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Ahmadinejad says market full of oil, prices artificial
Tue Jun 3, 2008 10:44am EDT
ROME (Reuters) - The global market is "full of oil" and rising crude prices are being artificially driven by forces trying to further their geopolitical aims, Iranian President Mahmoud Ahmadinejad said on Tuesday.
"While the growth of consumption is lower than that of production and the market is full of oil, prices continue to rise and this situation is completely manipulated," Ahmadinejad said in his address to a U.N. food summit in Rome.
Without naming countries, the Iranian leader said "hidden and unhidden hands are at work to control the prices mendaciously to pursue their political and economic aims."
He said the goal of "powerful and international capitalists" was to keep the price of oil and energy "artificially high" in part to justify new explorations in the North Pole and the deep seas.
In an apparent reference to the United States, he said the international community should have a mechanism to force "the bullying powers to resort to peace and amity instead of occupation and warmongering...."
(Reporting by Robin Pomeroy)
http://www.reuters.com/article/gc08/idU ... 2720080603
geogeo wrote:Every time oil and gas go higher there is a new set of bogus reasons for the sheeple to swallow. The fact is that Chinese and Indian demand is exploding, but production is level at 85 million. There is an elaborate and well-substantiated theory called peak oil, which actual explained all that is happening years. The game being played right now is to help consumers ease into higher and higher prices without creating a total friggin panic. 'Reasonable' NPR listeners and suchlike have no problem with that...
Anyway, if it ever did get really, really expensive, the economy would adjust, and we would transition to a post-oil economy...
Secondary narratives helped the transition, as they always help day-to-day explanations...
I feel a master narrative emerging that will sooth us and all those millions of investors out there (the rich) and get us to acquiesce; some combination of the above.
nathan28 wrote:geogeo wrote:Every time oil and gas go higher there is a new set of bogus reasons for the sheeple to swallow. The fact is that Chinese and Indian demand is exploding, but production is level at 85 million. There is an elaborate and well-substantiated theory called peak oil, which actual explained all that is happening years. The game being played right now is to help consumers ease into higher and higher prices without creating a total friggin panic. 'Reasonable' NPR listeners and suchlike have no problem with that...
Anyway, if it ever did get really, really expensive, the economy would adjust, and we would transition to a post-oil economy...
Secondary narratives helped the transition, as they always help day-to-day explanations...
I feel a master narrative emerging that will sooth us and all those millions of investors out there (the rich) and get us to acquiesce; some combination of the above.
Unless you actually are analyzing a market's fundamentals, or at the least supply and demand, the only thing that matters--the only thing--is price. You buy for a price and sell for a price. "Why" is largely horseshit--they call prices fluctuating over some narrative "news noise" for a reason. Prices change over speculator's perceptions of supply and demand. The fact that a giant infotainment industry has sprung up around financial markets only makes the narrative-factory that much more ridiculous. It might be a psy-op. But it might also just be some fourth-string glorified sports commentators and tarted-up news girls trying to fill dead air. Maybe a little of both.
"What’s been happening since 2004 is very high prices without record-low [oil] stocks. The relationship between U.S. [oil] inventory levels and prices has been shredded and become irrelevant."
— Jan Stuart, Global Oil Economist, UBS Securities
"What you have on the financial side is a bunch of money being thrown at the energy futures market. It’s just pulling in more and more cash. That’s the side of the market where we have runaway demand, not on the physical side."
— Tim Evans, Senior Oil Analyst, IFR Energy Services [From testimony: U.S. Senate Permanent Subcommittee on Investigations’ report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006]
The Love of Money
Record high prices without record low oil inventories, analysts saying that so much money flows into oil commodities that it gives the impression of shortages, when in fact no shortage exists. That mirrors the situation in the commodities market for food, as Bloomberg pointed out in its April 28 article, "Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin": "Commodity investors control more U.S. crops than ever before, competing with governments and consumers for dwindling food supplies." That’s right; food, oil and gasoline have become an "asset class." No longer are you fighting a neighbor at the supermarket over the last box of Cheerios®; now you’re fighting the futures traders, who are actually determining what you will pay for that cereal.
We started as a society that worships hard labor and the basic business ethic of building value into the goods you create. How’d we get from there to worshiping Wall Street’s billion-dollar boys — who create nothing, build nothing, own nothing and deliver no goods, and yet can throw so much money into products made by others that they determine what we consumers will pay for those goods?
It wasn’t always this way.
In the past, the Commodities Futures Trading Commission acted as the cop on the beat, ensuring that buyers in the market were not distorting or manipulating prices beyond what supply and demand normally dictate. Certainly, if a hard frost hit Florida and cost growers an orange crop, then bidding up the price of the remaining oranges was both a wise investment and allowed under the trading rules. Right now investors know that if they borrow and invest huge amounts in commodities futures, they can create a shortage on paper – which drives prices up just like an actual shortage of any given product would. What kept traders from cornering the market that way in the past were the government’s anti-manipulation rules.
Lay, DeLay, Gramm, Gramm & Clinton
The late, infamous Enron head, Ken Lay, realized in the eighties that he could make more money bidding up energy in the futures market than by actually creating and selling energy. But, under then-current rules, how much you could make swapping paper was limited. Fortuitously, Lay had excellent Texas political connections; and in November of 1992, the head of the Commodities Futures Trading Commission moved to exempt energy-derivative contracts and related swaps from any government oversight.
A vote was hurriedly put together before the Clinton White House would take over, and so Lay could finally start "dark" – unregulated – futures trading. The head of the CFTC was Wendy Gramm, wife of Texas Senator Phil Gramm; five weeks after she left, she became a board member of Enron in Houston.
Fast-forward to late 2000 and H.R. 5660, the Commodity Futures Modernization Act of 2000, sponsored by Republican Congressman Thomas Ewing of Illinois. That bill went nowhere, even though Tom Delay’s wife Christine was then working for a Washington lobbying firm, Alexander Strategies – which Enron had paid $200,000 to push through legislation for permanent energy deregulation in these "dark" markets.
Six months later came Senate Bill 3283, also named the Commodity Futures Modernization Act of 2000. This time around the sponsor was Republican Sen. Richard Lugar of Indiana, and now Phil Gramm was listed as one of the bill’s co-sponsors. Like it had in the House, this bill was destined to go nowhere until, late one night, it was attached as a rider to an 11,000-page appropriations bill – which was signed into law by President Clinton.
Now traders had an officially deregulated market for energy futures. Worse, that bill also deregulated many financial instruments – including the collateralized debt obligations that are at the center of today’s mortgage crisis, which may well cost us more than $1 trillion before it’s over.
Everybody Was Warned!
As USA Today wrote of this fiasco in January of 2002, "But, as a power marketer, [Enron] could buy enough energy-futures contracts in a region to create a virtual monopoly." That’s right: As early as the winter of 2002, it was widely known that the 2000 Commodities Futures Modernization Act had created a monster, capable of running up energy prices outside of the normal law of supply and demand. Worse, our government had been warned this was going to happen. Representatives of the Federal Reserve, the Securities and Exchange Commission and the CFTC had already told Congress not to deregulate energy because "the market was ripe for manipulation." Everybody was warned; that’s why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.
Phil Gramm’s office denied that he had anything to do with writing the section of that bill that actually deregulated energy. And yet Prof. Michael Greenberger, formerly a CFTC board member himself, said that Gramm’s wife Wendy, along with a few lobbyists and Wall Street attorneys, had rewritten it. When Robert Manor of the Chicago Times wrote about this situation on January 18, 2002, neither Gramm could be reached for comment.
Kill It Before It Multiplies
When Enron failed and took its private, unregulated energy exchange to the grave, another rose to take its place. The Intercontinental Exchange (ICE) was the brainchild of Morgan Stanley, Goldman Sachs, British Petroleum, Deutsche Bank, Dean Witter, Royal Dutch Shell, SG Investment Bank and Totalfina. In 2001 ICE purchased the International Petroleum Exchange in London; renamed ICE Futures, it now operates as an "exempt commercial market" under section 2(H)(3) of the Commodity Exchange Act. As the Senate hearings pointed out in the summer of 2006, "Both markets operate outside of any CFTC oversight."
If you reread the quotes at the start of this story again, you find that many officials in the government warned against what would happen in a deregulated energy market, because it was so easy to manipulate. We already know this to be true thanks to Enron’s California misdeeds. And, as we pointed out last week, British Petroleum was busted for manipulating the propane market and fined over $300 million; and Amaranth Partners was caught manipulating the natural gas market, unconscionably causing the futures price for natural gas to raise every Texan’s electric bills. (It took two years for Amaranth to be exposed.) And yes, the manipulation happened in the new "dark" and unregulated exchanges, making it almost impossible to uncover. So it’s not a question of "if" some "theoretically possible" manipulation and distortion of the market will result from this bill, championed by Phil Gramm, his wife Wendy and Christine Delay’s employer, Alexander Strategies. The reason it is not theoretical is because we keep catching well-known companies doing it on a regular basis.
No Conscience in Congress?
All you hear daily is that the world has a severe shortage of oil, or you can buy only 200 pounds of rice at one time, or we will have a gasoline crisis this summer, etc. But it takes only a minute to find hundreds of quotes from highly respected oil and economic analysts, (not to mention CEOs of the major oil companies), that completely dismiss the claim of oil, gas or food shortages that have been headlining the news.
Even more troubling is that within months of the CFMA’s going into effect, we knew it had enabled easy manipulation of any energy market, but nothing was done to fix it. Nor was anything done when the Senate held its hearings on this matter in 2006, or in the House hearings last December.
Today we call this situation the "Enron Loophole," but that’s untrue. It’s not a loophole: it was a new law passed in 2000 – and far more individuals than Ken Lay have used that law to line their pockets with hundreds of billions of American consumers’ hard-earned dollars. That’s not my opinion, that’s direct testimony by numerous experts before both the House and Senate.
Professor Greenberger warned about our "New American Economy" far better than I could:
"Should we have an economy that’s based on whether people make good or bad bets? Or should we have an economy where people build companies, create manufacturing, do inventions, advance the American society and make it more productive? We are rewarding people for sitting at their computers and punching in bets. That’s not the way our economy is going to be built, and India and China, with their focus on science and industry and building real businesses, are going to eat our lunch, unless the American public wakes up and puts an end to an economy that praises and makes heroes out of speculators."
Greenberger’s statement explains why Detroit and other American manufacturers suffer while Wall Street speculators make a fortune — and your rapidly shrinking checkbook pays for it, every time you buy food, fuel or feed.
All because there is no shortage of these goods, you’re just being told there is because it’s more profitable – for a few – that way.
Everybody was warned; that’s probably why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.
© 2008 Ed Wallace
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society.
http://www.star-telegram.com/ed_wallace ... 59081.html
UK to examine oil market trading as prices soar
By Philip Aldrick
Last Updated: 12:55am BST 04/07/2008
Regulation of Britain's oil markets will come under political scrutiny later this month amid concerns that the spike in prices is being driven by speculators.
News that the powerful Treasury Select Committee has called a hearing into the market's regulation for "mid-July" came as Brent crude rose above $145 a barrel in London - a new high - and Gordon Brown warned oil prices may keep climbing.
The hearing is a first response to mounting pressure on politicians to take action over oil prices. America has attempted to curb speculation by imposing checks on London's oil traders through the Commodity Futures Trading Commission, leading to accusations of US imperialism.
US senators have blamed rising oil prices on "manipulation and excessive speculation" in the London oil market.
Speaking at his approval hearing before the TSC on Wednesday, Lord Turner of Ecchinswell, the incoming chairman of the Financial Services Authority, confirmed that "speculation is an issue that needs to be looked at". "So far there is no large evidence that speculation is playing a significant role in the oil price. There are a set of fundamental reasons on supply and demand as to why we have the spike in oil prices today."
The Prime Minister told the Commons Liaison Committee yesterday: "If demand succeeds supply and is likely to exceed supply for years to come, people will expect the price to rise."
The gloomy predictions came as Leeds-based haulage firm Macfarlane Transport collapsed into administration, risking the loss of 300 jobs, according to administrators KPMG.
UK drivers face further pain, with every $2 rise adding about 1p to petrol prices, according to the AA.
Cheaper oil: Many winners, a few bad losers
A lower price will boost the world economy and harm some unpleasant regimes—but there are risks
Oct 25th 2014 | From the print edition
THE collapse of the Soviet Union in 1991 had many causes. None was as basic as the fall in the price of oil, its main export, by two-thirds in real terms between 1980 and 1986. By the same token, the 14-year rule of Vladimir Putin, heir to what remained, has been bolstered by a threefold rise in the oil price.
Now the oil price is falling again. Since June, it has dropped from about $115 for a barrel of Brent crude to $85 or so—a reduction of roughly a quarter. If prices settle at today’s level, the bill for oil consumers will be about $1 trillion a year lower. That would be a shot in the arm for a stagnating world economy. It would also have big political consequences. For some governments it would be a rare opportunity; for others, a threat.
The scale of shale
Predicting oil prices is a mug’s game (we speak from experience). The fall of the past three months is partly the result of unexpected—and maybe short-lived—developments. Who would have guessed that chaotic, war-torn Libya would somehow be pumping 40% more oil at the end of September than it had just a month earlier? Saudi Arabia’s decision to boost output to protect its market share and hurt American shale producers and see off new developments in the Arctic was also a surprise. Perhaps the fall was exaggerated by hedge-fund investors dumping oil they had been holding in the false expectation of rising prices.
Geopolitical shocks can surprise on the upside as well as the down. Saudi Arabia may well decide to resume its self-appointed post as swing producer and cut output to push prices up once more. With war stalking Iraq, Libya still fragile and Nigeria prey to insurgency (see article), supply is vulnerable to chaotic forces.
But many of the causes of lower prices have staying power. The economic malaise weighing down on demand is not about to lift, despite the tonic of cheaper oil (see article). Conservation, spurred by high prices and green regulation, is more like a ratchet than a piece of elastic. The average new car consumes 25% less petrol per mile than ten years ago. Some observers think the rich world has reached “peak car”, and that motoring is in long-term decline. Even if they are wrong, and lower prices encourage people to drive more, energy-saving ideas will not suddenly be uninvented.
Much of the extra supply is baked in, too. Most oil investment takes years of planning and, after a certain point, cannot easily be turned off. The fracking revolution is also likely to rage on. Since the start of 2010 the United States, the main winner, has increased its output by more than 3m barrels per day to 8.5m b/d. Shale oil is relatively expensive, because it comes from many small, short-lived wells. Analysts claim that a third of wells lose money below $80 a barrel, so shale-oil production will adjust, helping put a floor under the price. But the floor will sag. Break-even points are falling. In past price squeezes, oilmen confounded the experts by finding unimagined savings. This time will be no different.
For governments in consuming countries the price fall offers some budgetary breathing-room. Fuel subsidies hog scandalous amounts of money in many developing countries—20% of public spending in Indonesia and 14% in India (including fertiliser and food). Lower prices give governments the opportunity to spend the money more productively or return it to the taxpayers. This week India led the way by announcing an end to diesel subsidies. Others should follow Narendra Modi’s lead.
The axis of diesel
For those governments that have used the windfall revenues from higher prices to run aggressive foreign policies, by contrast, things could get uncomfortable. The most vulnerable are Venezuela, Iran and Russia.
The first to crack could be Venezuela, home to the anti-American “Bolivarian revolution”, which the late Hugo Chávez tried to export around his region. Venezuela’s budget is based on oil at $120 a barrel. Even before the price fall it was struggling to pay its debts. Foreign-exchange reserves are dwindling, inflation is rampant and Venezuelans are enduring shortages of everyday goods such as flour and toilet paper.
Iran is also in a tricky position. It needs oil at about $140 a barrel to balance a profligate budget padded with the extravagant spending schemes of its former president, Mahmoud Ahmedinejad. Sanctions designed to curb its nuclear programme make it especially vulnerable. Some claim that Sunni Saudi Arabia is conspiring with America to use the oil price to put pressure on its Shia rival. Whatever the motivation, the falling price is certainly having that effect.
Compared with these two, Russia can bide its time. A falling currency means that the rouble value of oil sales has dropped less than its dollar value, cushioning tax revenues and limiting the budget deficit. The Kremlin can draw on money it has saved in reserve funds, though these are smaller than they were a few years ago and it had already budgeted to run them down. Russia can probably cope with today’s prices for 18 months to two years, but the money will eventually run out. Mr Putin’s military modernisation, which has absorbed 20% of public spending, looks like an extravagance. Sanctions are stifling the economy and making it hard to borrow. Poorer Russians will be less able to afford imported food and consumer goods. If the oil price stays where it is, it will foster discontent.
Democrats and liberals should welcome the curb the oil price imposes on countries like Iran, Venezuela and Russia. But there is also an increased risk of instability. Iran’s relatively outward-looking president, Hassan Rouhani, was elected to improve living standards. If the economy sinks, it could strengthen the hand of his hardline opponents. Similarly, a default in Venezuela could have dire consequences not just for Venezuelans but also for the Caribbean countries that have come to depend on Bolivarian aid. And Mr Putin, deprived of economic legitimacy, could well plunge deeper into the xenophobic nationalism that has fuelled his campaign in Ukraine. Cheaper oil is welcome, but it is not trouble-free.
Insane U.S. Oil Glut Wars
A Black Agenda Radio commentary by BAR executive editor Glen Ford“The destruction of energy exporting economies will only intensify the global recession that has already begun.”
The people that rule the United States have determined that, the only way for the U.S. to maintain its hegemony in the world is to engineer the economic collapse of its rivals. The likelihood that such economic warfare will wind up dragging the entire planet into chaos and catastrophe does not seems to phase the Lords of Capital, who are so rich they can only be made poor at the point of a firing squad. Having surpassed Saudi Arabia and Russia as the world’s biggest producer of oil and natural gas, the Americans are now flooding the planet with fuel that no one needs in order to keep prices so low that Russia, Iran and Venezuela will suffer regime change. Washington is also eager to deploy its military and dirty tricks of all kinds to break its rivals’ will to resist U.S. empire.
The problem is, it’s very difficult to aim an oil and gas weapon. The effects tend to be general, rather than targeted. It’s kind of like poison gas; the wind blows death into everybody’s face, including the guy who popped the canister. The Americans have soaked the entire world with gasoline, and now they’re running around with matches between their fingers, laughing like maniacs, thinking they have the ultimate power because they can burn the whole place down. Yes, it is conceivable that the regimes in Russia, Iran and Venezuela could be brought low, broken, through years of depressed prices – but oil and gas prices can only be kept low if the world economy is also depressed, locked in stagnation. The destruction of energy exporting economies will only intensify the global recession that has already begun. Chaos, instability, unintended – and even unimaginable – consequences will surely characterize the next, purposely created crisis: a deliberate economic crime against humanity.“Oil and gas prices can only be kept low if the world economy is also depressed, locked in stagnation.”
It has already become clear to the nations of the Caribbean and Central America that the disruptions imposed by the oil glut go beyond the drilling platforms of Venezuela. The 17 members of Petrocaribe have for years enjoyed access to Venezuelan fuel at cut-rate prices, with the best of credit terms, as part of the socialist country’s policy of solidarity with its neighbors. Venezuela even accepted payment in commodities, a kind of barter system. The Petrocaribe program was losing Venezuela about $2.3 billion a year, and with the collapse in world prices, Venezuela may have to scale back its generosity. Meanwhile, the U.S. is licking its chops, hoping to make the whole region dependent on American liquefied natural gas. But, we all know what dependence on the United States means in the Caribbean and Central America. It means the end of sovereignty, the end of dignity, and the certainty of continued misery for the masses of the people.
The artificial oil glut, on top of global economic stagnation, will also cause insane things to happen to a U.S. economy whose only bright spot – besides the Wall Street casinos – is an energy industry that keeps on churning out oil and gas that a stagnant world can’t use, just to spite other countries that have oil. How crazy is that? And how long can that go on?
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