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Regulators Step Up Probes Of Trading in Oil Markets
Wall Street Journal ^ | 30 May 2008 | By IAN TALLEY, ANN DAVIS and GREGORY MEYER

Posted on 05/30/2008 8:23:05 AM PDT by shrinkermd

U.S. regulators disclosed a broad nationwide probe into potential oil-market manipulation and said they are expanding surveillance of energy markets.

The move Thursday by the Commodity Futures Trading Commission, including its unusual announcement of an investigation in progress, comes after crude-oil prices topped $130 a barrel last week...

Lawmakers in Congress have been pressing regulators to crack down on manipulation, as politicians seek to demonstrate ahead of the fall elections that they are responding to soaring gasoline prices.

Many economists and oil-industry executives say possible shenanigans by market traders have little or nothing to do with the high price of oil. They maintain that the rise is mainly due to fundamental factors such as rising demand, constrained supplies and the weak dollar.

Still, suspicions have lingered that speculators have helped drive oil prices higher. At a series of congressional hearings over the past month, energy consumer groups and some financial insiders have contended that large investments in commodity futures by hedge funds and pension funds are distorting prices.

Congress is weighing proposals to increase collateral requirements for futures traders and otherwise restrain their activities. The implied hope is that such moves will help rein in prices that have almost doubled in a year.

The CFTC has expanded an investigation into alleged short-term manipulation of crude-oil prices via a price-reporting system run by Platts, a unit of McGraw-Hill Cos. One suspicion is that energy companies and traders have at times issued a flood of orders during a time window used by Platts to determine its reported prices for physical oil transactions, then used the potentially distorted prices to make profits in other markets

(Excerpt) Read more at ...

TOPICS: Business/Economy; Extended News; Politics/Elections
KEYWORDS: cftc; energy; energyprices; oil; regulators
I note SAJ on posts 47 and 48 last night had a different and better take. See this FR Thread: HERE.
1 posted on 05/30/2008 8:25:02 AM PDT by shrinkermd
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To: shrinkermd

Democrats still looking for the evil corporate scapegoat to cover up their failed energy policy and denying the laws of market economics and reality.

2 posted on 05/30/2008 8:27:59 AM PDT by HwyChile
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To: shrinkermd

The message is don’t trade oil.

I wonder if that will reduce the price? Somehow I don’t think so.

3 posted on 05/30/2008 8:28:55 AM PDT by Brilliant
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To: shrinkermd
"oil-industry executives say possible shenanigans by market traders have little or nothing to do with the high price of oil"

Nothing to see here, move along. Whistling..............

4 posted on 05/30/2008 8:32:49 AM PDT by rednesss (Fred Thompson - 2008)
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To: shrinkermd

It takes surprisingly few speculators to drive a market bonkers. Any of us individually are capable of doing it with penny stocks. A few super rich can do it with oil.

5 posted on 05/30/2008 8:36:02 AM PDT by fso301
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To: shrinkermd

It was common in those days, as it is in ours, to identify the Communists as leftist and the Nazis as rightists, as if they stood on opposite ends of the ideological spectrum. But Mises knew differently. They both sported the same ideological pedigree of socialism. “The German and Russian systems of socialism have in common the fact that the government has full control of the means of production. It decides what shall be produced and how. It allots to each individual a share of consumer’s goods for his consumption.”

The difference between the systems, wrote Mises, is that the German pattern “maintains private ownership of the means of production and keeps the appearance of ordinary prices, wages, and markets.” But in fact the government directs production decisions, curbs entrepreneurship and the labor market, and determines wages and interest rates by central authority. “Market exchange,” says Mises, “is only a sham.”

Mises’s account is confirmed by a remarkable book that appeared in 1939, published by Vanguard Press in New York City (and unfortunately out of print today). It is The Vampire Economy: Doing Business Under Fascism by Guenter Reimann, then a 35-year old German writer. Through contacts with German business owners, Reimann documented how the “monster machine” of the Nazis crushed the autonomy of the private sector through onerous regulations, harsh inspections, and the threat of confiscatory fines for petty offenses.

“Industrialists were visited by state auditors who had strict orders to examine the balance sheets and all bookkeeping entries of the company or individual businessman for the preceding two, three or more years until some error or false entry was found,” explains Reimann. “The slightest formal mistake was punished with tremendous penalties. A fine of millions of marks was imposed for a single bookkeeping error.”

Reimann quotes from a businessman’s letter: “You have no idea how far state control goes and how much power the Nazi representatives have over our work. The worst of it is that they are so ignorant. These Nazi radicals think of nothing except ‘distributing the wealth.’ Some businessmen have even started studying Marxist theories, so that they will have a better understanding of the present economic system.

“While state representatives are busily engaged in investigating and interfering, our agents and salesmen are handicapped because they never know whether or not a sale at a higher price will mean denunciation as a ‘profiteer’ or ‘saboteur,’ followed by a prison sentence. You cannot imagine how taxation has increased. Yet everyone is afraid to complain. Everywhere there is a growing undercurrent of bitterness. Everyone has his doubts about the system, unless he is very young, very stupid, or is bound to it by the privileges he enjoys.

“There are terrible times coming. If only I had succeeded in smuggling out $10,000 or even $5,000, I would leave Germany with my family. Business friends of mine are convinced that it will be the turn of the ‘white Jews’ (which means us, Aryan businessmen) after the Jews have been expropriated. The difference between this and the Russian system is much less than you think, despite the fact that we are still independent businessmen.”

As Mises says, “independent” only in a decorous sense. Under fascism, explains this businessman, the capitalist “must be servile to the representatives of the state” and “must not insist on rights, and must not behave as if his private property rights were still sacred.” It’s the businessman, characteristically independent, who is “most likely to get into trouble with the Gestapo for having grumbled incautiously.”

“Of all businessmen, the small shopkeeper is the one most under control and most at the mercy of the party,” recounts Reimann. “The party man, whose good will he must have, does not live in faraway Berlin; he lives right next door or right around the corner. This local Hitler gets a report every day on what is discussed in Herr Schultz’s bakery and Herr Schmidt’s butcher shop. He would regard these men as ‘enemies of the state’ if they complained too much. That would mean, at the very least, the cutting of their quota of scarce and hence highly desirable goods, and it might mean the loss of their business licenses. Small shopkeepers and artisans are not to grumble.”

“Officials, trained only to obey orders, have neither the desire, the equipment, nor the vision to modify rules to suit individual situations,” Reimann explains. “The state bureaucrats, therefore, apply these laws rigidly and mechanically, without regard for the vital interests of essential parts of the national economy. Their only incentive to modify the letter of the law is in bribes from businessmen, who for their part use bribery as their only means of obtaining relief from a rigidity which they find crippling.”

Says another businessman: “Each business move has become very complicated and is full of legal traps which the average businessman cannot determine because there are so many new decrees. All of us in business are constantly in fear of being penalized for the violation of some decree or law.”

Business owners, explains another entrepreneur, cannot exist without a “collaborator,” i.e., a “lawyer” with good contacts in the Nazi bureaucracy, one who “knows exactly how far you can circumvent the law.” Nazi officials, explains Reimann, “obtain money for themselves by merely taking it from capitalists who have funds available with which to purchase influence and protection,” paying for their protection “as did the helpless peasants of feudal days.”

“It has gotten to the point where I cannot talk even in my own factory,” laments a factory owner. “Accidentally, one of the workers overheard me grumbling about some new bureaucratic regulation and he immediately denounced me to the party and the Labor Front office.”

Reports another factory owner: “The greater part of the week I don’t see my factory at all. All this time I spend in visiting dozens of government commissions and offices in order to get raw materials I need. Then there are various tax problems to settle and I must have continual conferences and negotiations with the Price Commission. It sometimes seems as if I do nothing but that, and everywhere I go there are more leaders, party secretaries, and commissars to see.”

In this totalitarian paradigm, a businessman, declares a Nazi decree, “practices his functions primarily as a representative of the State, only secondarily for his own sake.” Complain, warns a Nazi directive, and “we shall take away the freedom still left you.”

In 1933, six years before Reimann’s book, Victor Klemperer, a Jewish academic in Dresden, made the following entry in his diary on February 21: “It is a disgrace that gets worse with every day that passes. And there’s not a sound from anyone. Everyone’s keeping his head down.”

It is impossible to escape the parallels between Guenter Reimann’s account of doing business under the Nazis and the “compassionate,” “responsible,” and regulated “capitalism” of today’s U.S. economy today. At least the German government was frank enough to give the right name to its system of economic control.

Here is the link for this article:

6 posted on 05/30/2008 8:37:48 AM PDT by stockpirate (McCain betrayed his conservative roots, conservatives and America. Screw McCain)
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To: shrinkermd
I'll be curious to see what new news the CFTC comes up with since they publish a “commitment of traders” report every week.
7 posted on 05/30/2008 8:40:14 AM PDT by Eric in the Ozarks
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To: shrinkermd
Being that much of the increased price of oil was caused by speculator investors - the bubble has got to burst at some point, like it did with the tech-bubble in 2000-2001. You could see some stock-dumping yesterday as this news broke. I hope that trend continues.
8 posted on 05/30/2008 8:44:30 AM PDT by NavyCanDo
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To: shrinkermd

Here we encourage investors/speculators in the markets to add liquidity, and when the market gets hot and liquid, we whiplash back and say “No” get them out.

We Americans are a fickle lot.

9 posted on 05/30/2008 8:48:46 AM PDT by WarToad
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To: NavyCanDo; All
If this quote from part of an IBD editorial is correct, then it sure sounds like a bubble to me...

Blame part of $135-a-barrel oil on the increased demand in China and India, where the populations and economies are growing rapidly.

But the impact of those nations on crude prices in recent months is suspect. Global oil consumption grew 2% in the first quarter of this year over the first quarter of 2007, while production increased 2.5% over the same period. On a daily basis, roughly 85 million barrels of oil are consumed across the world, almost exactly matching the amount produced each day.

Production over the next two quarters is projected to continue rising (3.3% and 4.1%, according to estimates from Citigroup), while demand is expected to grow at a slower 1.6% pace over the next six months.

10 posted on 05/30/2008 8:57:01 AM PDT by az_gila (AZ - need less democrats)
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To: stockpirate
Also, George Reisman, Capitalism.
11 posted on 05/30/2008 8:59:38 AM PDT by onedoug
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To: NavyCanDo

Only regulatory changes and enforcement will end the bubble... few key changes in regulation and enforcement will pop this bubble like a childs balloon, until then however they’ll just continue to rape the little guy without shame.

12 posted on 05/30/2008 9:02:39 AM PDT by HamiltonJay
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To: Brilliant

Can these socialist rats prove that commodities that do not trade on futures exchanges have less manipulation?

13 posted on 05/30/2008 9:18:57 AM PDT by stan_sipple
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To: shrinkermd

I’m sue the industry is fine with this. They’ve got nothing to hide, after all.

14 posted on 05/30/2008 10:39:15 AM PDT by Wolfie
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To: shrinkermd

bump for later read.

15 posted on 05/30/2008 8:16:55 PM PDT by khnyny (Being Irish, he had an abiding sense of tragedy which sustained him through temporary periods of joy)
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