Scapegoating the speculators is a distraction. Too many insiders from the oil industry and some having worked in Saudi Arabia, have come forward with warnings. The recently deceased Matt Simmons was a big voice on this topic and he worked in the industry for decades including Saudi Arabia. Did you know that Saudi Arabia keeps it's reserves top secret?
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in response to your bullshit ...
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/marketreportenergyfutures.pdf
Futures and options open interest quintupled between 2000 and 2008. We show that this growth involved a considerable lengthening in the maturity structure, and a sea change in the trader composition, of market activity. More explicitly, we identify three trends in futures trading-related data that speak to the development of co-integration of prices across the futures term structure. One, open interest at maturities greater than one year grew nearly twice as fast as open interest at shorter maturities. Several categories of traders now carry much larger long-dated positions (one year or more) than they held in near-dated contracts (three months or less) in 2000.
Two, swap dealers’ market share grew markedly during the key years of 2002 and 2003 amid the start of a commodity index investment boom. Three, “traditional commercial” aggregate market share has halved since 2000 as financial traders greatly expanded calendar-spread trading.
Indeed, the market share of financial traders has more than doubled, from less than 20 percent of all open futures and futures equivalent
option positions in 2000 to more than 40 percent in 2008.
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/hearing072809_stupak.pdf
According to CFTC data, from January 2008 through the end of June 2008, index investors poured $55 billion into major commodity indexes, pushing the price of crude oil from $99 per barrel to $140 per barrel. Gasoline prices spiked to a national average of more than $4 a gallon, with prices reaching more than $5 a gallon in some regions of the country.
That same market collapsed over the course of the next six months, with prices plummeting to $30 per barrel by December 2008 as investors withdrew $73 billion from the market. This was not a coincidence. The dramatic drop in oil prices was occurring at the same time index investors fled the market. From January 2009 through May 2009, you can see the price rise from $35 per barrel to $70 per barrel as index investors come back into the market and pour in $35 billion into major commodity indexes.
I have three charts here illustrating the fact that supply and demand fundamentals are still not driving the oil market. This year, domestic oil supplies are at a 20-year high, oil demand is at a 10-year low, yet in June, oil was trading at more than $70 a barrel, up from $35 a barrel in January, representing a price increase of more than 100 percent in the first six months of the year. This comes in the midst of the worst global economic decline since the Great Depression, but oil prices keep going up!
The driving factor contributing to an increase in the price of oil this year was the surge of funding from index investors back into the oil markets. According to an independent analysis of CFTC data on oil futures positions, index investors increased their crude-oil holdings to the equivalent of more than 600 million barrels in June, up more than 30 percent from the end of 2008.
There have been a number of reports and studies over the past few years implicating excessive speculation as the cause for volatility and price increases in the commodity futures markets. In October 2007, the Government Accountability Office (GAO) released its report on the ability of the CFTC to properly monitor energy markets to prevent manipulation. The GAO found that the volume of trading in energy commodities had skyrocketed, specifically after the Enron Loophole was enacted in 2000. The GAO also found that while trading has doubled since 2002, the number of CFTC staff monitoring these markets has declined.
On June 23, 2008, the Oversight and Investigations Subcommittee held its second of two hearings on the effect speculators have on energy prices. [
Fadel Gheit, Managing Director and Senior Oil Analyst at Oppenheimer & Co. Inc., said in his testimony:
“I firmly believe that the record oil price in excess of $135 per barrel is inflated. I believe, based on supply and demand fundamentals, crude oil prices should not be above $60 per barrel.”3
In 2000, physical hedgers – businesses such as airlines and trucking companies that need to hedge to ensure a stable price for fuel in future months – accounted for 63 percent of the oil futures market. Speculators accounted for 37 percent. By April 2008, physical hedgers’ share of the same market had dropped to 29 percent, with speculators now controlling an astonishing 71 percent of the oil market. The market was taken over by swap dealers and speculators, a considerable majority of whom have no physical stake in the market.
This excessive speculation is a significant factor in the price Americans are paying for gasoline, diesel and home heating oil. Even the executives of the major U.S. oil companies recognize this. On April 1, 2008, in testimony before the House Select Committee on Global Warming, Mr. John Lowe, Executive Vice President of ConocoPhillips said:
“It is likely that the large inflow of capital into the commodity funds is temporarily exaggerating upward oil price movements.”
3 companies & 2 men are sued over oil-pricing scheme in 2008; Now they are at it again
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http://able2know.org/topic/172572-1
WikiLeaks: Saudis often warned U.S. about oil speculators
By Kevin G. Hall | McClatchy Newspapers
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.
What role Wall Street investors play in the high cost of oil is a hotly debated topic in Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.
One cable recounts how Dr. Majid al Moneef, Saudi Arabia's OPEC governor, explained what he thought was the full impact of speculation to U.S. Rep. Alan Grayson, D-Fla., who in July 2009 was in Saudi Arabia for the first time.
According to the cable, Moneef said Saudi Arabia suspected that "speculation represented approximately $40 of the overall oil price when it was at its height."
Asked how to curb such speculation, Moneef suggested "improving transparency" — a reference to the fact that most oil trading is conducted outside regulated markets — and better communication among the world's commodity markets so that oil speculators can't hide the full extent of their trading positions.
Moneef also suggested that the U.S. consider "position limits" — restrictions on how much of the oil market a company can control — something the CFTC is considering. But the proposal to prevent any single trader from accumulating more than 10 percent of the oil contracts being traded hasn't received final approval, and the CFTC also has yet to define what it considers excessive speculation.
Saudi concerns also came up during a May 2008 meeting in Riyadh, the Saudi capital, between U.S. officials and Prince Abdulazziz bin Salman bin Abdulaziz al Saud, the assistant petroleum minister.
Prince Abdulazziz was "extremely worried" that high prices would destroy the demand for oil, according to the May 7, 2008, account of his meeting with embassy officials.
"Aramco is trying to sell more, but frankly there are no buyers," the cable quoted him as saying, referring to the Saudi state oil company. "We are discounting crudes."
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http://able2know.org/topic/172572-1
URL:
http://able2know.org/topic/172572-1