Do you think oil prices are high and going higher because of demand? Think again:
"It’s a scam folks, it’s nothing but a huge scam and it’s destroying the US economy as well as the entire global economy but no one complains because they are ‘only’ stealing about $1.50 per gallon from each individual person in the industrialized world.
It’s the top 0.01 per cent robbing the next 39.99 per cent – the bottom 60 per cent can’t afford cars anyway (they just starve quietly to death, as food prices climb on fuel costs). If someone breaks into your car and steals a $500 stereo, you go to the police, but if someone charges you an extra $30 every time you fill up your tank 50 times a year ($1,500) you shut up and pay your bill. Great system, right?"
"Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities," he argues. "Not by companies that need oil, not by the airlines, not by the oil companies. But by investors who profit money from their speculative positions."Do I have your attention??? Read on:
I read a lot of financial blogs and one of my favorites, Phil'sStockWorld has been on fire for months, trying to expose the criminal enterprise that is oil futures trading.
This is how the scam works as documented in the middle of last year:
The great thing about the NYMEX is that the traders don’t have to take delivery on their contracts, they can simply pay to roll them over to the next settlement price, even if no one is actually buying the barrels. That’s how we have developed a massive glut of 677 million barrels worth of contracts in the front four months on the NYMEX and, come rollover day – that will be the amount of barrels "on order" for the front 3 months, unless a lot barrels get dumped at market prices fast.Basically, Phil see a rigged game where loaded tankers churn their way around the world's oceans, only docking when the price is right. But because we have an oil glut already these tankers have nowhere to go. This does not stop millions of barrels worth of contracts to be written every month. Just before expiration, the contracts are cancelled and rolled to the next month and the game begins again. This whole process serves to keep oil, that should be priced at no more than $60/barrel at an artificially high $100/barrel. The difference is pocketed by the speculators every month and the cost of "high" oil prices is passed on to you.
Keep in mind that the entire United States uses ‘just’ 18M barrels of oil a day, so 677M barrels is a 37-day supply of oil. But, we also make 9M barrels of our own oil and import ‘just’ 9M barrels per day, and 5M barrels of that is from Canada and Mexico who, last I heard, aren’t even having revolutions. So, ignoring North Sea oil Brazil and Venezuela and lumping Africa in with OPEC, we are importing 3Mbd from unreliable sources and there is a 225-day supply under contract for delivery at the current price or cheaper plus we have a Strategic Petroleum Reserve that holds another 727 Million barrels (full) plus 370M barrels of commercial storage in the US (also full) which is another 365.6 days of marginal oil already here in storage in addition to the 225 days under contract for delivery.
These contracts for oil outnumber their actual delivery, a sign of speculation and market manipulation, as oil companies win government authorisations for wells but then don’t open them for exploration or exploitation.
It’s all a game of manipulating oil supply to keep prices up. And no one seems to be regulating it.
Phil has more to say on the subject here:
On a global basis, this is a $2.5 TRILLION annual scam that funnels money from the bottom 99% to the top 1%, but mostly to the top 0.01%. Those guys will do ANYTHING to keep the price of oil as high as possible, no matter how much suffering it causes and no matter how much damage it does to the Global economy. The scam works because nobody calls their bluff - these speculators do not REALLY want 288,420,000 barrels of oil delivered to them in July. That would cost them (at $101.60) $29.3 Billion! It's not just the cost of the oil, they would also have to find a place to put 288M barrels of oil and the US storage system is full. So once we drop 1,000 barrels off in Jamie's (Jamie Dimon, head of JPMorgan Chase) garage and put another 2,000 barrels in Lloyd's (Lloyd Blankfein, head of Goldman Sachs) swimming pool (84,000 gallons) - they begin to run out of space pretty quickly.Despairing of any true regulation of the NYMEX or any other oil speculation cartel, Phil suggests basically calling their bluff....meaning offer to sell them oil at slightly less than the contract price. Here's how he scammed them back in July (keep in mind Phil continues to do this regularly because the scam will never end until the Justice Dept. finally does something about it):
I am harping on this theme this week because we, the American people, have an excellent opportunity to do what I very much doubt Obama's investigation will be able to - we can stop energy speculation and drive prices back down and all we have to do is agree to sell oil to these jackasses for $101 a barrel. Last Wednesday, I pointed out that there were 367,620 open contracts (1,000 barrels per contract) on the NYMEX at $103 per barrel and I said that the number was total BS and that real demand was 35M barrels at most. One week later, how many contracts are still open for July delivery? 288,420! In just one week, we have pressured them into closing 22% of the contracts by simply offering to sell them the contracts at $103 - oil fell all the way to $97.24 as speculators would much rather take a $456,192,000 loss on the 79,200 barrels they dumped (so far) than get stuck accepting delivery of 79,200,000 barrels of oil that they pay us $8,157,600,000 for (at $103). We "sell" them the barrels by taking naked short positions, using the same loophole in the NYMEX that the speculators are using to fake their demand. We, of course, don't have any oil to deliver and the contracts require us to do so by July if we are foolish enough to hold them to expiration on June 21st. (Note: Futures buyers can roll their contract to the next month, they don't need a buyer for the front month to roll, they just pay the spread to the NYMEX. Their choices are to sell or roll each month, and most roll, so it's not even like the demand for the next month is real, it's just the crap they couldn't sell last month rolling over and over again but the "open interest" is interpreted as demand.)I'm not saying we should all become future's traders....that is a really risky game. If, however, this subject started to make it on the teevee, there might just suddenly be more incentive to regulate the future's market. It's YOUR money. You're being ripped off every time you fill your gas tank. In a world where every damn thing is stacked against the 99.9 percent, we can at least try to shame these guys.
So Futures Trading is petty much a very dangerous game of financial chicken - they have no intention of buying barrels of oil (because they have no use for them at all) and we have no intention of selling them (because we don't have oil wells) and you can lose Billions as easily as you can make them. What we are doing is accepting their fake offers to buy oil, which is what they do to drive up the prices. Then people like the Kochs (allegedly) and JPM (who hire supertankers to take oil off the market so they can flip it for a profit), who do have access to physical crude, can shift costs of their artificial shortages to the American consumers, who end up paying 100% or more than the oil is actually worth in an unmanipulated market.
Have a day!