The Great Oil Swindle – How Much Did the Fed Really Know? « Operation Awakening — Now that a lot of attention is being paid to this fiasco the swindlers will be heading to the exits, shortly.
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.
Found by Kerry Lutz.
#17, gquaglia, the fact your car doesn’t run on gold wasn’t the point. Market speculation, regardless of the commodity, has effects on other products. Computers and other electronics do ‘run’ on gold, and many items that use them are rising or will rise in cost.
Looks to me like you all agree that this isn’t a problem of supply and demand.
So then, is it correct to say that the current US administration is laying a big fat egg rather than taking tangible steps that would make a difference in the US economy?
While he’s fscking around with FISA and POTUS 08, Bush could ask that congress up the margins a bit, which would make a difference…but is there any downside to anyone outside of oil futures investors if that happens in reasonable steps?
Fiddling while Rome burns, is what I’m thinking.
#20 “Neither presidential candidate, neither of their parties, no one on the national stage is even talking about stopping the slide of the dollar.”
Of course not, it would cost more to service the S debt. Your fed prefers it lower.
“So==as you so astutely pointed out==buy low, sell high, avoid the crash.”
Or short the commodity, like BubbaRay’s example. Money is going to oil and energy because it’s volatile. True speculators don’t care which way it goes as long as the price is unstable.
#22 “Looks to me like you all agree that this isn’t a problem of supply and demand.”
Not me. Demand keeps rising worldwide and supply has leveled out. In the late 90′s the thinking was that the cost of oil extraction/processing had been driven down by technology so there would be a long period of overcapacity. Couple that with a previous decade of low prices – no one bothered to develop supply.
It takes years and years for supply to come online so they lack of development from 6-10 years ago is being felt now.
Also, the Saudis probably don’t have as much oil as they claim. Bush and Cheney figured all this out when they came to office and the rest is history.
Of course, they just made things worse, not better. Bad news when a bunch of morons have an army to play with and a compliant congress.
Drill here, drill there, start drilling everywhere. Solar where you can. Wind where you can. Hydro where you can. Clean coal. Coal liquification. Shale oil. Suspend all eco laws that prevent breaking ground on at least 250 new nuclear plants NEXT WEEK. Do all of it RIGHT NOW. If people link arms and protest, run them over and use them for fuel.
BTW the real reason gas prices are going up is because the price being charged is increasing.
Don’t listen to the right wing noise machine: this is not a drilling shortage.
It’s the foreseeable result of conservative anti-regulation philosophy which as dominated since Reagan.
#11, Bobbo, #9–Jim R==can you explain what the chart beginning this thread means? It kinda looks like a constant dollar analysis using today’s dollar from a post a few weeks ago? The implication is that gas is as cheap today in “real dollars” as it was in 1919 as if dollar inflation was the only relevant factor?
That’s what is means Bobbo. Fortunately inflation isn’t the only factor for what we pay for things, or a single story wooden house would cost 1.5 million today.
That chart actually shows that gas has recently been artificially inflated to essentially wipe out 90 years of industrial and economical progress.
#25, BigCarFt, Exactly. Too much is happening too fast. The IPCC ranting that we are all going to die if we don’t do something drastic now… rather like yelling “the building is unstable” in a very overcrowded earthly theater. And their cheerleading for high gas prices isn’t helping matters.
The lower class guy or gal driving a 4th hand gas guzzler to work 40km’s every day to his menial job to make brass couplings for someone’s $60000 Jacuzzi, is getting hit the hardest. Inflation caused by high gas prices makes it harder to feed and clothe his/her children, on top of gouging a crappy pay cheque by costing more to get to work.
The author of this article seems to be ignorant as to how the futures market works. The only way index speculators can stockpile oil is to rent out storage facilities to house that 1.1 billion barrels. Such facilities do not exist!!
#2 Oil companies have plenty of places they can drill but aren’t, this campaign of Newt Gingrich and the oil companies who are paying him is to monopolize the future of oil. Oil companies can also build all the refineries they want, but wont because the refineries that exist are running BELOW capacity due to declining imports THERE ARE NO SHORTAGE OF REFINERIES… ITS A LIE!!!
MikeN is right (there I said it) it aint the speculators. #9 JimR is wrong. If you are holding a contract to buy, you have to take posession or sell the contract. If you are holding a contract to sell you have to produce some oil or buy another contract. At the end of the contract period futures traders have to zero out their contracts.
#24 has it exactly right. Production has been at a standstill for at least 3 years now. Demand continues to increase and shortages are popping up around the globe. Oil exporting countries are exporting less so they can keep more for themselves.
You think things are bad now wait till 2012 when many experts are saying oil production will start entering terminal decline.
Regarding Oil==I think the future is bright as we transition to electricity as the carrier/fuel and renewable carbon neutral resources.
We will have a last chance, probably not to be taken, to regain world leadership in this green technology of the 21st Century. No Coal, No Oil, No Nukes.
Only thing that is going to hurt is the transition. Grab your socks.
#29
I live in the oil rich province of Alberta. US refiners are planning to spend ~30 billion US$ to upgrade refineries for oilsands crude. However, the US congress, large city mayors, and Obama are all against this since the oil isn’t as clean as SA light sweet crude. They’re pushing ethanol (can you say CO2 ?).
Needless to say we’re already planning pipelines to the west coast.
In 1970 BEFORE the fake gas crisis,
gas by the barrel was $35
Gas at the pump was $0.35 per gallon.
By that idea/concept, why isnt gas $1.50 +0.70 tax..
#27 “or a single story wooden house would cost 1.5 million today. ”
They do where I live. Next.
What I really love, is the AVAFX and other ads for oil trading that appear in this page coutesy of googleads.
Nice to know that AVA charges only 1 dollar per traded barrel.
Re: #29 ArianeB said,“MikeN is right (there I said it) it aint the speculators. #9 JimR is wrong. If you are holding a contract to buy, you have to take posession or sell the contract.
Are you MikeN’s clone? You are wrong as well. Just common sense would dictate otherwise… but all you have to do is Google “futures”. Non speculating investors can take delivery. Speculators simply have their investment accounts increased or deducted depending on how they fared.
Investopedia: (conclusion after a lengthy example)
“Now that you see that a futures contract is really more like a financial position, you can also see that the two parties in the wheat futures contract discussed above could be two speculators rather than a farmer and a bread maker. In such a case, the short speculator would simply have lost $5,000 while the long speculator would have gained that amount. In other words, neither would have to go to the cash market to buy or sell the commodity after the contract expires.”
QB, as much as I would like to see Alberta prosper, the oil sands operation is as disgusting an assault on this earth as can be imagined. Shame on Alberta.
I’m being serious. There is NO reason to cut back on consumption since there is plenty of energy available to a country with a responsible energy policy. Mass transit and moving back into the city is not “progress” and is unnacceptable.
#37 Of course not. Nuc is available and gives us s/g to do with all the weapons we don’t need.
JimR. Oh yeah, it’s absolutely disgusting – it’s on par with coal conversion. There needs to be about 15 billion spent to finish the upgrades and manage slurry ponds so they meet current guidelines. The money is available to do it, just not the political will on either side of the border.
The biggest problem is that the area is so huge – we’re talking something the size of Florida. All mining and drilling/refining are nasty but when you’re creating the biggest industrial zone on the planet then it’s unimaginable. Anything to with oil is ugly which explains why the US doesn’t want to drill on their own shores anymore.
All that said, when compared to Ethanol, it actually doesn’t look that bad. The real solution is to use less. The western Canadian basin (minus the oilsands) is a pretty good supply of light sweet crude. The problem is that US demand has outstripped all new production by a 3:1 margin.
JimR: “QB, as much as I would like to see Alberta prosper…”
P.S. We already have way too much money already, it would just mess the place up more. Personally, I’d be just happy to stop the growth now – especially since we wiped out our long term debt.