...:]

The sentiment from Mr. Levy was nice, so I won't lambast a nice ideology with hard facts such as price fixing has been tried before around the world and it always fails with a vital commodity.

But I will give credence to one of his points that a government's job is security in protecting the people. That facts of rampant fraud occured over the last decade, tied into Washington politicians is abundant. If a government is not providing security whether it be on domestic or military issues, what good is it? We get an C- in the regard of security (no nuclear terrorist event) but an F on domestic security this last decade. Washington is certainly an oligarchy and the USA is running a Fascist government at this point. But Fascism can work for a short time, the problem is that is always seems to morph into dictatorships and blatant tyranny rather then the subtle one occuring now.

2008 Sep 23 10:49 AM

[Ferdinand E...:]

Michael, you should read the article by George Soros in one of the latest New York Review of Books. He has almost - almost - the entire story. Demand is outrunning the supply of "available oil", but there is also a speculative element present. He seems to believe, however, that the speculative element is minor/secondary, and I believe the same thing.

But you are right when you say that we can't handle oil at $140/b, and it could be that again after the international macroeconomy gets back in the groove.

2008 Sep 23 11:14 AM

[Road Runner:]

Please don't post a bunch of lofty sounding rants and raves on this web site and call it an article. Maybe you had a real point in all that high-minded meaningless rambling, but I was annoyed that you would talk down to us (like all of us don't already know all this) with so many “standard-issue” rantings. Conventional wisdom zombies like you get on my nerves because you waste so much of my time.

Next time, make your point immediately and no ranting babble that is useless to investors.

2008 Sep 23 11:23 AM

[nakedjaybird:]

Based on the stir of the folks, there must be some truth to the article; and that being more than the quotes at the end.

2008 Sep 23 11:44 AM

[DownOnMyLuck:]

Water is everywhere yet sells for more than gasoline at most gas stations.

2008 Sep 23 11:59 AM

[Charlie Peters:]

Does corn fuel ethanol policy increase oil use and oil profit?

Some folks think so

Clean Air Performance Professionals

2008 Sep 23 12:21 PM

[Tony Daltorio:]

What a ridiculous article! Holding the price of oil to $40-$80/bbl will only result in the world's oil flowing to China,other emerging markets,and other countries willing to pay the 'real' price for oil. There will be no oil available for America to use.

2008 Sep 23 01:14 PM

[crudeoilcra...:]

Really Mr. Levy? That's the best you can do? This is the one of the worst pieces of fail I have read in the past 19 minutes. For future reference, I would suggest you preface all your future articles with the disclaimer "I failed economics 101."

2008 Sep 23 03:33 PM

[xander:]

Did our politicians protect the interests of
Americans when they let Venezuela expropriate the oil fields of Creole petroleum in lake
Maracaibo.I
remember the eastern lib senators and the New York Times denouncing talk of protecting Creole. Venezuela's successful theft led to the formation of Opec- a cartel of thieves. There is a price for electing fools and we are paying it.

2008 Sep 24 01:59 AM

[Pretzel Logic:]

It's pretty much been said, but just to add my vote: you can't price fix things. If you price-fix, the entire profitability model changes, which lowers the supply. Price-fixing also artificially increases the demand. Price-fixing thus leads to shortages. This fact is really very simple if you think it through completely. It's called "the law of unintended consequences."

Oil and gas shortages will NOT help our economy, they will hurt it. Your article means well, but your suggestions would do more harm than good.

2008 Sep 24 06:42 AM

[Michael Levy:]

Thank you all for taking the time to express your viewpoints. While I except my article fly's in the face of so called, free market capitalism, I guess we need to ask ourselves show well is that system functioning and who is benefiting from it?

True lasting change always faces massive opposition and if humanity does not unite for the benefit of all, not just for the speculative few, there will be little left for future generations.

Energy and food are two commodities that cannot be left at the mercy of a leveraged,hi-tech derivitive system that can accelerate at the speed of light and cause world wide pandemonium.

As a wise man one said...Treat others as you yourself would like to be treated.

I wish you all great success in your investments.

2008 Sep 24 08:42 AM