Speculate This
Forwarded by a Naybob of Simian nature... A surprising but predictable industry backed media piece from Fortune regarding how hedge funds, traders, and Big Oil are really driving gas prices.
Surprising in the fact that Fortune would attempt to lift up the dirty covers, but alas, the authors miss the boat whilst trying to put a supply and demand spin on this travesty.
In addition, the authors are remiss in not addressing the 212 to 1 ratio of contracts to actual production on the IPE. An attempt to point the finger away from speculative hedge funds while downplaying the oil companies production hedging doesn't help the effort either.
Re: IPE 212 to 1... In 2004 alone, if you added up just the BRENT crude being controlled by ONLY futures contracts on the IPE, these contracts called for 212 times the actual global annual production of Brent crude.
As in 212 times the amount of oil that got pumped out that year. As in virtual oil that NEVER existed, nor could be PHYSICALLY delivered.... talk about leverage, its no wonder oil is $70 a barrel.
We have gone on record regarding this fraud and larcency. Its still a dirty little secret that no one really wants to talk about.
Some key excerpts from the Fortune article: Big Oil is pointing fingers at hedge fund managers, who blame commodity index funds, who in turn cite surging demand in China, production losses in Nigeria and Iraq, and hostile regimes in Iran and Venezuela.
Commodity futures allow producers, consumers, and investors to hedge price risk by contracting to buy or sell a commodity at an agreed-upon price at a future date. (This actually points the finger directly at the oil producers.)
"So if inventories are normal, why should the price be so high?" asks Royal Dutch Shell CEO Jeroen van der Veer. At least part of the answer, he concludes, must lie in the financial markets.
"I know various pension funds that had money in bonds, in shares. Now they went into commodities," he says. "That's new. And that has to have an impact."
At least van der Veer is attempting to be honest, but this quote from a "hook in mouth" Barclays trader disgusts me: "the price of futures is still inextricably linked to supply and demand in the physical market."
From this line of bull, the authors attempt to spin back to "supply and demand" being the "real" issue.
As we have proven countless times in these pages... outside of an orchestrated refinery production squeeze, the supply and demand canard is absolute rubbish and nothing could be further from the truth.
And for just this once we actually agree with Bill O'Reilly. I know, thats not a typo.
Fox's O'Reilly, at least, is clear: He blames all "these Vegas-type people [who] sit in front of their computers and bid on 'futures' contracts." As he puts it: "Supply and demand? - my carburetor, this has nothing to do with the free market."
Surprising in the fact that Fortune would attempt to lift up the dirty covers, but alas, the authors miss the boat whilst trying to put a supply and demand spin on this travesty.
In addition, the authors are remiss in not addressing the 212 to 1 ratio of contracts to actual production on the IPE. An attempt to point the finger away from speculative hedge funds while downplaying the oil companies production hedging doesn't help the effort either.
Re: IPE 212 to 1... In 2004 alone, if you added up just the BRENT crude being controlled by ONLY futures contracts on the IPE, these contracts called for 212 times the actual global annual production of Brent crude.
As in 212 times the amount of oil that got pumped out that year. As in virtual oil that NEVER existed, nor could be PHYSICALLY delivered.... talk about leverage, its no wonder oil is $70 a barrel.
We have gone on record regarding this fraud and larcency. Its still a dirty little secret that no one really wants to talk about.
Some key excerpts from the Fortune article: Big Oil is pointing fingers at hedge fund managers, who blame commodity index funds, who in turn cite surging demand in China, production losses in Nigeria and Iraq, and hostile regimes in Iran and Venezuela.
Commodity futures allow producers, consumers, and investors to hedge price risk by contracting to buy or sell a commodity at an agreed-upon price at a future date. (This actually points the finger directly at the oil producers.)
"So if inventories are normal, why should the price be so high?" asks Royal Dutch Shell CEO Jeroen van der Veer. At least part of the answer, he concludes, must lie in the financial markets.
"I know various pension funds that had money in bonds, in shares. Now they went into commodities," he says. "That's new. And that has to have an impact."
At least van der Veer is attempting to be honest, but this quote from a "hook in mouth" Barclays trader disgusts me: "the price of futures is still inextricably linked to supply and demand in the physical market."
From this line of bull, the authors attempt to spin back to "supply and demand" being the "real" issue.
As we have proven countless times in these pages... outside of an orchestrated refinery production squeeze, the supply and demand canard is absolute rubbish and nothing could be further from the truth.
And for just this once we actually agree with Bill O'Reilly. I know, thats not a typo.
Fox's O'Reilly, at least, is clear: He blames all "these Vegas-type people [who] sit in front of their computers and bid on 'futures' contracts." As he puts it: "Supply and demand? - my carburetor, this has nothing to do with the free market."
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