Miami Herald: Speculators charged with manipulating oil market

[twa]

Do you think that the OPEC nations aren't willing to manipulate the price of oil through production AND supply?

Do you think that the OPEC nations NEVER buy oil futures?

---------- Post added May-25th-2011 at 09:55 PM ----------

Of course they are and do....What you gonna do about it?

These 'speculators' are nothing more than a corner crack dealer in the big picture

[PeterMP]

Of course they are and do....What you gonna do about it?

These 'speculators' are nothing more than a corner crack dealer in the big picture

Nothing, but let's not pretend the that oil market isn't ripe for artificial affects of prices in multiple places.

[stevenaa]

http://www.huffingtonpost.com/2011/05/12/exxon-ceo-wall-street-oil-prices_n_861326.html

"If you were to use a pure economic approach . . . It's pretty hard to judge, but it would be, when we look at it, it's gonna be somewhere in the $60 to $70 range," Tillerson said.

The easier answer from the producers would be that oil prices are right where market demands they should be. However, eventually more facts and understanding of just how much speculation is really affecting prices will come to light. So it's a win for him to give a truthful answer. I don't buy in the least that the market is too big to manipulate. That's hugely naive to think.

[FanboyOf91]

WikiLeaks: Saudis often warned U.S. about oil speculators

WASHINGTON — When oil prices hit a record $147 a barrel in July 2008, the Bush administration leaned on Saudi Arabia to pump more crude in hopes that a flood of new crude would drive the price down. The Saudis complied, but not before warning that oil already was plentiful and that Wall Street speculation, not a shortage of oil, was driving up prices.

Saudi Oil Minister Ali al Naimi even told U.S. Ambassador Ford Fraker that the kingdom would have difficulty finding customers for the additional crude, according to an account laid out in a confidential State Department cable dated Sept. 28, 2008,

"Saudi Arabia can't just put crude out on the market," the cable quotes Naimi as saying. Instead, Naimi suggested, "speculators bore significant responsibility for the sharp increase in oil prices in the last few years," according to the cable.

http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-saudis-often-warned.html

[twa]

Nothing, but let's not pretend the that oil market isn't ripe for artificial affects of prices in multiple places.

Well we certainly are good at doing nothing and not exploiting our own reserves

The normal speculators can only play the margins....the NOC's on the other hand

[PeterMP]

Well we certainly are good at doing nothing and not exploiting our own reserves

The normal speculators can only play the margins....the NOC's on the other hand

We've been over this more than once. Nobody that serioiusly studies the mater believes that given our resources and the difficulty in extracting them that they will significantly lower oil prices given the current prices.

Which of course is why the oil industry is sitting millions of acres of leased land, but oh if we'd only open up those couple of 1,000 other acres THAT would make THE difference.

http://www.leftlanenews.com/obama-to-oil-companies-use-leases-to-drill-more.html

[techboy]

So the price went up, but when it came back down, there were artificial actions related to the price, but what it drove it up (of we are ignoring that there is a group of countries that control their oil output to affect price in the first place), but the initial increase had nothing to do with artificial actions?

Look, the data shows that while speculation may have some influence over the short term, and can certainly accelerate moves, the overall story with prices is fundamentals.

In the case you're talking about, oil prices went up through 2008 because, as the numbers showed, international consumption in general, and China's in particular, is way up. All those newly middle class Chinese are driving and consuming indoor heat and the like. Prices naturally go up.

In 2008, the economy hit a worldwide recession, including China. This drove down consumption of oil, along with everything else. Prices naturally go down.

The economies of the world began to recover, and simultaneously some of the world's current oil supply (Libya) was placed in jeapordy. Prices went up.

Going back to Dr. Hamilton's May 8 blog entry:

I believe that events in Libya had been a key driver of the price of oil over the last few months. The country produced about 2% of total world supplies last fall. If one assumes a short-run price elasticity of demand of 0.1, that would warrant a 20% price increase if those supplies were knocked out and no one else had the excess capacity to replace them. Not all of Libyan production has been lost, but on the other hand, I have heard some analysts claim that Libya accounted for 15% of current light sweet production, where the real crunch has been recently.

Production increased, though, and so prices began to drop somewhat, as he suggested would happen:

The political currents recently manifest in North Africa could still easily spread to other key oil-producing countries. But if that does not happen, then with the likely response of consumers to the still-high price, and the promising near-term production gains, it is possible that this week's dramatic oil price declines are only the beginning.

In terms of what this means for American consumers, each $1/barrel change in the price of oil usually translates into 2.5 cents per gallon of gasoline at the pump. With the price of oil now down $16 from its peak, that might mean a drop of 40 cents per gallon in the retail price of gasoline.

I understand your suspicion of OPEC, but when the data supports the fundamental explanation (and really, all the signs are there that we've already hit Peak Oil), then there's no need to posit conspiracy.

Also, Krugman's challenge still stands. In order to affect prices that way, someone needs to be storing massive quantities of oil somewhere (like the manipulators in the original article did on a small scale). Where is it?

I'd also note in any case that even if we agree that OPEC is manipulating prices, that doesn't implicate speculators. All they have to do is just control supply, which is exactly how they do it at their meetings. So this is sort of off the point in any case.

"If you were to use a pure economic approach . . . It's pretty hard to judge, but it would be, when we look at it, it's gonna be somewhere in the $60 to $70 range," Tillerson said.

Exxon is blaming somebody else for high oil prices, looking for an easy scapegoat? Shocking!

http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-saudis-often-warned.html

The Saudis are blaming somebody else for high oil prices, looking for an easy scapegoat? Shocking!

[twa]

We've been over this more than once. Nobody that serioiusly studies the mater believes that given our resources and the difficulty in extracting them that they will significantly lower oil prices given the current prices.

Which of course is why the oil industry is sitting millions of acres of leased land, but oh if we'd only open up those couple of 1,000 other acres THAT would make THE difference.

http://www.leftlanenews.com/obama-to-oil-companies-use-leases-to-drill-more.html

And you are still wrong, ...exploiting our own changes leverage,despite not needing to be totally self supplying....and largely removes the need for the strategic reserve.

couple thousand other acres my ass...that sounds like what Obama considers opening up drilling as though :beatdeadhorse:

[Bang]

Well we certainly are good at doing nothing and not exploiting our own reserves

The normal speculators can only play the margins....the NOC's on the other hand

If I'm right it won't matter where we drill, how much we get.. nothing will make any difference.

Unless you can somehow get ito n your own,. refine it on your own and run your car on it. You will pay the price they want.

Simple as that.

And they'll just "engineer" a bunch of bull**** excuses..

"Too many birds this year.. prices have to be this high."

This is the life of the addict, and that is what we are. And the people running these oil companies are as unscrupulous as any drug dealer I ever knew.

Think they haven't noticed that we're able to survive on 4.00 gas? What reason do they have to ever let it go back down much further?

~Bang

[panel]

Oil speculating is not wrong or immoral at all.

If I think that there are going to be world wide needs for solar power in a year, there should be no problem with me buying up a bunch of solar panels. If I am a store owner, and I think that the weather is going to be super hot in two years, there should be no problem with me buying tons of sun tan lotion now, and selling it in two years (even though I didn't consume it myself).

These oil speculators aren't taking the oil and dumping in the ocean for no one to use, they are buying at one point, and then selling it at another point. They make the most profit if they buy it when the supply is high (everything in the world is fine and production is maxed out), and selling it when the supply is low (wars and unrest in oil producing nations is limiting productions). THIS IS A GOOD THING. It insures that there is enough oil all the time, even if oil productions drops for a bit. And if the speculators are WRONG, they loose money. No one cares when that happens. There are tons of speculators that are loosing money right now because prices are coming down, so it shouldn't be a crime when they actually do make money.

[PeterMP]

I understand your suspicion of OPEC, but when the data supports the fundamental explanation (and really, all the signs are there that we've already hit Peak Oil), then there's no need to posit conspiracy.

Also, Krugman's challenge still stands. In order to affect prices that way, someone needs to be storing massive quantities of oil somewhere (like the manipulators in the original article did on a small scale). Where is it?

I'd also note in any case that even if we agree that OPEC is manipulating prices, that doesn't implicate speculators. All they have to do is just control supply, which is exactly how they do it at their meetings. So this is sort of off the point in any case.

It is easier for them to control future appearant demand, which they can do by buying futures that they never plan on taking delivery for than controlling what is actually being produced.

It has the added benefit that they get paid more for more product as compared to really cutting production, which results in them making more money per a barrele, but also decreases the number of barrels they have to sell.

[JMS]

Interesting speculation

Whole lot of possibilities open up when you suppress domestic sources that you can largely control....and eliminate competition.

The oil companies have eliminated competition. there were like 2000 mergers in teh oil industry during the 1990's. today three oil companies own like 70% of all the pumps and an even greater percentage of the transport, wholesale and refinary capacity.

What they've shown is you don't need to control the production of oil in order to manipulate the market. If you are smart enough on consumption you can predict when production capacity vs demand will be soo tight that you take advangate of that risk free in order to justify raising prices on assets which you entirely control.

[twa]

The oil companies have eliminated competition. there were like 2000 mergers in teh oil industry during the 1990's. today three oil companies own like 70% of all the pumps and an even greater percentage of the transport, wholesale and refinary capacity.

What they've shown is you don't need to control the production of oil in order to manipulate the market. If you are smart enough on consumption you can predict when production capacity vs demand will be soo tight that you take advangate of that risk free in order to justify raising prices on assets which you entirely control.

Govt policies caused those mergers and restricts the expansion today

There is no futures market risk free