US oil supplies jump to seven-year high: EIA

Reuters ^ | Wed Mar 8, 2006 11:52 AM ET

[sully777]

NEW YORK (Reuters) - U.S. commercial crude supplies shot to the highest level in nearly seven years last week on sluggish refinery use and high imports, the government said on Wednesday.

U.S. oil stocks jumped 6.8 million barrels in the week ended March 3 to 335.1 million barrels, or 10 percent higher than last year, according to the Energy Information Administration (EIA), the statistical arm of the Department of Energy.

"The crude build is huge," said Jason Schenker, an economist at Wachovia Bank in Charlotte, North Carolina.

Oil futures on the New York Mercantile Exchange fell more than $1.00 after the report to $60.55 a barrel. In May 1999, the last time supplies were as high, oil futures were less than $17 a barrel.

Refineries operated at 83 percent of capacity, down 2.2 percentage points on the week and a slump of 6.5 percentage points from the same time last year.

As a result of the low output, gasoline supplies fell for the first time in 10 weeks. Supplies of the motor fuel fell 1.1 million barrels to 224.8 million barrels.

But even with the slip, gasoline supplies remain above the upper end of the average range, according to the EIA. "Gasoline inventories are very well supplied going into the summer market," said Schenker.

And Kyle Cooper, analyst at Citigroup Global Markets, said supplies could soar when plants return. "After that you will see a flood of refined products," he said. Refiner maintenance is high this winter as many plants catch up with work that had been delayed by a wave of hurricanes last year.

At least three big coker units were set to restart in early March, including Exxon Mobil's coker at Baytown, Texas, and Valero's cokers in Corpus Christi, Texas and Aruba, according to a Reuters survey.

Distillate stocks, which include heating oil and truck diesel, fell 2.7 million barrels to 131.4 million barrels, but were still nearly 14 percent above last year.

Crude oil imports averaged 10.1 million barrels per day last week, up 267,000 bpd from the previous week, the EIA said.

[himno hero]

yup, its all good

and just yesterday they pushed our price per liter a dime to 93 cents (cdn)

[blam]

"The crude build is huge," said Jason Schenker, an economist at Wachovia Bank in Charlotte, North Carolina."

Getting ready for Iran?

[sully777]

Refining capacity being utilized is at 83% not 100%. Add to discussion the President's executive order eliminating refining formulas in the wake of Katrina (no need to raise prices for formula change) plus the influx of government subsidized strategic reserves at $25 per barrel.

How do all of these factors translate into high prices at the pump?

[Realism]

How do all of these factors translate into high prices at the pump?

Supply and Demand?? (Shrugged shoulders)

[oolatec]

How do they translate? Price gouging.

[HamiltonJay]

Pleanty of crude, pleanty of gas.. yet the price is still completely out of whack with historical values.... Thank god for futures trading of energy... /sarcasm

Make some traders wealthy on the backs of the general public.

[Shanty Shaker]

Is the market is costing in a war with Iran?

[A Texan]

Yup. I don't believe we import a large amount of oil from Iran but others in the world do. If they turn of the "taps" then those other country's need to find a new trader or increase amounts from there current suppliers.

The game is about to start.

[LOC1]

If you think the price of crude, gasoline, or heating oil is too high, you are always welcome to short the respective futures contract on the NYMEX. If you are right, you will make a lot of money. If not, the person on the other side of your trade will make the money.

[sully777]

How do they translate? Price gouging.

---

And here I thought it was China (whose workers make little money to buy gasoline let alone 150,000 yuan SUVs) or India (whose workers make little money to buy gasoline let alone buy 300,000 rupee SUVs).

Or a bullet whizzing by at a remote Saudi refinery.

Or a minor and typical explosion at a refinery down for repairs.

---

Well, GM and Ford employees totalling 55,000 will be unemployed. All the suppliers and infrastructure that supports GM and Ford will be severely hurt ALL BECAUSE SOMEONE's HEDGEFUND IS PUSHING THE PRICES PAST SANITY.

[ARealMothersSonForever]

Getting ready for Iran?

Nothing on this scale is coincidental. There are two messages that can be interpreted. First, that Iran would hurt themselves with a production cut. And second, that Europe could have a buffer of contracts for US surplus if TSHTF.

[sully777]

Funny how facts never seem to persuade the futures market.
http://www.trackntrade.com/crude/
Nymex Crude Future
59.65
-1.93
-3.13
12:38 PM


PETROLEUM (¢/gal)

Nymex Gasoline Future (April Contract)
160.70
-2.64
-1.62
12:38

[HamiltonJay]

Its not a matter of its too high or not, its a matter of the market is willfully and intentionally manipulated, just like the stock market oh say circa 1999/2000.

There is not one remote supply or demand justification in terms of end consumer for the price of oil today... just a bunch of middle men leeching and manipulating the system.

Futures trading in the energy market is just manipulation and gougin, pure and simple.

[VeniVidiVici]

Distillate stocks, which include heating oil and truck diesel, fell 2.7 million barrels to 131.4 million barrels, but were still nearly 14 percent above last year

And yet diesel remains at a stupid price.

[RightWhale]

That's a two-week supply. The Strait of Hormuz could be closed for a month. There is no way to stockpile enough oil to get the country past that crisis without severe disruption.

[sully777]

Its not a matter of its too high or not, its a matter of the market is willfully and intentionally manipulated, just like the stock market oh say circa 1999/2000.

There is not one remote supply or demand justification in terms of end consumer for the price of oil today... just a bunch of middle men leeching and manipulating the system.

Futures trading in the energy market is just manipulation and gougin, pure and simple.

---

Two remarks regarding your post

One, when Katrina and Rita hit the futures sham was revealed. The prices remained steady, and actually fell, in the wake of the storm. Had the market been based on true supply and demand, prices for the commodity would have soared to $100 per barrel.

Second, if the opposite news came out from the EIA (as it did December, 2005) futures prices would have jumped. I recall refined gasoline trading at close to 1.40 per gallon and dropping when the EIA stated inventories were lower than expected (what happened to that report?). Then NOAA issued a bulletin stating the Northeast would be hit by a cold winter. Neither forecaast was an actual fact. But facts don't matter in speculation.

Here's an interesting article

The Energy Outlook Changes





If you stayed out of the oil futures line dance, you don’t need rose-colored glasses right now





By Ed Wallace





Special to the Star-Telegram



“Spot oil prices would have to climb to $77 a barrel this year for those futures investors just to break even.”
Contango: A condition in which distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity. — www.investorwords.com

Last week this column ended with a prediction that, if the average middle-class family could get a break on its energy costs — gasoline, electricity or natural gas — or hit the trifecta and see all three of those costs fall, America’s automobile industry could see a substantial improvement in sales. Little did I know that even as that column was being written, a silent seismic shift was beginning that may have started moving us in that very direction.

Now, on the face of it, one would think the energy world was not in as dire straits as we’ve been led to believe.


Bad News or PR Campaign?
The International Energy Agency, which advises 26 industrialized nations, reported that in January OPEC countries watched their oil production fall by 450,000 barrels per day. The primary causes of this decline? The United Arab Emirates had taken their system offline for maintenance; rebels in the oil fields of Nigeria were on a rampage; Iraq is still Iraq, and so on. This loss, moreover, doesn’t include the 220,000 bpd that Russia, which suffered unusually harsh winter conditions last month, couldn’t ship. Further, according to our own Energy Information Administration’s “Short Term Energy Outlook” paper, published Feb. 7, 255,000 barrels a day of oil from the Gulf of Mexico will remain off line right up to the start of this year’s hurricane season — as will 400 million cubic feet of natural gas per day. The IEA report also mentioned that the daily buffer for petroleum had fallen to a mere 1.4 million barrels a day. Mixing in all the other geopolitical uncertainties, you’d think that the world’s energy supplies had become even more uncertain than they’ve been for the past two years.

For two years some people deeply involved in trading oil and natural gas futures have seemed to be moonlighting on network television, playing energy gurus. They’ve been steadily shown predicting not only that the world’s economy as we know it will end soon — when Peak Oil hits and prices for crude can no longer be contained — but also that the Saudi oil wells are just about empty. But, their one-sided, negative and almost fatalistic outlook notwithstanding, there appears to be far more to this story.


Know What You’re Hearing
Watch any network’s morning news program and you’ll hear the previous day’s closing price for oil on the futures market, followed by speculation about what the price of gasoline is going to do in the near future — as if the price of oil were the only factor involved. But the oil prices that we so often hear quoted are for light sweet crude; you don’t hear the substantially discounted prices for the lesser grades of oil. OPEC’s “basket price” figures take into account the prices of both the more expensive, sweeter crudes and their sour grades.

The factor most often overlooked in the discussion of future gasoline prices is the margin of profits that refiners make per barrel. Few realize that last Sept. 1, shortly after Dennis and Katrina destroyed so much of the South, Bloomberg reported that refiners’ profits had hit $31.07 per barrel.

And so from September through December we watched as the price of natural gas climbed to $15.40 per million British Thermal Units; gasoline hit $3 a gallon and more at the pump; and our own electric rates were slated for two large increases to meet those of natural gas futures’ prices.

Last month we watched oil jump briefly back over $70 a barrel, and this year looked to be a repeat of last in terms of steadily increasing energy prices. But today the near energy future looks markedly different.


Thank Goodness That Fad’s Out
First, it should be noted that a week ago Friday, the government released data showing that we now have a near record amount of natural gas on hand due to the milder than normal winter we’ve experienced. As a result, reserves have hit a 17-year high, which has caused the market prices for natural gas to collapse; now they’re at less than half of December’s rate, a mere $7.32 per million BTUs. One has to wonder whether, in this era of electric deregulation, our larger electric companies will now ask the state for permission to lower their rates for spring.

Second, I’m enjoying reading other states’ discussions about the identical problems they’re having with deregulated electric utilities. Some Republicans in Delaware must not find the situation as entertaining as I do; they say it’s time to reverse this ill-thought-out legislation — obviously, the industry needs some regulation. But refinery profits are nowhere near last September’s high of $31.07 per barrel; in fact, that profit margin has disappeared. Bloomberg Financial reported on Feb. 10 that profits are now a mere $3.086 per barrel refined — and the profit for “turning crude into gasoline fell below $1 per barrel for the first time since September of 1994.” Refiners may even be losing a little on each barrel as a result of the 90 percent decline in refinery profits.

And third, a couple of days before Bloomberg’s report came out, the Department of Energy released inventory data for the week showing that we had again put over 4 million barrels of refined gasoline into reserves — for a total gain of more than 20 million barrels over the previous six weeks. And, while oil supplies on hand fell by 300,000 barrels, amounts of crude oil, heating oil, gasoline and diesel on hand now have all surpassed their five-year averages.

However, by the time I heard these numbers I’d already read some shocking and certainly underreported news.


The Contango: It Only Takes One to Dance
On Tuesday, Feb. 7, Reuters Business Asia reported Deutsche Bank’s warning about just how high the spot oil market price would have to go this year to cover futures traders’ losses in the oil market contango. That’s right: Deutsche Bank says that oil futures have been in contango since November of 2004. In layman’s terms, the spot market price for oil has consistently been lower than their oil contracts obligated futures traders to pay.

This circumstance encourages oil companies to build reserve stocks, because they can make more by storing crude oil and reselling it later. But that doesn’t mitigate what Deutsche Bank’s warning concerned: spot oil prices would have to climb to $77 a barrel this year for those futures investors just to break even.

From the day that warning was issued, we watched the price of light sweet crude fall; early this week it was selling for less than $61 per barrel. Meanwhile, gasoline futures fell to $1.40 per gallon; that’s an indication that we might soon see retail gasoline prices under $2 again.

In the middle of all this, the Wall Street Journal reported that Congress is working on legislation that would give the Commodity Futures Trading Commission more enforcement authority to regulate the energy market. Seems “energy users [were] complaining that shortages of natural gas have created a market dominated by speculators who manipulate prices.”


“Positive” Pressures
So now we know. The oil market has been in contango for the last 13 months; spot prices are actually lower than the higher numbers we are told (future) oil contracts are going for. The price of natural gas has fallen by 50%, while refinery profits are down 90 percent from last September. All of this, furthermore, is happening during a period when OPEC lost 450,000 bpd, Russian oil production was off 220,000 bpd, and our own Gulf of Mexico production is still short 255,000 bpd. And yet we are now sitting on a 17-year high for natural gas; gasoline reserves are up 20 million barrels over the past six weeks; and diesel and oil reserves are higher than they were Jan. 1.

That’s good news: Our energy industry apparently has done an exceptional job of improving America’s buffer for oil products — and, according to statistics, has done so in a very tough environment. Yet I must issue a word of caution: the industry is still vulnerable to major disruptions, whether they be acts of God or of people claiming to be acting on God’s instructions. But, with another two million barrels of oil per day due to come on line this year — and the market already in the red, praying for $77 a barrel prices to fix traders’ losses — maybe reporting more of the positive downward pressures on oil and gas prices might stop the feeding frenzy in this market for a little while.

On the other hand, this just in from our “Have-they-no-shame” department: The New York Times reported last Tuesday that our Interior Department’s budget plan for 2006 will allow oil and gas companies to take $65 billion worth of oil and gas from federal lands without having to pay royalties to the government. Maybe that will soften the pain of years of record oil profits.


Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA. He reviews new cars every Friday morning at 7:15 on Fox Four’s Good Day and hosts the talk show Wheels Saturdays from 8:00 to 1:00 on 570 KLIF. E-mail: ed-wallace@charter.net

[Paperdoll]

Supply up, yet the price per gallon went from $2.05 to $2.29 in my part of Washington state this week!

[sully777]

That's a two-week supply. The Strait of Hormuz could be closed for a month. There is no way to stockpile enough oil to get the country past that crisis without severe disruption.

---

The world would never let the Straits close. During the Iran-Iraq war, the Straits of Hormuz was threatened by the warring factions, yet the price of oil per barrel dropped by 1986-87 to one of its lowest historic levels.

[PAR35]

And the local gas stations just pushed up prices by about 12 cents a gallon. The bubble has to burst soon. I predicted 6 months ago, and I'll stick with it, that we would see $28 dollar oil before we saw $100.

[Gone GF]

OK, I guess this explains why gas in my area has risen more than 10 percent in a week. Not.

[PAR35]

If you think the price of crude, gasoline, or heating oil is too high, you are always welcome to short the respective futures contract

Never play poker when the other fellow can stack the deck.

[Wristpin]

The US Navy will destroy those missiles in less than one hour if the Iranians are stupid enough to try it.

[Beagle8U]

I hope something happens soon, I'm paying $2.49 a gallon for propane.( no natural gas in my area)

[sully777]

The Tanker War, 1984-87 (Price per barrel went from $53 in 1982 to approx. $18 in 1987)

Much of Iraq's export capability was lost during the Iran-Iraq War, either to war-related damage or due to political reasons. In 1982, for instance, Syria (allied with Iran at the time) closed the 500-mile, 650,000-bbl/d-capacity Banias pipeline, which had been a vital Iraqi access route to the Mediterranean Sea and European oil markets. By 1983, Iraq's export capabilities were only 700,000 bbl/d, or less than 30% of operable field production capacity at that time.

Iran's revenue share fell after the 1978/79 Iranian Revolution, followed soon thereafter by the Iran-Iraq War for much of the 1980s [and has not recovered since]. All Iranian onshore crude oil production and output from the Forozan field (which is blended with crude streams from the Abuzar and Doroud fields) is exported from the Kharg Island terminal located in the northern Gulf. The terminal's original capacity of 7 million bbl/d was nearly eliminated by more than 9,000 bombing raids during the Iran-Iraq War.

The tanker war seemed likely to precipitate a major international incident for two reasons. First, some 70 percent of Japanese, 50 percent of West European, and 7 percent of American oil imports came from the Persian Gulf in the early 1980s. Second, the assault on tankers involved neutral shipping as well as ships of the belligerent states.

The tanker war had two phases. The relatively obscure first phase began in 1981, and the well-publicized second phase began in 1984.

The relatively obscure first phase began in 1981, and the well-publicized second phase began in 1984. As early as May 1981, Baghdad had unilaterally declared a war zone and had officially warned all ships heading to or returning from Iranian ports in the northern zone of the Gulf to stay away or, if they entered, to proceed at their own risk. The main targets in this phase were the ports of Bandar-e Khomeini and Bandar-e Mashur; very few ships were hit outside this zone. Despite the proximity of these ports to Iraq, the Iraqi navy did not play an important role in the operations. Instead, Baghdad used Super Frelon helicopters equipped with Exocet missiles or Mirage F-1s and MiG-23s to hit its targets. Naval operations came to a halt, presumably because Iraq and Iran had lost many of their ships, by early 1981; the lull in the fighting lasted for two years.

In March 1984, the tanker war entered its second phase when Iraq initiated sustained naval operations in its self-declared 1,126-kilometer maritime exclusion zone, extending from the mouth of the Shatt al Arab to Iran's port of Bushehr. In 1981 Baghdad had attacked Iranian ports and oil complexes as well as neutral tankers and ships sailing to and from Iran; in 1984 Iraq expanded the so-called tanker war by using French Super-Etendard combat aircraft armed with Exocet missiles.

In March 1984 an Iraqi Super Etendard fired an Exocet missile at a Greek tanker south of Khark Island. Until the March assault, Iran had not intentionally attacked civilian ships in the Gulf.Neutral merchant ships became favorite targets, and the long-range Super-Etendards flew sorties farther south. Seventy-one merchant ships were attacked in 1984 alone, compared with forty-eight in the first three years of the war. Iraq's motives in increasing the tempo included a desire to break the stalemate, presumably by cutting off Iran's oil exports and by thus forcing Tehran to the negotiating table. Repeated Iraqi efforts failed to put Iran's main oil exporting terminal at Khark Island out of commission, however.

The new wave of Iraqi assaults, however, led Iran to reciprocate. In April 1984, Tehran launched its first attack against civilian commercial shipping by shelling an Indian freighter. Iran attacked a Kuwaiti oil tanker near Bahrain on May 13 and then a Saudi tanker in Saudi waters five days later, making it clear that if Iraq continued to interfere with Iran's shipping, no Gulf state would be safe. Most observers considered that Iraqi attacks, however, outnumbered Iranian assaults by three to one. Iran's retaliatory attacks were largely ineffective because a limited number of aircraft equipped with long-range antiship missiles and ships with long-range surface-to-surface missiles were deployed. Moreover, despite repeated Iranian threats to close the Strait of Hormuz, Iran itself depended on the sea-lanes for vital oil exports.

These sustained attacks cut Iranian oil exports in half, reduced shipping in the Gulf by 25 percent, led Lloyd's of London to increase its insurance rates on tankers, and slowed Gulf oil supplies to the rest of the world; moreover, the Saudi decision in 1984 to shoot down an Iranian Phantom jet intruding in Saudi territorial waters played an important role in ending both belligerents' attempts to internationalize the tanker war. Iraq and Iran accepted a 1984 UN-sponsored moratorium on the shelling of civilian targets, and Tehran later proposed an extension of the moratorium to include Gulf shipping, a proposal the Iraqis rejected unless it were to included their own Gulf ports.

Iraq began ignoring the moratorium soon after it went into effect and stepped up its air raids on tankers serving Iran and Iranian oil-exporting facilities in 1986 and 1987, attacking even vessels that belonged to the conservative Arab states of the Persian Gulf. Iran responded by escalating its attacks on shipping serving Arab ports in the Gulf. As Kuwaiti vessels made up a large portion of the targets in these retaliatory raids, the Kuwaiti government sought protection from the international community in the fall of 1986. The Soviet Union responded first, agreeing to charter several Soviet tankers to Kuwait in early 1987. Washington, which has been approached first by Kuwait and which had postponed its decision, eventually followed Moscow's lead. United States involvement was sealed by the May 17, 1987, Iraqi missile attack on the USS Stark, in which thirtyseven crew members were killed. Baghdad apologized and claimed that the attack was a mistake. Ironically, Washington used the Stark incident to blame Iran for escalating the war and sent its own ships to the Gulf to escort eleven Kuwaiti tankers that were "reflagged" with the American flag and had American crews. Iran refrained from attacking the United States naval force directly, but it used various forms of harassment, including mines, hit-and-run attacks by small patrol boats, and periodic stop-and-search operations. On several occasions, Tehran fired its Chinese-made Silkworm missiles on Kuwait from Al Faw Peninsula. When Iranian forces hit the reflagged tanker Sea Isle City in October 1987, Washington retaliated by destroying an oil platform in the Rostam field and by using the United States Navy's Sea, Air, and Land (SEAL) commandos to blow up a second one nearby.

Within a few weeks of the Stark incident, Iraq resumed its raids on tankers but moved its attacks farther south, near the Strait of Hormuz. Washington played a central role in framing UN Security Council Resolution 598 on the Gulf war, passed unanimously on July 20; Western attempts to isolate Iran were frustrated, however, when Tehran rejected the resolution because it did not meet its requirement that Iraq should be punished for initiating the conflict.

In early 1988, the Gulf was a crowded theater of operations. At least ten Western navies and eight regional navies were patrolling the area, the site of weekly incidents in which merchant vessels were crippled. The Arab Ship Repair Yard in Bahrain and its counterpart in Dubayy, United Arab Emirates (UAE), were unable to keep up with the repairs needed by the ships damaged in these attacks.

Source: http://www.globalsecurity.org/military/world/war/iran-iraq.htm

[antaresequity]

its a matter of the market is willfully and intentionally manipulated

Sure it is...and your proof is what?

I watch the oil markets with a live feed from NYMEX...and the oil market got hammered on the news...and has been selling the last three days steady...down 3.70 a BBL since Monday open...

[LOC1]

Do you have direct evidence of manipulation of the futures markets? If you do, I am certain that the CFTC would be very interested.

In the mean time, here is some information relating the price we all pay at the pump to the price on the futures markets after a time delay. This subject has been rather extensively studied.

http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2003/gasolinepass/gasolinepass.htm

[William Tell]

HamiltonJay said: "There is not one remote supply or demand justification in terms of end consumer for the price of oil today..."

Given the high prices, then, there should be significant signs of decreased consumption, right? The price of oil has more than tripled since 1999. Has the consumption decreased to one-third? Has the consumption decreased to half? Has the consumption even decreased by 10%?

To watch the world continue its consumption despite the tripling of price, and to claim that nothing "justifies" the high price reflects, I think, some wishful thinking.

It takes time for markets to adjust. But the the tripling of prices has hardly created any adjustments whatever. Crude oil surpluses, such as they are, are not a very convincing indicator that consumption is declining. Without such a decline, there is little reason to expect a decline in prices.

[sully777]

Evidence? Gave it already.

BTW, NYMEX trading April contracts for refined at 1.60 at 12:38 PM EST. It is now trading 1.6280 at 2:20 PM EST. That would be UP. Now, if I recall correctly, NYMEX was trading March contracts in the low 1.50's. I mean the cold in the Northeast (NOT), the Chinese (NOT), Nigeria (NOT), Saudi terrorist (NOT), supply and demand (NOT see related threads), and Starits of Hormuz (see my post above).

Evidence? I've posted two threads that gives cold hard facts, and historical context that counter the wild speculation. But the speculators always counter with demands of proof. Sheesh that's ballsy.

BTW, how many related jobs will be lost when GM and Ford close their plants because gasoline prices have been so high, based on speculation. Let's see there's 55,000 direct losses and a ratio of 1 in 6 jobs interconnected to automotive manufacture in this country.


Here's to the speculator and hedge fund manager: Consistently giving Americans real world jobs for unknown years.

[antaresequity]

Futures trading in the energy market is just manipulation and gougin, pure and simple.

You haven't a clue as to what your talking about...nor do you understand the function of the futures market as it relates to producers, shippers, and refiners...

I suppose you would prefer a closed market or to leave the participants naked to risk?

I suppose aluminum futures markets are also manipulated?

[antaresequity]

You have given no evidence...only opinion...

The manipulation of the oil market is done by OPEC...openly...and even our own government through the use of the strategic oil reserve releases and purchases.

Further...the price you pay at the pump is nearly .50 cents of tax (and that tax is taxed again via sales tax)...Perhaps you can vent your angst in this direction?

Market manipulations by speculators would require trillions of dollars and be fraught with risk...

Speculators don't manipulate...they speculate in response to past market behavior and their opinion of future oil prices.

Perhaps what your pissed off at is the futures market itself?

If so what are you proposing? Eliminating your opportunity to participate in it?

Many many professional and armature prognosticators are forecasting oil at 80-100 BBL in the year to come. I have even read that oil will go over 200 within ten years...

If your so certain of your theories concerning manipulation...Buy a few January 07 contracts and enjoy your subsidized gas...

It never ceases to amaze me that free market conservatives would attack a market...and every time oil spikes up they act like little socialist crybabys...

[sully777]

You haven't a clue as to what your talking about...nor do you understand the function of the futures market as it relates to producers, shippers, and refiners...

I suppose you would prefer a closed market or to leave the participants naked to risk?

I suppose aluminum futures markets are also manipulated?

---

Either/Or fallacy

Markets have been historically manipulated in free market economies by speculators. Please note some of these manipulations resulted in Market corrections (aka CRASH/DEPRESSION):

Tulips (that was a classic scam from another century)
Silver (classic speculation in the 1800s during laissez faire economy)
Austrian Banks (1920s)
Oil (late 70s early 80s)
Silver at $50
Gold at $500
S&Ls
Japanese real estate
British Pound (That was a Soros special)
Pacific Rim
Dot coms (IPOs for nothing but geeks with bad business plans)
Steel (Once China completed Three Gorges the world found out prices were overvalued and the prices dropped like a steel ...)
Gold (I think the whole thing from the 1970s is happening again)
Oil today
Google (no one ever learned from the Dot Com crash)

[PCBMan]

"And the local gas stations just pushed up prices by about 12 cents a gallon."

Must be nice. Not too long ago, it was around $2.20 here in mid-Michigan. It's $2.56 now. Nobody has an explanation.

[N. Theknow]

And yet diesel remains at a stupid price.

And yet taxes on diesel remains at a stupid price.

[antaresequity]

Once agian no facts...

Can you please point to a single case where speculators in commodity markets have manipulated the market...

Further...exclude all instances that occurred before the Internet and the mass participation of individual speculators buying and selling at the speed of light?

The dot com bubble was not market manipulation by speculators...it was as Greenspan stated..."IRRATIONAL Exuberance"...

The China Steel incident again...was not market manipulation by speculators...it was covert actions of a nation state...

Gold too huh? Then I guess copper, silver, palladium, uranium, lead and aluminum are also being manipulated?

Get a grip...there are now 6 billion people on this planet and billions of them have cell phones and TV's with satellite dishes...they see the same adds on TV you see...they see it, they want it...and the demand for raw materials is going to go through the roof over the next decade...and its not going to be manipulation...its called DEMAND

Oil?...you have no proof that oil speculators are manipulating the market...

Google? give me a break...people have run up googly pining for the market bubble days...Google will be trading at 50 just like all the rest of its big cap tech brethren in due time...

Go short some goggle...and be guilty of market manipulation as you define it...

[edsheppa]

Can you please point to a single case where speculators in commodity markets have manipulated the market...

Hunt brothers who manipulated the silver market. Yes, they went bust but nevertheless their manipulations caused the price to increase ten-fold.

Further...exclude all instances that occurred before the Internet ...

OK, the California electricity market, manipulated by Enron et al. Yes, they were just taking advantage of inefficiencies created by gov rules, but many markets are inefficient to some extent.

For another, Saddam Hussein managed to turn a pretty penny before the recent Gulf War by alternating between saber-rattling and feigned meekness.

There is a respectable argument to be made that the Internet and automation of many trading activities introduce the possibility of new kinds of manipulations. Given a flaw in widely used systems one could conceivably exploit unstable feedbacks and really make a killing. Or perhaps by subtly hacking a router to adjust the timing of trades you could get a kind of millisecond-level resonance going. Hmmm, I smell a novel in that. Too bad I can't write worth a damn.

[antaresequity]

Perhaps...but the posters point was that "speculators" manipulate the oil market...and that the "futures market" was the cause or contributed to the "manipulation"...nothing could be further from the truth.

Speculators provide liquidity to the market...and the markets themselves perform fine.

How could you possibly manipulate the oil futures market without taking delivery of the physical oil and hording it like the Hunts did silver? And in reality was it market manipulation? I don't think so.

The Hunts bought legally and took possession of silver. The deliverable supply began to dry up, and as prices rose, speculators fed the frenzy. Yes they were guilty of conspiracy...and they ended up bankrupt...

The Hunts couldn't unload their 200 million ounces of silver on the market in one day, and they were just as susceptible to a falling market as the next guy. They became victims of their own greed...and though they actually made money on their physical silver...they got hammered by their long contracts...

It was the silver derivative market that handed them their own heads...the market worked...

There are oil markets in every major financial center on the planet...from London to Dubai, Hong Kong, Tokyo and New York...

In order to manipulate one...you would have to manipulate all...not possible.

Speculators and traders in a million years could never manipulate the oil market now. With the terrorist risk premium looming...it would be suicide.

A far more likely scenario would be for the Arab sheiks to take one side of the market and then move the price on "news"...After all...it was the Saudi Royal family that was in bed with the Hunts...

But thats not 'speculator' manipulation...that is the predatory practice of a global cartel...

Every time the price of oil goes up...I always hear this nonsense about about the oil markets being manipulated by speculators plying their trade in the contract market...I find it nearly humorous if it didn't sound so pathetic and desperate...

[COEXERJ145]

Not too long ago, it was around $2.20 here in mid-Michigan. It's $2.56 now. Nobody has an explanation

Sounds like what happened in my part of Texas. Jumped around .25 cents in one day for no reason @ all. Hasn't gone down since and I doubt it ever will.

[TChris]

Umm... Refining capacity is still the bottleneck. Crude supply hasn't been a problem for many years.

Don't like gasoline prices? Yell at an environmentalist and/or refinery NIMBY.

[blam]

"The game is about to start."

"Nothing on this scale is coincidental."

It's about the flow of oil out of the Persian Gulf more than Iran's oil supply. I saw a military analyst on Fox News the other day who said that one of our early plans to deal with Iran was to shut the Strait Of Hormuz ourselves. Iran will try to close the Strait and may even try to wreck the Saudi terminals, refineries and etc..

We have numerous agreements with other nations to supply them with oil if their normal supply is interrupted. So...keep your gas tank full.

[sono]

Why do I pay 2.49/gal for regular?

[blam]

"That's a two-week supply. The Strait of Hormuz could be closed for a month. There is no way to stockpile enough oil to get the country past that crisis without severe disruption."

I saw some guy say the other day that we have enough oil in the SPR to get us through the Iranian troubles.

[ARealMothersSonForever]

We have numerous agreements with other nations to supply them with oil if their normal supply is interrupted. So...keep your gas tank full.

Good summary, and sound advice. Personally, I think that there should be an overt hostile act before we offer any military assistance. Paid for in advance with cash and oil.

[fhlh]

"Big Aluminum"

[edsheppa]

but the posters point was that "speculators" manipulate the oil market

You have a good point about that. I don't see how speculation and trading per se can manipulate so large a market as oil.

[Paperdoll]

Wow! Like I said, gas per gallon in my part of Washington State - $1.04 Friday, $2.29 Monday and $2.49 today! Same octane! Unbelievable!

[RightWhale]

As far as ME oil is concerned, the US imports something like 15% of its daily consumption. The Reserve would cover that for 90 days. The big question is what the world recovery curve would look like: would the rest of the world also have a 90 day cushion, and what would oil supply look like after 30 days, after 60 days, after 90 days. Japan and China would be in the deep spicy, but China could just forbid anyone to drive for the duration and could keep its electricity usage confined to coal only. I don't know what the situation is in India, there could be some problems. One thing for sure, the US Reserve would be held for military use first, so the civilians might not be able to run out to the store eight times a day for quite a while and public transportation is a joke. Europe would go on public transportation.

[blam]

I have about 100 gallons of gasoline set aside for hurricanes, Bird Flu pandemic, war with Iran and etc. I could probably stretch that for months. I know other people who have extra supplies of gasoline...in fact, some of our recent high prices may be a result of hoarding. A lot of people in this region got 'burned' for lack of fuel when Katrina came through and aren't going to let that happen again. We (the US) are probably sitting on more 'reserves' than is on the books.

[RightWhale]

The 16 gallons of gasoline in my SUV will last about a year. Only reason I go anywhere is I have a P O Box and have to pick up a couple bills a month. If I put them on autopay, I wouldn't have much excuse to go anywhere at all. I am finding it harder to justify going to the supermarket even every two weeks now. If municipal power also goes out I will be back where I was 20 years ago when we finally got power.

[prairiebreeze]

GMTA