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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.

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.

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.

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.)  

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.

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.

Have a day!

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Comment Preferences

  •  Gas prices are already rising (7+ / 0-)

    The GOP will be forced to play one of their trump cards, that "big regulation" Obama is shutting down oil wells and driving up the price of oil.  They will attack on this, they have to given the candidates they've got.

    What we need is a massive pushback on oil speculation and price gouging.  Obama at the SOTU address said our oil and refining production are up vs. Bush.  And we export a ton of gasoline each month.  So the hard facts are that gas can be cheaper today, but it is oil company profits that are keeping it expensive.

    It's also a huge bonus that the $1.50 price increase you mention is about 3x the taxes.

    Cutting taxes saves $0.50 and costs you more in potholes.

    Drill Baby Drill! didn't drop prices because we're doing it right now.

    So that leaves the speculators as the only place to cut gasoline costs.

    •  Oil speculaton is enviromentaly good. (3+ / 0-)

      It drives up the price and makes green energy more competitive.   It also means that prices are unpredictable also leading to using less oil.  For once, wall street is doing us a favor.  

      Under capitalism man exploits man, under communism the roles are reversed.

      by DavidMS on Sat Feb 18, 2012 at 05:05:12 PM PST

      [ Parent ]

      •  I guess.... (13+ / 0-)

        ....if for every $4 you pay at the pump, $1.50 goes to a speculator, you consider that a favor. If that $1.50 was a tax that financed green energy, maybe then we'd have ourselves a real favor.

        •  In a sensible world the profits you ascribe (1+ / 0-)
          Recommended by:
          truong son traveler

          to speculators would instead accrue to the public through a carbon tax.

          But since we don't live in a sensible world, this seems to be the only way to get things done.

          p.s. have you ever heard of peak oil?  And China and India sucking it down like there's no tomorrow??

          •  and keep in mind (1+ / 0-)
            Recommended by:
            Roadbed Guy

            the fear-mongering going on these days over Iran and the decision of the EU not to buy Persian oil. The speculators are smiling.

            Iran is the second-largest Organization for Petroleum Exporting Countries (OPEC) producer, exporting up to 2.5 million barrels of oil a day. Around 450,000 of these barrels go to the European Union - the second-largest market for Iran after China.

            The requisite faceless bureaucrat, EU Energy Commissioner Gunther Ottinger, has been spinning that the EU can count on Saudi Arabia to make up the shortfall from Iran.

            Any self-respecting oil analyst knows Saudi Arabia does not have all the necessary extra spare capacity. Moreover, and crucially, Saudi Arabia needs to make a lot of money out of expensive oil. After all, the counter-revolutionary House of Saud badly needs these funds to bribe its subjects into dismissing any possibility of an indigenous Arab Spring.

            “Humankind can not bear very much reality.” - T.S. Eliot

            by truong son traveler on Sun Feb 19, 2012 at 06:41:21 AM PST

            [ Parent ]

  •  This is just a test (7+ / 0-)

    The petro and finance boys are just practicing for the late summer and early fall, when they'll really try to put gas prices through the roof.

    Their Super Pac's bigger than your Super Pac.

    by Minerva on Sat Feb 18, 2012 at 04:24:25 PM PST

  •  greedy, thieving, rotten bas$@&ds (4+ / 0-)

    this needs to be frigging illegal....

    "It is horrifying that we have to fight our own government to save the environment." *Ansel Adams* ."Even if you are on the right track, you'll get run over if you just sit there."*Will Rogers*

    by Statusquomustgo on Sat Feb 18, 2012 at 04:25:44 PM PST

  •  Welcome to the 1981 New Economy. (6+ / 0-)

    This is part of what the economy has been based on for a long time.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sat Feb 18, 2012 at 04:30:33 PM PST

  •  So how does this brilliant theory explain (3+ / 0-)
    Recommended by:
    BradMajors, Sparhawk, Roadbed Guy

    how natural gas prices have reached ten year lows?

  •  Just in time for the elections.... (5+ / 0-)

    What would be better for the republicans than gas prices approaching (or exceeding) $5 a gallon?  A market that is so easily manipulated can just as easily be used as a campaign tool.  We already know that scruples and ethics left the building a long time ago and I look at this as just another strategy by Obama's enemies to assure that he's a 1 term president.  
    This one has a chance of working.

  •  On a related note, (5+ / 0-)

    we were informed by our utility company that our gas rates would be going up.  They bought too much this winter and we didn't use it because it was too warm.  Last year, the rates went up because they didn't buy enough (we used too much because it was cold).  This kind of thing is crazy-making for those of us who just want to get by without freezing to death in the winter.  No matter what we do or what the weather is, we have to pay more.

    -7.62, -7.28 "Hold fast to dreams, for if dreams die, life is a broken winged bird that cannot fly." -Langston Hughes

    by luckylizard on Sat Feb 18, 2012 at 05:11:36 PM PST

  •  Oil (3+ / 0-)
    Recommended by:
    TheLawnRanger, cordgrass, Sparhawk

    Still way to cheap. The real cost is in no way factored into the price we are paying.

    We need $200/bl oil yesterday. The US needs $8/gallon gas yesterday.

    The path we are on is unsustainable and only price will help to change it.

    Sure the oil market is rigged. Sure there is a cartel. But it is a non-renewable resource. After it is used it is no more.

    Every day we use what it took the earth 10,000 years to make. Talk about over exploitation - and that generally happens when things are way too cheap.

    Those who make peaceful revolution impossible will make violent revolution inevitable. - JFK

    by taonow on Sat Feb 18, 2012 at 05:16:13 PM PST

    •  All true... (7+ / 0-)

      ...but not related to the topic of this diary. Oil speculation likely accounts for $1.50 for every $4 you pay at the pump. Would you rather we pay $6 to speculators for every $8 at the pump?This cartel is STEALING from you...

      •  of course they are (3+ / 0-)
        Recommended by:
        cls180, TheLawnRanger, pdx kirk

        and the Fed is stealing from me and you too (low interest rates are screwing many in the economy). Almost all of the markets are broken these days. The stock market is rigged too (HFT and PPT) - believe me I watch it every day.

        The way around the oil issue is for governments to up oil taxes ... a lot. Then the money goes to governments not speculators.

        In addition a lot of oil never actually goes through the oil markets - it is sold directly

        Those who make peaceful revolution impossible will make violent revolution inevitable. - JFK

        by taonow on Sat Feb 18, 2012 at 05:31:52 PM PST

        [ Parent ]

  •  pure speculation (5+ / 0-)

    you are right and the only place I have seen any mention of this is The Young Turks. MSM would not touch it. But just try to explain that this trading is driving up gas prices to oil & gas folks....whoa get yer head knocked off... their standard rant is because we don't have enough oil and must drill. The stats say different on the supply of oil and gas. And last time gas prices went up it was the same futures trading then also.

  •  Oh, there's demand allright. I see it every day. (1+ / 0-)
    Recommended by:
    Sparhawk

    I get up in the morning and I take an express bus on I-93. And every morning, that bus shares the road with lots and lots of drivers taking themselves and only themselves in their cars, which they fueled up at $3.70/gallon, into downtown Boston.

    That is the demand.

    If the price of oil was only due to speculation, all of them would be off the road and tumbleweeds would blow across the gas stations. But they buy, and they keep buying.

    That is the demand. That is why oil prices are high.

    As for speculation on the NYMEX:

    The NYMEX is not the most important trading point for oil. The WTI contract that NYMEX trades is not the most important contract. That is the Brent contract, which is traded primarily in London, and covers delivery of oil at Atlantic ports.

    And Brent is trading at even higher prices than WTI.

    Then there's the TAPIS contract, for oil delivered in Singapore. Which is even more expensive.

  •  top 3 things killing the economy (0+ / 0-)

    oil prices are not on that list.

    Is oil spec over the top... yes.

    FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sat Feb 18, 2012 at 06:08:48 PM PST

  •  Actually, you DO control them (2+ / 0-)
    Recommended by:
    ocschwar, Sparhawk

    Every time they hit a psychological high, people stop driving and throwing away plastic, and it goes back down.

    We DO have the power to end their speculation. Stop driving unnecessarily now--today. Every single person reading this could cut 20 percent off their driving by a lot of thought, and perhaps a little car pooling, and the effect could be seen in a week.

    Then the prices would go back down. Guarantee!

    Quidquid latine dictum sit, altum viditur.

    by MrMichaelMT on Sat Feb 18, 2012 at 06:12:31 PM PST

  •  Network news all shouting $5 gas as soon... (1+ / 0-)
    Recommended by:
    askyron

    as Memorial Day. If that happens, President Obama may well consider releasing another 30 million barrels like last summer.

    Better yet, release 60 million!

    •  or try jujitsu (1+ / 0-)
      Recommended by:
      Notreadytobenice

      or should I say 11th dimensional chess?
      dump some now to shock the market with an warning to follow sometime later in the year.
      let them sweat about holding on to the futures too long and getting busted.

    •  Only if he was a moron (0+ / 0-)

      We need that oil for strategic reasons (war, major catastrophe, etc). It is foolish to release it so people can get a break driving their SUVs all over creation on Memorial Day.

      (-5.50,-6.67): Left Libertarian
      Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

      by Sparhawk on Sun Feb 19, 2012 at 05:21:00 AM PST

      [ Parent ]

  •  Consumption is at 1997 levels (1+ / 0-)
    Recommended by:
    SquirrelWhisperer

    I have seen this in the media a bit so people are starting to make the connection.  One reason the producers want oil at $100 a barrel?  Getting it out of the ground isn't profitable unless the price is that high.

    Loyalty to petrified opinion never yet broke a chain or freed a human soul in this world--and never will. Mark Twain

    by whoknu on Sat Feb 18, 2012 at 08:09:04 PM PST

  •  It's killing my business (1+ / 0-)
    Recommended by:
    Raggedy Ann

    I drive a taxi.  My rates are regulated, and were set when gas locally was $2.70/gallon.  I'm now paying $4.019.

    Fuel that was $45/day is now $65/day.  On slow days, that really makes a difference.  Fewer drivers are showing up because of higher fuel costs, lube costs, repair rates, parts prices, insurance rates...

    When more people are out of work and businesses cut back travel for salespeople, fewer people ride taxis.

    It's one thing for airlines, railroads, and shipping lines to buy futures to hedge future fuel costs, but the rampant speculation now practiced is not only morally wrong, it should be illegal.

    "Everybody wants to go to Heaven but nobody wants to die" --- Albert King

    by HarpboyAK on Sun Feb 19, 2012 at 12:05:00 AM PST

    •  Ours too (0+ / 0-)

      My husband has a dump truck service.  Once diesel reaches $5/gallon, again, we might have to park the truck.  

      Once diesel reaches $5/gallon, look for all prices in stores to increase, again.

      love the fetus, hate the child

      by Raggedy Ann on Sun Feb 19, 2012 at 06:14:21 AM PST

      [ Parent ]

  •  personally, I think it's great. (0+ / 0-)

    we should be doing substantial things to help oil-dependent businesses, like the taxi driver commenter above me and truck drivers, but I think that federal and state governments should beef up public transportation as much as possible and encourage development of electric cars.  High gas prices are the perfect thing to get us off fossil fuels and I'm pleased that the oil is just being shipped around the world rather than burned.

    •  There is a bit of disconnect in the diary (0+ / 0-)

      between the vast amounts shipped around the globe and then a narrowing of the focus from the globe to domestic supplies to try and illustrate just how vast this amount is . ..  

      About a week's worth of global consumption, it would seem.

      Probably has little more effect on prices than when Obama released that oil from the SPRs.

  •  1998 Congress (0+ / 0-)

    Alot of it goes back to the legislation created in the 1998
    congress that moved oil trading into wallstreet control.

    The next point is that this is a symptom of the disease.
    The disease is the FED/IRS created at the same time in 1913.

    Presently the FED is printing money for the third time called
    quantitative easing, banks' cash is surging. Banks do not loan
    out this money. The only way new money can enter an economy in the FED monitary system is through new loans
    with usery such that no one benefits except the banks, this is not happening, either the banks will not loan out into a collapsing middle class or the people just won't accept the usery rates and/or have no capacity for additional debt repayment.

    Instead these banks use the FED fiat to speculate in things in the market, stock and commodities. Certainly banks cannot buy government bonds anymore, all debt is trash, leaving only stocks and commodities available for bank speculation. And the banks do it with leverage, the amount of leverage may be regulated but if they go overseas the leverage can be up to 100 to 1 but 50 to 1 is common. When Leyman went down their leverage was around 35 to 1.

    The Fed prints the money but the banks will not loan in into a collapsing middle class, instead for the banks it seems better for them to speculate in stocks and commodities, and they can
    buy 50 barrels of oil for the price of one with leverage.

    This is the end days of the paper fiat ponzie. This could not have existed unless IRS was created at the same time as the FED in 1913. Such that the banks get this free paper from YOU,
    IRS feeds the FED out of your labor.

    Corporations only pay IRS on NET INCOME, YOU pay on GROSS INCOME no matter what you cumulative annual loss is
    after income minus expenses, you lose. Corporations only pay tax if there is something left after income minus expenses.

    There again automatic inflation in the fiat paper system is designed so that you lose, so that your income minus expenses is always running a loss and you are always taxed from the top line of gross income while paper ponzie inflation is designed to keep your NET INCOME after expenses always running a loss.

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