Gasoline is at $4+ a gallon nationally. Supply is high. Demand is decreasing. So, in a free market, where supply and demand are supposed to be the yin and yang of price control, how does it happen that gas prices stay so high? When the market isn't free. The Koch Brothers aren't just about Right Wing politics. One of their businesses may be making millions by influencing the supply of crude oil.
The New York Times reported this morning that the Commodities Futures Trading Commission (CFTC) filed criminal investigations against a handful of small fish for manipulating the prices of oil in the commodity market with the United States Justice Department.
"With oil prices climbing again this year, President Obama has asked Attorney General Eric H. Holder Jr. to set up a working group to look into fraud in oil and gas markets and "safeguard against unlawful consumer harm."
"In the case filed Tuesday, the defendants -- James T. Dyer of Australia, Nicholas J. Wildgoose of Rancho Santa Fe, Calif., and three related companies, Parnon Energy of California, Arcadia Petroleum of Britain and Arcadia Energy, a Swiss company -- have told regulators they deny they manipulated the market.
"If the United States proves the claims, the defendants may give up $50 million in profits that were believed to be made as a result of the manipulation and also pay a penalty of up to $150 million."
In my blog yesterday at my Truth-2-Power.com, "Things Get Worse With Koch: Tea Party Pumps Up $4 Gas" I connect the dots between the Koch Brothers' lavish giving to more than 80 ultra-Right organizations that stoke the Tea Party and their vision of "reduced government" that turns a blind eye to the practices that they helped to invent that seem to jerry the commodities market in oil to their advantage, where they reap hundreds of millions for their political investment.
Why would they spend those millions on manipulating the Congress and possibly the White House? The connect-the-dots answer as to why the Koch Brothers lavish money on ultra-Right political action groups and candidates is simple: Koch Supply & Trading, a unit of Koch Industries, is one of the top five players in the oil commodity game. They not only buy millions of barrels, but they employ an acquisition and selling strategy that may artificially inflate the value of that oil enough that more than forty cents of your oil price could be traced back to their activities in the commodities market.
Traders like the Koch Brothers' firm can buy millions of barrels of oil that would normally head straight to refineries when the price of oil is low. The Koch firms that deal in oil also have clients whom they advise to either do the same, or buy into index funds that track oil as a commodity.
A "contango strategy" is used. Take millions of barrels of oil out of the supply chain. Park it in storage tanks and even in multi-million barrel super tankers that sit idling as storage.
The supply side dries up artificially against the demand, driving the price of that oil up, sometimes as much as 50%, as it did in 2008.
The people and companies gaming the system then sell the oil at the higher price. These, and their clients, or those they advise, also cash in on investments in the oil indexes that track the price of the commodity.
In 2008, Jon Birger at Fortune wrote in his article:
"Based on the estimates I've seen, a 200,000 barrel-a-day decrease in supply could raise gasoline prices by anywhere from 20 to 40 cents a gallon."
Do that with a million barrels and you could raise prices by 2.00 or more.
The "less government" mantra is all about less regulation and oversight. Fewer eyes and fewer rules allow big commodity traders like the Koch Brothers to manipulate the price of that commodity. The extra millions that they reap in profits in turn escalate the cost of gasoline, then foodstuffs, other goods and services. It puts even more hardship on the already hard pressed middle class.
The irony is that companies like those run by the Koch Brothers are not only driving up the price of gasoline and every foodstuff, goods or service, but that they are sticking it to the same Tea Party zealots who are blindly backstopping their call for the smaller government that will allow them to get away with it. They also have the mindless minions out there supporting their 3% tax break on those millions.
Forrest Gump was right: Stupid is as stupid does.
Read more about Contango Strategy and its impact on government and the economy at my blog. You'll see the admission by a top employee of the Koch Brothers that they engage in these kinds of market manipulations.
Then email the Justice Department and demand that the Koch Brothers be investigated along with the others whom they suspect of manipulating the market. askdoj@usdoj.gov
My shiny two.
12:20 PM PT: A reader shared an excellent link to a 60 Minutes II interview with the Zeppo of the Koch Brothers, Bill Koch:
http://www.cbsnews.com/...