Political Hypocrisy Of Oil Prices

[Sanslines]

It's interesting to me that when oil was climbing in recent years, the Bush administration was blamed for its links to "big oil," and that because Bush and Cheney were "oil guys," they were somehow "paying themselves and their friends" off and manipulating the market. Of course they were not. Now they are out of office. Obama and the Democrats are in FULL control of the show. Funny, oil is rising again. I don't think there is a damn thing they can do to stop it. Most of their "fixes" will only lead to less oil production, and a bigger shortage in the future. Where are the cries now about what Obama is going to do? What sickening hypocrisy.

Eric (Posted 05.29.09 9:45 AM)

May oil price up most since 1999

Posted May 29 2009, 05:46 AM by Douglas McIntyre

In May, oil will post its largest one-month rise since 1999. That does not seem possible, given that it rocketed up to $147 in the middle of last year. The news is a sign that crude prices are on a march that may not end this month.

According to (http://www.bloomberg.com/apps/news?pid=20601100&sid=aKXniLdtaWnw&refer=germany) Bloomberg, much of the fuel for the increase is the desire to put money that has been on the sidelines for months to work. If so, crude is going up for one of the same reasons that the stock market is -– speculation.

The speculation could expand as investors gamble that it will be a cold winter in the northern hemisphere and that GDP improvements in China and India will mean demand is already stepping up. An end to the U.S. recession before the end of the year would pressure the need for oil even more.

Of course, oil prices may be the greatest enemy of the recovery. If consumers and businesses are forced to take whatever improving income they have and put it toward oil-based products or gasoline that may suck the life out of a rise in discretionary income.

If May is any indication, the recovery may be put on hold for some time.

http://blogs.moneycentral.msn.com/topstocks/archive/2009/05/29/may-oil-price-up-most-since-1999.aspx

[Navigator]

Obama and the Democrats are in FULL control of the show. Funny, oil is rising again. I don't think there is a damn thing they can do to stop it. Most of their "fixes" will only lead to less oil production, and a bigger shortage in the future. Where are the cries now about what Obama is going to do? What sickening hypocrisy.


I don't see that you've made a case for hypocrisy. Obama has never promised low oil prices. In fact one of the key items he ran on during his campaign was the goal of facing up to our energy shortage and working to find a solution to the problems....not lowering prices.

The world is past the point in time where we produced the most oil per day that we will ever produce. World oil production is now decreasing from every major field in the world as the amount of oil in those fields is depleted. Each year oil companies are finding about 1 barrel of new oil for every 5 barrels they produce and sell. In some fields, like the second largest in the world, Mexico's Canterell, production is dropping by as much as 30% a year. Since Mexico is the 2nd or 3rd largest supplier of oil to the U.S. and since Mexico gets almost half it's government revenues from oil, this will present us with two potential problems in the near future....lost oil supply and the possibility of a failed state on our border.

The current low prices just exacerbate the problem since they are generally less than the cost of producing a barrel of oil. Therefore new exploration and drilling is reduced which is setting us up for a big leap in prices when rising demand...due to increasing populations....exceeds declining supply.

The world still has a lot of oil. But, what's left is the hard to produce...read expensive to produce...oil. When it costs more to produce a barrel of oil than it can be sold for, it won't be produced. Most importantly, when the energy required to produce a barrel of oil is greater than the energy produced by a barrel...that field is done despite the fact that a lot of oil may still be recoverable.

The world will soon be very short of energy even though demand is currently reduced somewhat due to the Bush depression. There's no hypocrisy in Obama's position on energy. In fact he's the first President since the great Jimmy Carter to recognize and face up to the unimaginably huge energy shortage problems the world will face in the very near future.

What's really a shame about all this is that, during the 6 years that Bush and the R's had full controll of all branches of government, they didn't build and leave us 20 or 30 new nuclear reactors, new geothermal and hydroelectric facilities, 10 or 20 new solar-thermal electricity generating plants in western deserts, wind generating farms all through the midwestern wind zones, tidal generating farms all along our coasts where tidal ranges are high and a country full of natural gas powered vehicles with nationwide infrastructure for refueling them.

Wouldn't that have been a nice use of those wasted years? Maybe Bush was too busy paying off his buddies in the oil and defense industries.

[marko486]

Thanks for posting Navigator, saving me the trouble. Just a bunch of idiocy. Funny how it doesn't even mention how much OPEC throttled the spigot because prices had tanked so much. I would add what Bush and even Clinton were guilty of is not doing enough to promote alternative energies as such that it take many years for technologies to come to fruition. Also Bush and congress did little towards conservation, not even gas mileage standards were raised. They actively promoted whatever cause oil companies wanted. Case in point, the drill here, drill now crap, which in actuality would only supply us with maybe a week of oil at our consumption rate. Was China's marked increase in use that triggered the problem with demand out-stripping capacity. One area agree with Bush over Obama was the promotion of nuclear plant and the storage in Nevada, but I am biased having worked in that field before.

[Sanslines]

I don't see that you've made a case for hypocrisy. Obama has never promised low oil prices. In fact one of the key items he ran on during his campaign was the goal of facing up to our energy shortage and working to find a solution to the problems....not lowering prices.


The reason for the recent run up in the price of oil is pure price speculation. It is not about a sudden shortage of energy or sudden problems with Mexico. Obama did campaign on the promiss to end run away oil price speculation. This is what he said during his campaign:

Obama offers steps to curb oil speculation (DIG DUG)

Posted June 25th, 2008 by theStockMasters... in

http://www.dmiblog.com/archives/barack_obama.jpgBarack Obama has offered new steps to crack down on speculation in oil markets, saying his plan would help rein in runaway fuel costs. Let's review the details of Obama's plan, which will benefit investors by Shorting DIG (http://finance.google.com/finance?q=dig&hl=en) and going Long DUG (http://finance.google.com/finance?q=dug&hl=en&meta=hl%3Den):
* The Illinois senator's campaign said he would close the so-called Enron loophole that exempts some energy speculators from U.S. regulations that apply to commodities traded over exchanges. It takes its name from the energy giant that benefited from the law and later collapsed because of massive accounting fraud.
* His plan would require U.S. energy futures to trade on regulated exchanges.
* Obama is calling for more data on index funds and other similar types of investments to boost transparency of institutional players in commodities markets.
* He backs legislation that would direct the Commodity Futures Trading Commission to investigate proposals such as increasing margin requirements in the market.
* He would aim to stop energy traders from evading U.S. regulations by conducting transactions through foreign subsidiaries of U.S. exchanges.
* He would call on the Federal Trade Commission to expedite investigations of suspected price manipulation and direct the Justice Department to look at whether illegal activity has contributed to the run-up in oil prices.http://www.thestockmasters.com/files/u1/dig-dug-oil.jpg











http://www.thestockmasters.com/node/657


For more detail: http://www.barackobama.com/2008/06/22/obama_announces_plan_to_fully.php

Oil prices are being speculated. Obama promissed to end price speculation. When Bush was in office, there was non stop criticism of him for not stopping oil price speculation. Obama is in office now and yet no one has criticized him for not ending oil price speculation. This is the hypocrisy.


Regulators asleep at the wheel AGAIN: oil speculation (http://www.acouplethings.com/blog/2009/05/regulators-asleep-at-the-wheel-again-oil-speculation/)

<!-- BEGIN TEMPLATE: postbit_external -->“Excessive speculation in any commodity under contracts of sale of such commodity for future delivery . . . causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity.”
--US Commodity Exchange Act

The law requires the Commodity Futures Trading Trading Commission to establish such trading limits as the Commission finds are necessary to diminish, eliminate, or prevent such burdens.

The free market system is very broken in the oil futures market. Rather than being an anticipatory investment it has become a major self-defeating force: the run up in price is in anticipation of a recovery, a recovery that the run up in price may very well stymie. If that's not an undue and unnecessary burden on commerce then I don't know what is.

Is the CFTC asleep at the wheel?

There is another oil speculation bubble growing but this time it threatens the global economic recovery. Where the hell are the regulations that Obama and Congress and the G 20 promised. Or, in this case, the law is already in place...where the hell are the regulators?

http://www.acouplethings.com/blog/2009/05/regulators-asleep-at-the-wheel-again-oil-speculation/

[Sanslines]

Thanks for posting Navigator, saving me the trouble. Just a bunch of idiocy. Funny how it doesn't even mention how much OPEC throttled the spigot because prices had tanked so much. I would add what Bush and even Clinton were guilty of is not doing enough to promote alternative energies as such that it take many years for technologies to come to fruition. Also Bush and congress did little towards conservation, not even gas mileage standards were raised. They actively promoted whatever cause oil companies wanted. Case in point, the drill here, drill now crap, which in actuality would only supply us with maybe a week of oil at our consumption rate. Was China's marked increase in use that triggered the problem with demand out-stripping capacity. One area agree with Bush over Obama was the promotion of nuclear plant and the storage in Nevada, but I am biased having worked in that field before.

Oil price speculation has absolutely nothing to do with any of this.

[marko486]

Figuring out what supply supply and demand is doing not part of speculation? You are kidding, right? There is actually alot of factors involved. One neglected to mention was the devaulation of the dollar.

http://www.ritholtz.com/blog/2009/01/oil-speculation/

1. Oil is priced in US Dollars. Since 2001, the Dollar fell 40% (from 120 to 72); Oil rise nearly 5 fold over the same period. And Oil’s collapse occurred over a period when the dollar formed a short term bottom; it has certainly had its most significant rally in years (72 to 88).

2. Over the same period that Oil prices were rising, the US was fighting two major wars in the Middle East, Iraq and Afghanistan. These impact prices via psychology and risk of supply disruption — especially at a time when producers were running flat out.

3. Energy prices rose during a global economic expansion (fueled by low rates and cheap money); Oil fell during a period that marked the beginning of the US recession and the start of a global slowdown.

4. Since 2001, Commodities of all sorts rose significantly: Steel, aluminum, cement, cotton, soy, livestocks, foodstuffs, precious metals, etc. Were they all driven by speculation, or was something else going on?

5. Since the 1% Fed funds rate of 2002-03, inflation has had a dramatic impact on ALL prices — from medical costs to insurance to education to health care to transportation to housing to food and energy. That 60 Minutes failed to even mention inflation in a piece on Oil prices is a terrible oversight on their part.

6. Throughout the 1990s and 2000s, cars were increasingly replaced with SUVs and trucks in the United States. Not only did these get appreciably worse gas mileage, that fleet transition took place as the total US miles driven rose. Over the past 20 years, people have lived increasingly further away from their jobs. Hence, increased US demand for energy accompanied (and increased prices).

7. Since gas prices hit $4 a gallon and the recession began, total US miles driven fell significantly, by several billion miles. As expected,t he drop in driving was followed by a fall in prices.

8. 60 Minutes interviewed Mike Masters, a hedge fund manager who had testified before Congress that speculation was driving prices. They omitted to mention he was talking his book. His holdings in energy sensitive stocks — with large positions, the vast majority in call options, in AMR Corp (AMR), the parent of American Airlines, Delta Air Lines (DAL), General Motors (GM), UAL Corp (UAUA) and US Airways (LCC) — were responsible for his fund losing 35% of its value before the Fall 2008 market collapse..

9. China boomed~! More and more global manufacturing outsourcing saw factories being built throughout China. They also went through a wild process building out the nation in preparation for the 2008 Olympics held there. Oh, and China, like the US, also began filling its Strategic Petroleum Reserves. Another small country, India, was booming over this period also.

10. The rise of extremist terrorist groups like al-Quada, the hostility of Iran towards the West, supply and political disruptions in places like Nigeria, and overt hostility to the US by oil producers like Venezuela President Hugo Chavez also contributed to drive prices up. The political factors were also omitted.

[Navigator]

The reason for the recent run up in the price of oil is pure price speculation. It is not about a sudden shortage of energy or sudden problems with Mexico. Obama did campaign on the promiss to end run away oil price speculation.

Oil prices are being speculated. Obama promissed to end price speculation. When Bush was in office, there was non stop criticism of him for not stopping oil price speculation. Obama is in office now and yet no one has criticized him for not ending oil price speculation. This is the hypocrisy.


Sans...there's a big difference between speculation and manipulation in any market, regardless of how a blog or even the mainstream media (mis)uses each term.

What Obama promised, and what each of the bullet points in your article goes to, is eliminating or reducing manipulation in the oil market...not speculation.

Speculation is a major part of and a major necessity in any commodity market. Speculators provide liquidity so that the large price swings that would happen if a commodity market was made up of only producers and consumers are dampened. Commodity markets exist for the benefit of hedgers on both the producer and consumer side of any commodity and speculators as well as hedgers take the opposite side of a hedgers trade allowing the hedging to take place. The idea that any President or anyone else who's aware of how free markets work would want to do away with speculation in commodity markets is absurd. And finally, all studies have shown that speculators do not move prices except momentarily in some cases. Price trends, both up and down, are caused by supply vs. demand....and sometimes by manipulation if a culture of corruption is allowed to exist as during the Bush years.

And the fact that you may have suddenly become aware of Peak Oil production or or problems with Mexico's oil production does not mean the problems have suddenly come about. These problems have been building for a long, long time...as Jimmy Carter mentioned. In fact if you google M. King Hubbert you'll find that Mr. Hubbert predicted Peak Oil way back in the 1950's...and hit it almost to the year.

Finally, I guess I don't understand why you're so positive that oil prices are "being speculated" (sic) so that...I think you're implying...prices are moving up in a way that isn't justified by the oil market's hedgers and speculators view of future supply/demand balances. But if you're sure....why don't you buy a few oil futures contracts and make your fortune?;)

[Sanslines]

Figuring out what supply supply and demand is doing not part of speculation? You are kidding, right? There is actually alot of factors involved. One neglected to mention was the devaulation of the dollar.

http://www.ritholtz.com/blog/2009/01/oil-speculation/

1. Oil is priced in US Dollars. Since 2001, the Dollar fell 40% (from 120 to 72); Oil rise nearly 5 fold over the same period. And Oil’s collapse occurred over a period when the dollar formed a short term bottom; it has certainly had its most significant rally in years (72 to 88).

2. Over the same period that Oil prices were rising, the US was fighting two major wars in the Middle East, Iraq and Afghanistan. These impact prices via psychology and risk of supply disruption — especially at a time when producers were running flat out.

3. Energy prices rose during a global economic expansion (fueled by low rates and cheap money); Oil fell during a period that marked the beginning of the US recession and the start of a global slowdown.

4. Since 2001, Commodities of all sorts rose significantly: Steel, aluminum, cement, cotton, soy, livestocks, foodstuffs, precious metals, etc. Were they all driven by speculation, or was something else going on?

5. Since the 1% Fed funds rate of 2002-03, inflation has had a dramatic impact on ALL prices — from medical costs to insurance to education to health care to transportation to housing to food and energy. That 60 Minutes failed to even mention inflation in a piece on Oil prices is a terrible oversight on their part.

6. Throughout the 1990s and 2000s, cars were increasingly replaced with SUVs and trucks in the United States. Not only did these get appreciably worse gas mileage, that fleet transition took place as the total US miles driven rose. Over the past 20 years, people have lived increasingly further away from their jobs. Hence, increased US demand for energy accompanied (and increased prices).

7. Since gas prices hit $4 a gallon and the recession began, total US miles driven fell significantly, by several billion miles. As expected,t he drop in driving was followed by a fall in prices.

8. 60 Minutes interviewed Mike Masters, a hedge fund manager who had testified before Congress that speculation was driving prices. They omitted to mention he was talking his book. His holdings in energy sensitive stocks — with large positions, the vast majority in call options, in AMR Corp (AMR), the parent of American Airlines, Delta Air Lines (DAL), General Motors (GM), UAL Corp (UAUA) and US Airways (LCC) — were responsible for his fund losing 35% of its value before the Fall 2008 market collapse..

9. China boomed~! More and more global manufacturing outsourcing saw factories being built throughout China. They also went through a wild process building out the nation in preparation for the 2008 Olympics held there. Oh, and China, like the US, also began filling its Strategic Petroleum Reserves. Another small country, India, was booming over this period also.

10. The rise of extremist terrorist groups like al-Quada, the hostility of Iran towards the West, supply and political disruptions in places like Nigeria, and overt hostility to the US by oil producers like Venezuela President Hugo Chavez also contributed to drive prices up. The political factors were also omitted.


Are you trying to say that all of this is the reason behind the past couple of month's large rise in gasoline prices at the pump?

This is what I had originally posted:

May oil price up most since 1999

Posted May 29 2009, 05:46 AM by Douglas McIntyre

In May, oil will post its largest one-month rise since 1999. That does not seem possible, given that it rocketed up to $147 in the middle of last year. The news is a sign that crude prices are on a march that may not end this month.

According to (http://www.bloomberg.com/apps/news?pid=20601100&sid=aKXniLdtaWnw&refer=germany) Bloomberg, much of the fuel for the increase is the desire to put money that has been on the sidelines for months to work. If so, crude is going up for one of the same reasons that the stock market is -– speculation.

The speculation could expand as investors gamble that it will be a cold winter in the northern hemisphere and that GDP improvements in China and India will mean demand is already stepping up. An end to the U.S. recession before the end of the year would pressure the need for oil even more.

Of course, oil prices may be the greatest enemy of the recovery. If consumers and businesses are forced to take whatever improving income they have and put it toward oil-based products or gasoline that may suck the life out of a rise in discretionary income.

If May is any indication, the recovery may be put on hold for some time.






I can assure you that the dollar did not experience an enormous swing last month, that psychological effects from Iraq and Afghanistan did not suddenly traumatize the nation last month, that there was no sudden global ecomonic expansion last month, etc, etc. None of what you posted above is at all relevant to the fact that oil prices rose substantially last month due to pure speculation that had no basis in a booming China, large swings in the US dollar,etc.

[Sanslines]

Sans...there's a big difference between speculation and manipulation in any market, regardless of how a blog or even the mainstream media (mis)uses each term.


Market Manipulation

Market manipulation is the activity of trying to force prices in a certain direction. For decades, speculation and market manipulation have gone hand in hand. There is no question that market manipulation is an unethical and illegal activity.

There are broadly two classes of market manipulation: market-based manipulation, and information-based manipulation. "Market-based manipulation" includes buying up a huge number of shares on the market so that prices of illiquid stocks shoot up. Market-based manipulation also uses "short squeezes" to trap short sellers. "Information-based manipulation" influences market prices by manipulating news. This may include selective release of news, orchestrated dissemination of false rumours coupled with extreme projections, etc.

In either event, the objective of a manipulator is to force prices away from the equilibrium price on the market.

Market manipulation is undoubtedly a social ailment. At exchanges, procedures like price limits, market surveillance, detection of circular trading, etc. would be valuable insofar as they make manipulation harder. But we should be clear that speculation is not synonymous with market manipulation which is a criminal activity.

Speculation

If speculation does not involve counterparty risk (with trades guaranteed by a clearing corporation), and if it is neither manipulative, nor based on insider information, then what is speculation?

Speculation is assimilating available information about a security, and forming an assessement about whether the price is expected to rise or to fall. If a speculator thinks that the price will go up, he buys the security.

If he thinks that the price will go down, then he sells the security.

Speculation makes market prices incorporate a wealth of information and analysis about a company. A market that rapidly translates company knowledge into stock price is an efficient market. Therefore, speculation makes a market efficient.

If market prices are slow to reflect information or analysis, speculators could grab the opportunity to buy or sell, and profit whenever market prices catch up with this information. But as a consequence, the more rapidly speculators act on their information, the more rapidly is news assimilated by the market. Therefore market efficiency comes about through the actions of speculators alone!

Market efficiency is the most important single "deliverable" of financial markets from the viewpoint of the overall economy. Efficient markets reward good managers and direct investment into companies with good prospects and divert funds from companies with poor prospects. The market which is efficient is a good planner which runs the country.

Through market efficiency, speculators are the vital driver of any good financial market. The greater the supply of speculators, the better the efficiency of the market.



(One of the dirty little secrets in the dirty business of crude oil is that sometimes Oil Producers, entities that typically sell commodity futures to hedge, actually buy commodity futures contracts. In doing so, they join the speculators and are not hedging. They can exact their production costs out of the market. This might be an area for regulation.)

What you are addressing is an academic or pure definition of oil speculation. Pure oil speculation has a solid basis and price increases or decreases can be justified with facts. However, this is NOT what is presently occuring. There is no factual justification for the recent (last month's) huge rise in oil and gas prices. The enormous profits that oil companies are enjoying are not due to theoretical market efficiencies. There is no sudden and large demand for oil due to booming economies, no huge dollar currency exchange swings, no huge demand for home heating oil (for Winter is over in the Northeast USA - the world's larget home heating market), etc. Any of these effects would be the basis for price rises but they have not occured to a level which justifies the large oil price increases.

The post above concerning what Obama siad is exactly what Obama said. I do not believe that the media edited Obama's speech to the point where the word 'speculation' was swapped with the word 'manipulation'. Obama promissed to address oil speculation and this is the word that he used.

As for peak oil, peak oil is just a theory. The exact same thing was said about natural gas until an enormous pool of natural gas was discovered under the Northeast USA and a feasible and economic way was developed to extract this natural gas (Marcellus Natural Gas Field).

The reason that I am so certain that oil prices are being speculated (manipulated if you prefer for Enron claimed to be 'speculating' when in fact they were 'manipulating' and were caught in the act) is that there are no sound justifications for the recent huge increase in oil prices. Excuses are being fabricated in order to justify price speculation that have no sound basis. This is part of a classic example of manipulation that may be passed off as 'speculation' in order to fly under the radar.


Finally, I guess I don't understand why you're so positive that oil prices are "being speculated" (sic) so that...I think you're implying...prices are moving up in a way that isn't justified by the oil market's hedgers and speculators view of future supply/demand balances. But if you're sure....why don't you buy a few oil futures contracts and make your fortune?;)

Oil stocks and mutual funds are increasing in value and those who invest in such funds will make money to offset rising oil prices.

[jon71]

At it's worst under Bush gas was close to $4. It's barely over $2 now and at the start of the "summer driving season" when it typically goes up. That makes a difference.

[Navigator]

Market Manipulation

There is no question that market manipulation is an unethical and illegal activity.

But we should be clear that speculation is not synonymous with market manipulation which is a criminal activity.

Speculation

Speculation is assimilating available information about a security, and forming an assessement about whether the price is expected to rise or to fall. If a speculator thinks that the price will go up, he buys the security.

If he thinks that the price will go down, then he sells the security.

Speculation makes market prices incorporate a wealth of information and analysis about a company.

Therefore market efficiency comes about through the actions of speculators alone!

Through market efficiency, speculators are the vital driver of any good financial market. The greater the supply of speculators, the better the efficiency of the market.


Thanks Sans...you've correctly identified something you googled that supports my points about speculation and manipulation.

You also say:

Sans: (One of the dirty little secrets in the dirty business of crude oil is that sometimes Oil Producers, entities that typically sell commodity futures to hedge, actually buy commodity futures contracts. In doing so, they join the speculators and are not hedging. They can exact their production costs out of the market. This might be an area for regulation.)

But...but...but you were just extolling the virtues of speculators. Did you forget what you learned through your google search? I hate to break this to you, but almost all professional traders are frequently both long and short *at the same time*. This is how speculators hedge their positions and all it does is add liquidity to the market...and benefit the markets. (re-read your quotes above)

Sans: "There is no factual justification for the recent (last month's) huge rise in oil and gas prices. There is no sudden and large demand for oil due to booming economies, no huge dollar currency exchange swings, no huge demand for home heating oil (for Winter is over in the Northeast USA - the world's larget home heating market), etc. Any of these effects would be the basis for price rises but they have not occured to a level which justifies the large oil price increases."

I'm sure you're very knowledgable...but that's just your opinion. Opinions are what makes markets...markets wouldn't exist without opinions. Plus...I think you're confusing a cash market where a refiner buys oil today with the futures market where prices are based on expectations for the future.

Sans: "As for peak oil, peak oil is just a theory."

Apparently you didn't google Hubbert...or take anything away from it if you did. The idea that Peak Oil is a theory is a Republican talking point used to excuse Bush's failure to leave us with all the energy I listed in my first post.

Sans: The exact same thing was said about natural gas until an enormous pool of natural gas was discovered under the Northeast USA and a feasible and economic way was developed to extract this natural gas (Marcellus Natural Gas Field).

Actually, there was no M. King Hubbert in the nat gas world. That notwithstanding, it is possible that nat gas production has peaked because there are less than half the number of gas drilling rigs operating today that were operating 9 months ago due to the Bush depression, the rigs that have been pulled down are rusting away in fields across the U.S., the capital to get drilling started again is deflating away and the hands-on knowledge and experience to make those rigs operate is rapidly ageing. Plus, the Marcellus and other shale wells deplete in as little as 2 years.

Sans: This is part of a classic example of manipulation that may be passed off as 'speculation' in order to fly under the radar.

You might want to re-read your definitions of speculation and manipulation above.

[Sanslines]

Thanks Sans...you've correctly identified something you googled that supports my points about speculation and manipulation.

You also say:

Sans: (One of the dirty little secrets in the dirty business of crude oil is that sometimes Oil Producers, entities that typically sell commodity futures to hedge, actually buy commodity futures contracts. In doing so, they join the speculators and are not hedging. They can exact their production costs out of the market. This might be an area for regulation.)

But...but...but you were just extolling the virtues of speculators. Did you forget what you learned through your google search? I hate to break this to you, but almost all professional traders are frequently both long and short *at the same time*. This is how speculators hedge their positions and all it does is add liquidity to the market...and benefit the markets. (re-read your quotes above)

Sans: "There is no factual justification for the recent (last month's) huge rise in oil and gas prices. There is no sudden and large demand for oil due to booming economies, no huge dollar currency exchange swings, no huge demand for home heating oil (for Winter is over in the Northeast USA - the world's larget home heating market), etc. Any of these effects would be the basis for price rises but they have not occured to a level which justifies the large oil price increases."

I'm sure you're very knowledgable...but that's just your opinion. Opinions are what makes markets...markets wouldn't exist without opinions. Plus...I think you're confusing a cash market where a refiner buys oil today with the futures market where prices are based on expectations for the future.

Sans: "As for peak oil, peak oil is just a theory."

Apparently you didn't google Hubbert...or take anything away from it if you did. The idea that Peak Oil is a theory is a Republican talking point used to excuse Bush's failure to leave us with all the energy I listed in my first post.

Sans: The exact same thing was said about natural gas until an enormous pool of natural gas was discovered under the Northeast USA and a feasible and economic way was developed to extract this natural gas (Marcellus Natural Gas Field).

Actually, there was no M. King Hubbert in the nat gas world. That notwithstanding, it is possible that nat gas production has peaked because there are less than half the number of gas drilling rigs operating today that were operating 9 months ago due to the Bush depression, the rigs that have been pulled down are rusting away in fields across the U.S., the capital to get drilling started again is deflating away and the hands-on knowledge and experience to make those rigs operate is rapidly ageing. Plus, the Marcellus and other shale wells deplete in as little as 2 years.

Sans: This is part of a classic example of manipulation that may be passed off as 'speculation' in order to fly under the radar.

You might want to re-read your definitions of speculation and manipulation above.

Nav,

The definitions that I offered above are theoretical definitions that are not rigorously applied in the real world. In the real world, oil speculation is never 'pure' speculation in the theoretical sense but always has a degree of manipulation disguised as speculation (for manipulation is clearly illegal and speculation is not). The exulatations that are offered in the above posting are NOT what oil speculators exclusively use.

As for 'peak oil theories', there have been peak oil theories around forever. In the energy crisis of the early 70's, peak oil supporters screamed loud and clear about how the world would run out of oil in the 90's to the extent that there would only be sufficient oil left for lubricants.

Just look at the Marcellus natural gas reserves today. The extent of such reserves are still be discovered. A short few years ago, no one had any idea as to the extent of the Marcellus field. In 2002, the estimate was 1.9 trilliion cubic feet of natural gas. In early 2008, the estimate was increased to 500 trillion cubic feet. Your two full years of natural gas supply for the USA estimate is based upon a 10 percent recovery of this 500 trillion cubic feet You can be certain that natural gas estimates, along with recovery rates will substantially increase as time goes on.

In this region of the country, the Marcellus natural gas business is BIG business. It is not at all as you describe. The natural gas companies are just getting started and are drilling one well after another. The natural gas pipeline system does not even exist and will takes several years to construct. The capital to ignite this business started under Bush and continues under Obama. It will not dry up or stop for there is too much at stake.

http://geology.com/articles/marcellus/marcellus-shale-depth-map.gif
<TABLE class=image cellSpacing=0 cellPadding=4 width="100%" border=0><TBODY><TR><TD align=left>This map shows the approximate depth to the base of the Marcellus Shale. It was prepared using the map by Robert Milici and Christopher Swezey above and adding depth-to-Marcellus contours published by Wallace de Witt and others, 1993, United States Department of Energy Report: The Atlas of Major Appalachian Gas Plays. [4]



As for 'speculation' versus 'manipulation', in today's world, speculation may very well be a polite and legal word to use for what amounts to greed driven manipulation. We do not have a pure supply and demand economy as too many factors influence price and are used to manipulate price in order to increase profit. Academic definitions and theorietical beliefs about pure speculation versus manipulation belong at the universities. The real world involves something very different.


</TD></TR></TBODY></TABLE>

[Illinois59]

Those of us who remember the "oil embargo" days in the 1970's can only be amused by the political hacks ranting and ravings about the supply and pricing of oil and its refined products. Over the past 3 decades we heard the same baloney about reducing our dependence on foreign oil, yada, yada, yada. So in the past 3 decades what has been done? Nada, nada, nada. All that has changed is the development of creative ways to triple the price. The limiting factor now is not the laws of the country but how much greed the market will bear.

[Sanslines]

At it's worst under Bush gas was close to $4. It's barely over $2 now and at the start of the "summer driving season" when it typically goes up. That makes a difference.


Barely over $2??? Yesterday I dove by a gas station where the price was $2.74. This is hardly a bit over $2. The lowest price that I could find was $2.59. This is a far cry from what the price was a couple of months ago when it was just over $2.

The difference is the same forces that drove prices up to $4 when Bush was President still exist today. Unless Obama does something drastic, gas will again be over $3 by July 4 (at least around here). We all need to put politics aside and hold every politician to the same set of standards.

[Navigator]

The difference is the same forces that drove prices up to $4 when Bush was President still exist today. Unless Obama does something drastic, gas will again be over $3 by July 4 (at least around here). We all need to put politics aside and hold every politician to the same set of standards.

It wouldn't surprise me a bit to see gas prices over $3 by the 4th of July here in S. Ca. And I'm guessing...and speculating, but not manipulating...that we'll see oil priced at over $100 again sometime in the next 12 months.

But...I'm not sure Bush was ever held to any "standards" on anything...certainly not very high ones.

[Sanslines]

It wouldn't surprise me a bit to see gas prices over $3 by the 4th of July here in S. Ca. And I'm guessing...and speculating, but not manipulating...that we'll see oil priced at over $100 again sometime in the next 12 months.

But...I'm not sure Bush was ever held to any "standards" on anything...certainly not very high ones.


Here is an interesting article about oil companies and how they arrive at the price of gasoline (from 2006 no doubt!):


Oil Price Manipulation: Taking from the Poor to Give to the Rich


September 15, 2006


How much is too much? Someone is stealing from you! Every week you are overpaying for gasoline, and I can prove it in a way that is so simple even Congress can understand.


When oil was $30 a barrel (way back in 2003—when dinosaurs still roamed the earth) gas was $1.52 (avg), and ExxonMobil Corp. (XOM (http://seekingalpha.com/symbol/xom)) made $21b in profits on $246b in sales (http://finance.yahoo.com/q/is?s=XOM&annual)—not too shabby!

So since they were doing OK financially, we can assume they knew what they were doing price-wise and, as an “integrated oil company,” they were able to process that oil and deliver it right to your gas tank all under one great corporate umbrella. The same corporate umbrella, by the way, that the Supreme Court of 1911 dissolved into 34 companies (http://www.exxonmobil.com/Corporate/About/History/Corp_A_H_Kerosene.asp) in order to protect the American people from this sort of price gouging.

Now I’m not going to pretend to know all of Exxon’s costs, but obviously they were able to refine and deliver oil for a nice profit by charging you just $1.52 a gallon. We do know that a barrel of oil in 2003 cost an average of $28 (http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp), and there are 42 gallons in a barrel, so that’s $0.66 per gallon that we will say is something they can’t control (forgetting the fact that they own or lease the land, the equipment, the people and the production facilities that get oil out of the ground for an average of $8 per barrel).

Now here’s where I’ll start going slow so our legislators can follow. If oil, the main ingredient in gasoline, cost $0.66, and gasoline can be profitably delivered for $1.52, then that means all of Exxon’s costs were less than $0.86. In fact, that $0.86 they charged included an operating income (pre-tax) of $32b, or 13%.

That profit, by the way, is after paying salaries. Take Lee Raymond, the ex-CEO for example. He was paid an average of '$50m a year (http://www.dfw.com/mld/dfw/14376606.htm) for running Exxon, but, when it came time to retire, all the company could do for him was give him a check for $140m—not even a gold watch!

Now when oil goes up to $64 a barrel, like it is today, and Exxon, Chevron Corp. (CVX (http://seekingalpha.com/symbol/cvx)), ConocoPhillips (COP (http://seekingalpha.com/symbol/cop)), BP PLC (BP (http://seekingalpha.com/symbol/bp)) testify and swear (oh sorry, they refused to be sworn in (http://www.warprofiteers.com/article.php?id=12805)) to you that gas prices are not their fault, ask this very simple question:

When oil costs $0.66 a gallon, you add $0.86 and gas is $1.52. But now oil is $1.52 a gallon, and gas is selling for $2.60. Did refining and distribution costs increase to $1.08?

The truthful answer is—apparently not. Exxon’s operating income (http://finance.yahoo.com/q/is?s=XOM&annual) last quarter was $18.5b on $99b in sales, or 18.6%, a 43% increase in margins at the expense of the American consumer.

There is a reason the Supreme Court broke up Standard Oil in 1911; not only is it back together now, but it is part of an oligopoly (http://www.oligopolywatch.com/2003/04/22.html), a cartel, that controls the lifeblood of this country with virtually no oversight (as the BP debacle clearly demonstrates).

So when you are filling up at the pump this weekend, think about how much you SHOULD be paying for gas versus how much you ARE paying for gas and thank your Congressmen, especially Energy Chairman Senator Stevens of Alaska and our own beloved Vice President Cheney (http://spamreaper.org/frankie/halliburton.html) for the excellent work done by his apparently secret energy task force (http://www.projectcensored.org/publications/2005/8.html), which first met in 2001, when oil averaged $20 a barrel.

There can be no doubt as to the task force’s effect (even though we are not allowed to know who was on it or what was said), as oil climbed 25% in 2002 to average $25 for the year. Our Vice-President (former Halliburton Co. (http://www.halliburtonwatch.org/news/guide.htm) (HAL (http://seekingalpha.com/symbol/hal)) CEO) found this to be unacceptable and sprang into action, reconvening the secret society in 2002.

That must have really done the trick, because oil averaged just $27 in 2003. But by the end of that year we were well on our way to $35 (http://www.wtrg.com/oil_graphs/crudeoilprice01_05.gif), and the rest is history! Having done their jobs to defend Americans right to make a decent living, free from the tyranny of taxes and regulations (providing, of course, you use the broad definition of Americans to include Oil companies, because the rest of us just got screwed), the committee did not seem to feel it necessary to meet again as oil hit $45 and $55 in ’04, $65 and $70 in ’05 and $79 in ’06 (http://stockcharts.com/h-sc/ui).

“What’s the big deal?” you might say. “It’s just an extra 20 or 30 cents a gallon.” That’s the beauty of this kind of theft. Like credit card thieves (or credit card companies), they can get away with overcharging tens of millions of people a few dollars each day. It’s not enough for you to complain about, but for them... Well, Exxon earned $10b last quarter alone, more money than they earned in all of 1999 when those pesky democrats were in office!

Even if you don't need the money, don't you think that the extra $292b we are spending on oil every year could be put to better use in other parts of the economy? And that's just America. On a global scale, Cheney and Bush's circle of friends are raking in $1 trillion more per year than they did in 2000—Mission Accomplished for sure!

http://seekingalpha.com/article/16951-oil-price-manipulation-taking-from-the-poor-to-give-to-the-rich

[Sanslines]

Goldman Sachs and the Manipulation of Oil Prices (http://cryptogon.com/?p=7726)

<SMALL>March 29th, 2009 </SMALL>
<SMALL><!-- by Kevin --></SMALL>

<SMALL>Anyone who “dismisses” the role of speculators in this shakedown is either stupid, or in on the scam…</SMALL>
<SMALL>
Henry Paulson was formerly the Chairman and Chief Executive Officer of Goldman Sachs. Well, well, well. Hank might have us believe that the Tooth Fairy has more to do with the price of oil than speculators. I mean, what possible impact could a firm with more black boxes than DARPA and some of the deepest pockets on Wall Street have on leveraged commodity markets? Meh! Fuggetaboutit.

—House Energy and Commerce Committee Testemony: Gas Could Fall to $2 if Congress Imposed Limits on Speculators; Speculation Now Accounts for About 70% of All Benchmark Crude Trading on NYMEX (http://cryptogon.com/?p=2788)
</SMALL>
And now…

Via: Forbes (http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html):

How Goldman Sachs was at the center of the oil trading fiasco that bankrupted pipeline giant Semgroup.

When oil prices spiked last summer to $147 a barrel, the biggest corporate casualty was oil pipeline giant Semgroup Holdings, a $14 billion (sales) private firm in Tulsa, Okla. It had racked up $2.4 billion in trading losses betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20% of the nation’s crude oil inventories. With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.

But now some of the people involved in cleaning up the financial mess are suggesting that Semgroup’s collapse was more than just bad judgment and worse timing. There is evidence of a malevolent hand at work: oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup’s accounts.

“What transpired at Semgroup was no less than a $500 billion fraud on the people of the world,” says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.

What’s the evidence of this? Much is circumstantial. Proving oil-trading manipulation is difficult. But numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup’s trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring. “Nothing’s been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze,” says John Tucker, who is representing Kivisto.
What’s known for sure is that Goldman Sachs, through J. Aron & Co., its commodities trading arm, was in prime position to use such data–and profited handsomely from Semgroup’s fall. J. Aron was Semgroup’s biggest counterparty, trading both physical oil flowing through pipelines and paper oil, in the form of options and futures.
When crude oil peaked in July, Semgroup ran out of cash to meet margin requirements on options contracts it had with Aron, contracts on which it had paper losses of $350 million. Desperate to survive, Semgroup asked Aron to pony up $430 million it owed on physical oil. Aron said no, declared Semgroup in default on its contracts and demanded immediate payment of losses.

Research Credit: Lagavulin

No doubt, after the Wall Street speculators have made their billions and driven their trading companies into the ground, the federal government will step in with taxpayer bailout money. Taxpayers will get hosed two ways: once at the gas pump and the second time with higher taxes to pay for this unregulated 'theft'.

http://cryptogon.com/?p=7726 (http://cryptogon.com/?p=7726)

[Sanslines]

More Big Oil Price Manipulation:

Gas Prices Rise Just in Time for Summer Vacation 2009 (http://www.blogsmonroe.com/world/2009/05/gas-prices-rise-just-in-time-for-summer-vacation-2009/)

Gas prices rise just in time for summer vacation—again. Is this not a testament to the power of the oil industry and other wealthy entities like Morgan Stanley and Citigroup? Big oil has the greatest motive to raise war against environmentalism—mega profits. Yet there are those of us that just can’t see how much more powerful that motive is compared to any plausible objectives pro-environmentalists may have.

Reading article after article about supertankers storing oil, “super contangos,” and “backwardation,” it’s all about power, wealth, and manipulation and to heck with the environment and us. Big oil is going to do their darnedest to stay in business. And with mega billions in their coffers, it will be extremely hard to get untangled from that web of power especially when other big investors are in on the game. Don’t believe me that we’re audaciously manipulated by this mega monopoly? Do a Google search “supertankers at sea storing crude oil” and look at the roster of articles about who has and hasn’t contracted huge supertankers for the express purpose of storing crude oil for big profits. A NY Time’s article stated:
Private trading companies like Vitol and Phibro are storing oil in expectation of higher prices. They are taking their cues from markets where traders buy and sell contracts for future delivery of oil, which are signaling higher prices down the road.

Adam Sieminski, chief energy economist at Deutsche Bank, noted that a trading company could buy oil at the spot price of nearly $40 a barrel, store it and sell a contract to deliver it in a year for about $60. ‘You pay between $6 and $10 a barrel to store it, and you can make $10 a barrel,’ he said. ‘That’s why Cushing is filling up rapidly and people are leasing tankers.’
The oil being stored was bought back when oil prices were low, then stored in ships that have been lollygagging at sea, waiting for the right season to sell. What seems to be glanced over in many of the articles is the fact that storing the oil is also “withholding” oil from the marketplace, which in turn forces prices up like it does when anything in demand becomes scarce. This is being done in lieu of cutting back on production.

Taking a risk and investing in stored oil with the “hope” that it will go up in the future is one thing. But storing the invested oil for the express purpose of creating more demand for what appears to be lesser supply is every bit as unethical as what the diamond industry does to drive up prices of diamonds. It’s faking scarcity of a product to drive up cost. And we are forced to eat that cost because we have no alternative.

Any entity that sets up to become wealthy like this at a time when so many are already suffering from a poor economy is purely sadistic. The right season to unload this oil is right now when gas prices are high. It’s the summer season when people cannot afford air travel, or distant, expensive vacations, and have opted instead to take the family to local events. All of these events mean car travel of course that is not kind on gas. Attending local events means traffic backups and slow going in urban areas. You know, the kind of driving that just eats through a fresh tank of gas.

So there we have it again. A big kick in the pants from the manipulations of big oil and the wealthy, another summer of putting up with higher gas prices. It’s time to break out the tent and set it up in the backyard and get a projector to show movies on the side of the garage! Add a fire pit, and food and beverage and there is no need to go anywhere. Maybe it’s high time we meet all our neighbors with block parties, or traveling parties where every neighbor involved takes a turn at the barbeque. And in the course of doing these things we may rediscover “family life” the way it used to be, and possibly a way to bring gas prices down to where they used to be too.


http://www.blogsmonroe.com/world/2009/05/gas-prices-rise-just-in-time-for-summer-vacation-2009/

So there we have it, real price manipulation under the disguise of 'honest market speculation'.

[Sanslines]

Where Is Oil Going Next?

HOUSTON — From the Indian Ocean to the South Atlantic to the Gulf of Mexico, giant supertankers brimming with oil are resting at anchor or slowly tracing racetrack patterns through the sea, heading nowhere.

The ships are marking time, serving as floating oil-storage tanks. The companies and countries leasing them for that purpose have made a simple calculation: the price of oil has fallen so far that it is due for a rise.
Some producing countries are trying to force that rise by using the tankers to withhold oil from the market, while traders are trying to profit by buying cheap oil now to store and sell at a higher price later. Oil storage has become so popular that onshore tank capacity is becoming scarce.

Only six months ago, companies up and down the energy pipeline were rushing oil to market, struggling to keep up with galloping demand and soaring prices. Now, with the global economy slumping and people driving less, demand for oil has plunged — and the same companies are acting in ways that would have been unimaginable until recently.

Oil producers are shutting down rigs, refiners are producing less gasoline, and investment planning throughout the industry is in turmoil.

The problem for the companies is not just that prices are lower, but that they have become volatile — historically, a sign of an unstable market whose direction is uncertain. Between Christmas and a week ago oil prices soared 40 percent, only to reverse course almost as sharply in recent days. Just last week, the price of a barrel of crude oil dropped by nearly 12 percent in one day alone.

“The oil markets are suffering acute whiplash,” said Daniel Yergin, an energy consultant and author of “The Prize,” a history of world oil markets. “Price volatility is adding to the sense of shock and confusion and uncertainty.”

The wild price swings are a continuation of last year’s trends, when the price of a barrel of oil swelled to nearly $150 in July from just below $100 in January before collapsing to less than $35 last month. Daily oil prices rose or dropped by 5 percent or more 39 times, versus just four times over the previous two years. The only recent year that was comparably volatile was 1990, the year Iraq invaded Kuwait.

The continuing volatility is sending waves of anxiety up and down the complex production and investment chains of the oil world.

A year ago, oil producers and refiners could not move their products fast enough to meet growing world demand and chase rising prices. Now, with demand and prices slumping, they are sitting on 327 million barrels at tank farms around the country, particularly at Cushing, Okla., a major storage hub and a crossroads for pipelines. That is more than 40 million barrels more in storage than this time last year, and more than 30 million barrels higher than the five-year average.

The mounting buildup has come during the last 100 days or so, as consumption of oil fell behind imports and domestic production.
With storage tanks filling up onshore, private and national oil companies, refiners and trading companies are storing another 80 million barrels aboard 35 supertankers and a handful of smaller tankers, the most in 20 years, according to Frontline Ltd. (http://topics.nytimes.com/top/news/business/companies/frontline-ltd/index.html?inline=nyt-org), the world’s largest owner of supertankers.

The different players have different reasons for storing oil, whether onshore or offshore.

National oil companies are hoping to reverse the price slide by holding oil off the market. Iran alone is reportedly using as many as 15 tankers to store crude oil in hopes that higher prices will prop up its economy, which is dependent on oil exports.

Private trading companies like Vitol and Phibro are storing oil in expectation of higher prices. They are taking their cues from markets where traders buy and sell contracts for future delivery of oil, which are signaling higher prices down the road.

Adam Sieminski, chief energy economist at Deutsche Bank (http://topics.nytimes.com/top/news/business/companies/deutsche_bank_ag/index.html?inline=nyt-org), noted that a trading company could buy oil at the spot price of nearly $40 a barrel, store it and sell a contract to deliver it in a year for about $60. “You pay between $6 and $10 a barrel to store it, and you can make $10 a barrel,” he said. “That’s why Cushing is filling up rapidly and people are leasing tankers.”

One small example of how the price uncertainty has affected behavior is the Devon Energy Corporation (http://topics.nytimes.com/top/news/business/companies/devon_energy_corporation/index.html?inline=nyt-org), an Oklahoma City company that in recent years has excited the energy world with announcements about expensive new investments in Canadian oil sands (http://topics.nytimes.com/top/reference/timestopics/subjects/o/oil_petroleum_and_gasoline/oil_sands/index.html?inline=nyt-classifier) and deepwater oil exploration projects.

The company recently put off announcing details of its drilling program. Chip Minty, a Devon spokesman, said: “The volatility we have seen in the last year, and particularly the last few months, is making it more difficult to plan a drilling program that is funded through cash flow. Everybody is laying down rigs.”

Devon’s caution is a sign that the go-go days of investment are giving way to more modest expectations. Schlumberger (http://topics.nytimes.com/top/news/business/companies/schlumberger_ltd/index.html?inline=nyt-org) and Halliburton (http://topics.nytimes.com/top/news/business/companies/halliburton_company/index.html?inline=nyt-org), the two top oil service companies, are cutting jobs. Many oil companies are delaying investments in more expensive projects, like mining Canadian oil sands. A couple of refiners face bankruptcy.

The volatility is showing up at the retail level. Drivers who only a few weeks ago were finding relief from the summer’s $4-a-gallon gasoline are now shaking their heads as the average national price for unleaded regular gasoline has surged to $1.79, from $1.62, since Dec. 30.

Oil volatility has complicated the efforts of automobile companies to figure out future strategies. Toyota (http://topics.nytimes.com/top/news/business/companies/toyota_motor_corporation/index.html?inline=nyt-org) had to suspend production at one plant that builds the Tundra pickup truck for several months when gasoline prices soared last summer. Toyota then delayed completion of a second plant meant to build the Prius hybrid when falling gasoline prices led to weakening demand for that fuel-efficient model.

The gyrations in prices affect shipping and other businesses around the world. Cathay Pacific, one of many airlines that use fuel hedging strategies, recently acknowledged that it had hedging losses of hundreds of millions of dollars as a result of the collapse in fuel prices.
The slowdown in oil investment is so rapid that some analysts say they believe it is a matter of time before shortages appear that will push oil prices to new heights and damage the economy.

From day to day, the price swings reflect a push and pull among the various players in the market, and diverging geopolitical and economic trends.

After months of sharply dropping prices, psychology on the oil markets seemed to shift strongly after Christmas — sending oil prices to almost $50 in January, from just below $34 on Dec. 19.

Traders were putting investment money back into oil as OPEC (http://topics.nytimes.com/top/reference/timestopics/organizations/o/organization_of_petroleum_exporting_countries/index.html?inline=nyt-org) appeared to be serious about cutting output. Fighting between Israel and Hamas (http://topics.nytimes.com/top/reference/timestopics/organizations/h/hamas/index.html?inline=nyt-org) in Gaza appeared to threaten a broader Middle East conflict that might crimp oil supplies. The conflict between Russia and Ukraine over natural gas shipments threatened European supplies, raising fears that Europeans might have to switch from natural gas to oil.

But the mood shifted just as quickly last week when the Energy Department reported that crude oil inventories at Cushing had climbed by four million barrels, to 32 million barrels, for the week that ended Jan. 2, the highest since the government started tracking supplies in 2004. That number jumped again in a report on Wednesday, to 33 million barrels, near Cushing’s operating capacity of 35 million barrels.

Spooked by the signs of surplus, traders drove the spot price of oil down to $37.28 a barrel on Wednesday, a drop of 1.3 percent.

Gasoline, meanwhile, has become pricier at the pump because refiners have been producing less of it. Profits from refining have been so thin over the last several months that refiners have been earning little, or even losing money, on producing gasoline. So now they are storing oil or selling it to traders, or retooling their refineries to produce less gasoline and more products with better profit margins, like heating oil (http://topics.nytimes.com/top/reference/timestopics/subjects/h/heating_oil/index.html?inline=nyt-classifier), diesel or jet fuel.
Valero has curtailed gasoline supplies by extending maintenance time at some refineries and cutting production at eight of its 16 refineries. “There is not a lot of incentive right now to produce gasoline because there is lots of it,” said Bill Day, a spokesman for Valero, the nation’s largest refiner. “Obviously it would be better for us if there were more stability in prices.”

While Goldman Sachs (http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html?inline=nyt-org) has predicted the slumping global economy will soon drive the price of oil down to $30, a top Kuwaiti oil official predicted recently that big production cuts by the Organization of the Petroleum Exporting Countries would soon push oil prices back up.
“It’s a sure bet that both will be right,” Mr. Yergin said, basing his opinion on the sharp swings of recent days.

Analysts foresee prices staying volatile for much of the year.
“Volatility is just another way of saying uncertainty,” said Adam J. Robinson, director of commodities at Armored Wolf, a California hedge fund. “The demand outlook is very uncertain, the general outlook for prices is very uncertain, and the supply outlook is very uncertain.”

http://www.nytimes.com/2009/01/15/business/worldbusiness/15oil.html?_r=1

Does anyone still think that the price of oil and gasoline is only being 'honestly speculated' based upon pure fact?

It is fairly obvious that the oil 'speculators' are price 'manipulators' when they base their trades on know manipulation of supply. Their so called 'justifications' for higher oil proces are based upon fantasies that never materialize. This is NOT what real speculation of any commodity is all about! Sadly, speculation in today's world contains a certain amount of manipulation and is therefore manipulation under the guise of 'honest speculation'!

[Navigator]

[B][URL="http://cryptogon.com/?p=7726"][COLOR=#ff6600]Goldman Sachs and the Manipulation of Oil

Oh Sans...I thought we were done with this. And please, if you have a point to make...make it. Don't just vomit up a bunch or just-found articles that you think makes some sort of point and expect huzzahs and credit for research or logic or writing or whatever you're thinking that style does for you. Anybody can use the google.

With regard to your post on manipulation....I agree with you. In fact if you look at my earlier posts you'll find I've already said that manipulation can move prices if a culture of corruption is allowed to exist as under Bush. Despite your efforts to make your Goldman article look like it's dated recently...that whole scandal happened under Bush last summer and the underlaying article is here: http://www.marketwatch.com/story/gas-could-fall-to-2-if-congress-acts-analysts-say

With regard to your article on oil tankers....you've again jumped to a conclusion that something untoward is going on based on your lack of knowledge about how futures markets work. The oil market has been in "contango" for some months now. This means that oil prices for future delivery are higher than the cash market today because the market thinks prices will go up. Therefore, if you can afford it, you can buy oil in the cash market today, store it in a tanker, and sell it on the futures market for delivery this winter. This has the effect of slightly raising the cash prices today and slightly lowering the futures market price for your delivery month this winter. This is one way to arbitrage the market and it provides liquidity to hedgers, like we talked about, while adding some stability to prices for consumers. Of course, you only make a profit if your cost plus storage in the tankers is less than your selling price. It's not unethical...it's the hedging process that is the reason futures markets exist.

You misquoted me a few posts ago on shale oil and I don't appreciate it. I said nothing about 2 years supply of USA gas. I said a shale gas well depletes in as little as 2 years. In fact, a shale well will produce almost 60% of it's gas in it first year. The gas market is exactly as I described except for one item I didn't mention...shale gas drilling is extremely damaging to the environment and faces numerous lawsuits and, hopefully, environmental protection regulation.

You're also very wrong when you try to substantiate your view of Peak Oil by saying that "peak oil supporters screamed loud and clear about how the world would run out of oil in the 90's". This is the same mistake that most right-wing media makes because they confuse quantity with production rate. We have lots of oil. But the rate of production has been dropping since 2005 and will drop faster every year. That's peak oil. Go back and re-read what I said about oil not being produced when price exceeds cost and, most importantly, when energy out of a barrel is less than energy required to produce it. That's the cliff the world is on.

[Navigator]

Maybe this should be under "Are My Voices Bothering You?"


Two republican oil dudes that look a lot like Cheech & Chong fly over the Arctic in an airplane and one looks out the window.

"wow man, look at all that oil!"

"That's water, you jackass!"

"No no, man, that's oil. I can see the sheen, man!"

"How many times do I have to tell you, the oil is underground."

"I don't care, man, I can see the oil. There is a billion, gazillion barrels of oil out there, man. There is enough oil out there to last for centuries ... Those liberals and their Peak Oil theory are stupid man."

"This is supposed to be a scientific estimate. I can't tell the U.S. Geologic Survey that there are a 'billion-gazillion' gallons of oil ... "

"Barrels, man, barrels. Not gallons. Barrels!"

"What's that number on the back of that piece of paper?"

"It's the phone number of that girl I met last night."

"Well, double it and that will be our 'official estimate'."

"Hey man. I can see Russia from here ..."

[Sanslines]

Oh Sans...I thought we were done with this. And please, if you have a point to make...make it. Don't just throw up a bunch or just-found articles that you think makes some sort of point and expect points for research or logic or writing or whatever you're thinking that style does for you.

If I do not support what I post with articles, no doubt I will be accused of posting unsubstantiated opinions. I did not post these articles for any sort of 'points'. Statements should be backed up with research unless someone is only interested in posting opinions.

With regard to your post on manipulation....I agree with you. In fact if you look at my earlier posts you'll find I've already said that manipulation can move prices if a culture of corruption is allowed to exist as under Bush. Despite your efforts to make your Goldman article look like it's dated recently...that whole scandal happened under Bush last summer and the underlaying article is here: http://www.marketwatch.com/story/gas-could-fall-to-2-if-congress-acts-analysts-say

Bush is no longer in office and yet the corruption apparently still exists. Why continue to bring up Bush as if he is still President. The current manipulation is occuring under Obama's watch. It is up to Obama to do or not do anything about it. Will anyone speak out if Obama does nothing about it and prices again rise to $4 per gallon? What has changed with Goldman Sachs and the others to prevent them from doing exactly the same thing today? Has Congress done anything today to prevent this from happening again? Why not? Or is Bush to blame for Congress' lack of action today?

With regard to your article on oil tankers....you've again jumped to a conclusion that something untoward is going on based on your lack of knowledge about how futures markets work. The oil market has been in "contango" for some months now. This means that oil prices for future delivery are higher than the cash market today because the market thinks prices will go up. Therefore, if you can afford it, you can buy oil in the cash market today, store it in a tanker, and sell it on the futures market for delivery this winter. This has the effect of slightly raising the cash prices today and slightly lowering the futures market price for your delivery month this winter. This is one way to arbitrage the market and it provides liquidity to hedgers like we talked about. Of course, you only make a profit if your cost plus storage in the tankers is less than your selling price.

I think that you are refusing to see the obvious here concerning so much oil being 'parked at sea'. It is a clearly a price manipulation tool. You obviously see this as normal price 'speculation'at work. Others clearly see it as a means to force the price of oil higher by reducing the supply of oil until prices rise and then flooding the market with oil until the price comes crashing down again. When this occurs, some players will again park oil at sea and attempt to drive the price of oil up again. This is nothing more then a game of musical chairs with clear price manipulation. I haven't jumped to conclusions at all. I have backed up my statements with factual articles that support those statements.

You misquoted me a few posts ago on shale oil and I don't appreciate it. I said nothing about 2 years supply of USA gas. I said a shale gas well depletes in as little as 2 years. In fact, a shale well will produce almost 60% of it's gas in it first year. The gas market is exactly as I described except for one item I didn't mention...shale gas is extremely damaging to the environment and faces numerous lawsuits and, hopefully, environmental protection regulation.

I never quoted you in the first place. I made an assumptoin based upon your nebulous statement. That's all. So what if 'a gas shale well depletes in as little as 2 years'? As far as the overall Marcellus gas shale is concerned, there will be thousands of gas wells and the loss of one well won't matter one hoot.

Form my research, I found where it has been theoretically calculated that the Marcellus shale gas can be depleted in two years based upon certain gas supply assumptions and that an entire gas extraction infrastructure is in existance. Such infrastructure is not in existance and will take many years to completely construct.

You are again being sloppy when you say that "shale gas is extremely damaging to the environment". It is not the shale gas that is damaging; it is the waste water and fraking fluids that are potentially damaging to the environment. Such concerns are being addressed and those concerns will be resolved before major gas extractions continue. Rest assured that the New York State DEP is hard at work and on the job.

You're also very wrong when you try to substantiate your view of Peak Oil by saying that "peak oil supporters screamed loud and clear about how the world would run out of oil in the 90's". This is the same mistake that most right-wing media makes because they confuse quantity with production rate. We have lots of oil. But the rate of production has been dropping since 2005 and will drop faster every year. That's peak oil. Go back and re-read what I said about oil not being produced when price exceeds cost and, most importantly, when energy out of a barrel is less than energy required to produce it. That's the cliff the world is on.

In the 1970's peak oil advocates did indeed scream that the world would run out of oil in the 1990's. That's exactly what peak oil advocates stated at the time. You again are making a false assumption because you know that quantity is not production rate. You are incorrect when you assume that I am using this example as a means to substantiate my view about peak oil. I am only using this as an example to claim that so called 'experts' have made numerous predictions about oil reserves and were wrong. Just as the predictions about peak oil will also be proven wrong. Just as those who claim to be peak oil experts and are using oil rate declines as an example are wrong.

Peak Oil is simply the point at which maximum rate of global petroleum extraction has been reached, after which the rate enters a terminal decline.

To elaborate further: "The concept is based on the observed production rates of individual oil wells, and the combined production rate of a field of related oil wells. The aggregate (http://en.wikipedia.org/wiki/Aggregate_data) production rate from an oil field (http://en.wikipedia.org/wiki/Oil_field) over time usually grows exponentially until the rate peaks and then declines—sometimes rapidly—until the field is depleted. Peak oil is often confused with oil depletion (http://en.wikipedia.org/wiki/Oil_depletion); peak oil is the point of maximum production while depletion refers to a period of falling reserves and supply." Wiki

Now read this carefully: "Pessimistic predictions of future oil production operate on the thesis that either the peak has already occurred, we are on the cusp of the peak, or that it will occur shortly and, as proactive mitigation (http://en.wikipedia.org/wiki/Mitigation_of_peak_oil) may no longer be an option, predict a global depression (http://en.wikipedia.org/wiki/Recession), perhaps even initiating a chain reaction of the various feedback (http://en.wikipedia.org/wiki/Feedback#In_economics_and_finance) mechanisms in the global market (http://en.wikipedia.org/wiki/Market) which might stimulate a collapse of global industrial civilization (http://en.wikipedia.org/wiki/Civilization), potentially leading to large population declines within a short period."

The experts have been wrong about reaching peak oil just as they have been wrong about oil reserves. Neither takes into account the continuous development of new technologies.

Until recently. Marcellus shale gas was not economically feasible to extract. New technologies have made this possible and new technologies will solve environmental problems associated with waste water and fraking fluids.

[Sanslines]

Oh Sans...I thought we were done with this. And please, if you have a point to make...make it. Don't just vomit up a bunch or just-found articles that you think makes some sort of point and expect huzzahs and credit for research or logic or writing or whatever you're thinking that style does for you. Anybody can use the google.

Given that you have edited this from your original post, I will say that I have made my point over and over again and from different angles. You refuse to see it for you are convinced that you are right. I didn't just 'vomit up a bunch of new found articles' that I 'think' makes some point. Those articles support my claims and are certainly better then a bunch of alleged opinions with nothing to substantiate them. If 'anyone' can use the Google, then use it and find out for yourself rather then complain when someone presents something that you do not agree with. if you are bored with the justifications, then so be it.

Really now, you know better then this. Instead of disputing the message, you have now resorted to attacking the style of message delivery. Certainly you can do better then that.

[Navigator]

Sans: If I do not support what I post with articles, no doubt I will be accused of posting unsubstantiated opinions. I did not post these articles for any sort of 'points'. Statements should be backed up with research unless someone is only interested in posting opinions.

Ok...let's use that below...but this is getting awfully tedious.

Sans: Bush is no longer in office and yet the corruption apparently still exists. Why continue to bring up Bush as if he is still President. The current manipulation is occuring under Obama's watch.

Because you showed a current date for a a scandal that happened on Bush's watch. And, you haven't shown anything indicating corruption still exists...it's your unsubstantiated opinion based on your lack of understanding how commodity markets work. And, oil prices will go to $4 again, and then $10 and then higher due to Peak Oil.

Sans: I think that you are refusing to see the obvious here concerning so much oil being 'parked at sea'. It is a clearly a price manipulation tool.

Are you aware that almost all market participants, except speculators, store their commodity? Producers as well as consumers do this all the time. What do you think grain elevators are for? Storage for lots of reasons are part of all commodity markets. West Texas oil futures contracts are deliverable in Cushing Oklahoma because that's where huge oil storage tank farms are located. The fact that you just learned that oil can be stored at sea and you find this innovative does not mean it's illegal or even unethical.

Sans: So what if 'a gas shale well depletes in as little as 2 years'? As far as the overall Marcellus gas shale is concerned, there will be thousands of gas wells and the loss of one well won't matter one hoot.

I should suggest that you do the re-reading because you've lost track of your points...but...Here's what I said to your point: Actually, there was no M. King Hubbert in the nat gas world. That notwithstanding, it is possible that nat gas production has peaked because there are less than half the number of gas drilling rigs operating today that were operating 9 months ago due to the Bush depression, the rigs that have been pulled down are rusting away in fields across the U.S., the capital to get drilling started again is deflating away and the hands-on knowledge and experience to make those rigs operate is rapidly ageing. Plus, the Marcellus and other shale wells deplete in as little as 2 years.

Sans: You are being sloppy when you say that "shale gas is extremely damaging to the environment".

Agreed. I edited it to insert "drilling" after "gas" before you posted this critique.

Sans: In the 1970's peak oil advocates did indeed scream that the world would run out of oil in the 1990's. You are incorrect when you assume that I am using this example as a means to substantiate my view about peak oil. I am only using this as an example to claim that so called 'experts' have made numerous predictions about oil reserves and were wrong. Just as the predictions about peak oil will also be proven wrong.

Of course you're using it to support your view of Peak Oil. And you haven't shown that an "expert" made an incorrect prediction about Peak Oil...just advocates. This is another unsubstantiated opinion.

Sans: Peak Oil is simply the point at which maximum rate of global petroleum extraction has been reached, after which the rate enters a terminal decline.

Very good...isn't the google wonderful.

Sans: Now read this carefully: "Pessimistic predictions of future oil production operate on the thesis that either the peak has already occurred,[5][6][7] we are on the cusp of the peak, or that it will occur shortly[8] and, asproactive mitigation may no longer be an option, predict a global depression, perhaps even initiating a chain reaction of the various feedback mechanisms in the global market which might stimulate a collapse of global industrial civilization, potentially leading to large population declines within a short period."

Don't confuse "pessimistic predictions" from unnamed sources with Peak Oil. You were correct above when you mentioned production rates. Peak Oil makes no claims about what happens post peak except re: production rates. Quit while you're ahead.

Sans: The experts have been wrong about reaching peak oil just as they have been wrong about oil reserves. Neither takes into account the continuous development of new technologies.

You still haven't shown that an "expert" made an incorrect prediction about Peak Oil. This is another unsubstantiated opinion. On Edit: All new technologies increase flow rate but cannot increase reserves. This just brings peak production and ultimate total depletion of any field closer in time.

Sans: Until recently. Marcellus shale gas was not economically feasible to extract. New technologies have made this possible and new technologies will solve environmental problems associated with waste water and fraking fluids.

Possibly. Will this happen while nat gas price is below the cost of nat gas production? If it does, will it matter?

[jon71]

Barely over $2??? Yesterday I dove by a gas station where the price was $2.74. This is hardly a bit over $2. The lowest price that I could find was $2.59. This is a far cry from what the price was a couple of months ago when it was just over $2.

The difference is the same forces that drove prices up to $4 when Bush was President still exist today. Unless Obama does something drastic, gas will again be over $3 by July 4 (at least around here). We all need to put politics aside and hold every politician to the same set of standards.


It's $2.20 at Murphys, at least as of a few days ago. That's the place at the end of Wal-mart parking lots. Honestly there wasn't then nor is there now conditions that will push the price that high. It was only high because of gouging, nothing else. Whenever market conditions caused the price to go up a nickle they raised prices twenty cents instead knowing they could get away with it. Back then the oil companies used the Iraq war as cover for flat out gouging and they knew they had one of their own in the white house who would never give them trouble and would block congress from doing anything. They know they don't have a lackey anymore so they won't push it that far. Knowing how greedy they and unscrupulous they are, and how accustomed big oil is to operating dishonestly I don't expect them to be operate at what any other company would consider a decent profit margin, but they won't try the extremes they did a few years ago.

[Sanslines]

Navigator,

You are not the expert that you claim to be and your condescending attitude is not appreciated. All that you have offered are unsupported opinions and have resorted to criticisms when I support my statements with factual articles. My statements are fully supported for those with an open mind who wish to read and understand. Instead of claiming that I do not understand how markets work, perhaps you might consider the real facts for a change. I agree that it is getting tedious on my part to try and explain certain things to you that you continue to passively dismiss and patently reject. Given that all that you offer are unsubstantiated opinions, the endeavor to futher inform appears to be futile. I will offer one last attempt.

Because you showed a current date for a a scandal that happened on Bush's watch. And, you haven't shown anything indicating corruption still exists...it's your unsubstantiated opinion based on your lack of understanding how commodity markets work. And, oil prices will go to $4 again, and then $10 and then higher due to Peak Oil.

There is absolutely nothing to indicate that all of the corruption that existed under Bush still does not exist today in some way, shape, or form. Just because there was an administrative change does not mean that all means for corruption automatically cease with the wave of a magic wand. Instead of complaining about long winded articles, go back and read the articles and you will find the answers. It's all there. Clearly you attribute corruption to 'natural market forces at work' but then again this is just your unsubstantiated opinion. You offer nothing to prove this. You should also stop dismissing everything because the author of the article doesn't meet your definition of 'expert'. You have offered nothing to indicate that you are able to look beyond a 'classic' definition of how markets work in spite of clear information presented to the contrary. You haven't even defined what market forces are! You really need to look beyond classic definitions and peak oil and consider all factors involved. So far, you clearly have refused to do so.


I should suggest that you do the re-reading because you've lost track of your points...but...Here's what I said to your point: Actually, there was no M. King Hubbert in the nat gas world. That notwithstanding, it is possible that nat gas production has peaked because there are less than half the number of gas drilling rigs operating today that were operating 9 months ago due to the Bush depression, the rigs that have been pulled down are rusting away in fields across the U.S., the capital to get drilling started again is deflating away and the hands-on knowledge and experience to make those rigs operate is rapidly ageing. Plus, the Marcellus and other shale wells deplete in as little as 2 years.

I suggest you stop making condescending and dismissive opinionated remarks and do some reading yourself. I never mentioned Hubbert in any post. Anything is possible but then again anything is not possible. Show some proof instead of making profound and unsubstantiated opinionated statements about peak natural gas. You talk about rigs rusting, etc and yet offer no proof of this. You continue to state that marcellus and other shale wells deplete in as little as two years and yet offer nothing to back this up. You appear to be completely uninformed about Marcellus natural gas. I live in the Marcellus region and read about the gas fields each and every day. I see those drilling rigs and talk with the gas companies. I know first hand what is going on. You obviously do not. The technology is growing, the funding is there, and the crews are working day and night drilling. The serous environmental issues are being discussed and addressed. This is the reality. Please do some google research and inform youself before making such uninformed statements. Please back up your statements with articles and references. So far, you have not posted one reference.


Are you aware that almost all market participants, except speculators, store their commodity? Producers as well as consumers do this all the time. What do you think grain elevators are for? Storage for lots of reasons are part of all commodity markets. West Texas oil futures contracts are deliverable in Cushing Oklahoma because that's where huge oil storage tank farms are located. The fact that you just learned that oil can be stored at sea and you find this innovative does not mean it's illegal or even unethical.

Are you aware that your opinion is ridiculous when you must know that it is not the fact that oil is being stored, but the degree to which it is being stored? Do you not understand the differences and the motives behind those differences? Did you not read the article carefully enough to understand the subtleties?


Of course you're using it to support your view of Peak Oil. And you haven't shown that an "expert" made an incorrect prediction about Peak Oil...just advocates. This is another unsubstantiated opinion.

Do a basic google search and you will find the answers. It is easy to do. I'll get you started: "The pope of peak oil, Colin Campbell, is legendary for a long string of incorrect predictions of the peak oil date. For example, as we saw in #53 (http://peakoildebunked.blogspot.com/2005/08/53-oil-will-peak-in-5-minutes.html), his 1991 prediction called for oil to peak in the early 90s at a level of 60mbd, and decline to about 50mbd by 2005, and then to about 40mbd by 2010. In fact, we are currently producing about 84mbd in 2005. If you want all the evidence on Campbell's piss-poor track record, see CRYING WOLF: Warnings about oil supply, by Michael Lynch (http://sepwww.stanford.edu/sep/jon/world-oil.dir/lynch/worldoil.html)." See how easy Google search is?

No doubt you will dismiss all of this as being presented by non experts but then again you are not the judge of who is and is not a qualified 'expert'.

Possibly. Will this happen while nat gas price is below the cost of nat gas production? If it does, will it matter?

You again show your lack of understanding of the Marcellus natural gas field development. The development of this field is a long term project that will take many years and involve a substantial development cost. Both federal and state government support is heavily involved in developing this project. Gas prices will fluctuate up and down but this project will continue to be developed in spite of those fluctuations. You need to get off the peak oil and peak natural gas bandwagon and consider all of the factors involved in the process. You need to really look beyond market forces and consider the entire picture. Consider all factors involved.

It's been a blast, but the thrill is gone. Enjoy your peak oil and peak natural gas theories. Not everyone believes in them and some look beyond them to consider all possible events and explanations. Please consider doing some google searches yourself to better inform yourself of (at least) the Marcellus natural gas fields. Unsubstantiated opinions do not make for reality. Enjoy.

[Fitz1980]

Oil prices are being speculated. Obama promissed to end price speculation. When Bush was in office, there was non stop criticism of him for not stopping oil price speculation. Obama is in office now and yet no one has criticized him for not ending oil price speculation. This is the hypocrisy.

I do like the fact that you biggest criticism of Obama's administration is that he's too middle of the road and not liberal enough, which I do agree with; but that doesn't match with much of the right's later criticisms that he's a socialist and too liberal.

[Navigator]

Navigator,

Show some proof instead of making profound and unsubstantiated opinionated statements about peak natural gas. You talk about rigs rusting, etc and yet offer no proof of this. You continue to state that marcellus and other shale wells deplete in as little as two years and yet offer nothing to back this up. You appear to be completely uninformed about Marcellus natural gas. I live in the Marcellus region and read about the gas fields each and every day. I see those drilling rigs and talk with the gas companies. I know first hand what is going on. You obviously do not. The technology is growing, the funding is there, and the crews are working day and night drilling. The serous environmental issues are being discussed and addressed. This is the reality. Please do some google research and inform youself before making such uninformed statements. Please back up your statements with articles and references. So far, you have not posted one reference.

Are you aware that your opinion is ridiculous when you must know that it is not the fact that oil is being stored, but the degree to which it is being stored?



Maybe this will help you. It's a slide presentation presented 11 days ago at an energy symposium in Tulsa by one of the real experts in oil and gas, Matt Simmons. Simmons and Co. are the people who finance most oil and gas fields. When he uses the words "unconventional" and "tight rock" with regard to nat gas he's talking about shale gas. If you 're really interested in this, since you live in an energy producing area, you might be interested in Simmons book "Twilight In The Desert" which is one of many solid sources making the case for peak oil.

http://www.simmonsco-intl.com/files/Oklahoma%20State%20University.pdf

WRT how commodity markets work...if you're really interested you can find numerous basic books at your local bookstore. The books will support everything I tried to tell you yesterday. However, I have to believe that your interest is more in trying to disparage Obama than it is in learning about markets.

WRT to drilling rigs rusting away...here's the latest count of the number that are operating vs. the number at peak. http://www.reuters.com/article/rbssEnergyNews/idUSN1528461120090529?rpc=401& 703 are operating and about 900 are rusting away.

WRT to the amount and "degree" of tanker storage...most experts believe there may be around 50 VLCC's or Very Large Crude Carriers being used for storage today. This would be about 100 million barrels of oil and is less than two days of world supply. There is debate in the industry about how much is being stored on VLCC's with many experts making the case for a much lower number. No one makes the case that this is somehow illicit.

Best...

Navigator