Global Research
Both the war danger and peak oil explanations are off base. As in the astronomic price run-up in the Summer of 2008 when oil in futures markets briefly hit $147 a barrel, oil today is rising because of the speculative pressure on oil futures markets from hedge funds and major banks such as Citigroup, JP Morgan Chase and most notably, Goldman Sachs, the bank always present when there are big bucks to be won for little effort betting on a sure thing. They’re getting a generous assist from the US Government agency entrusted with regulating financial derivatives, the Commodity Futures Trading Corporation (CFTC).
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Aftermath of BP's Gulf oil spill |
Yet demand for crude oil worldwide is not rising, but rather is declining in the same period. The International Energy Agency (IEA) reports that the world oil supply rose by 1.3 million barrels a day in the last three months of 2011 while world demand increased by just over half that during that same time period.Gasoline usage is down in the US by 8%, Europe by 22% and even in China. Recession across much of the European Union, a deepening recession/depression in the United States and slowdown in Japan have reduced global oil demand while new discoveries are coming online daily and countries like Iraq are increasing supply after years of war. A brief spike in China’s oil purchases in January and February had to do with a decision last December to build their Strategic Petroleum Reserve and is expected to return to more normal import levels by the end of this month.
Why then the huge spike in oil prices?
Playing with ‘paper oil’
A brief look at how today’s “paper oil” markets function is useful. Since Goldman Sachs bought J. Aron & Co., a savvy commodities trader in the 1980’s, trading in crude oil has gone from a domain of buyers and sellers of spot or physical oil to a market where unregulated speculation in oil futures, bets on a price of a given crude on a specific future date, usually in 30 or 60 or 90 days, and not actual supply-demand of physical oil determine daily oil prices.
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Criminal oil companies hiding fact that Earth drowning in oil |
The Commodity Futures Modernization Act of 2000 (CFMA) was drafted by the man who today is President Obama’s Treasury Secretary, Tim Geithner. The CFMA in effect gave over-the-counter (between financial institutions) derivatives trading in energy futures free reign, absent any US Government supervision, as a result of the financially influential lobbying pressure of the Wall Street banks. Oil and other energy products were exempt under what came to be called the “Enron Loophole.”
In 2008 during a popular outrage against Wall Street banks for causing the financial crisis, Congress finally passed a law over the veto of President George Bush to “close the Enron Loophole.” And as of January 2011, under the Dodd-Frank Wall Street Reform act, the CFTC was given authority to impose position caps on oil traders beginning in January 2011.
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This mentally retarded criminal responsible |
The role of key banks along with oil majors such as BP in manipulating a new oil price bubble since last Autumn, one detached from the physical reality of supply-demand calculations of real oil barrels, is being noted by a number of sources.
A ‘gambling casino…’
Current estimates are that speculators, that is futures traders such as banks and hedge funds who have no intent of taking physical delivery but only of turning a paper profit, today control some 80 percent of the energy futures market, up from 30 percent a decade ago. CFTC Chair Gary Gensler, perhaps to maintain a patina of credibility while his agency ignored the legal mandate of Congress, declared last year in reference to oil markets that "huge inflows of speculative money create a self-fulfilling prophecy that drives up commodity prices." 2 In early March, Kuwaiti Oil Minister Minister Hani Hussein said in an interview broadcast on state television, "Under the supply and demand theory, oil prices today are not justified."3
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Please click to enlarge graph |
Michael Greenberger, professor at the University of Maryland School of Law and a former CFTC regulator who has tried to draw public attention to the consequences of the US Government’s decisions to allow unbridled speculation and manipulation of energy prices by big banks and funds, recently noted, "There are 50 studies showing that speculation adds an incredible premium to the price of oil, but somehow that hasn't seeped into the conventional wisdom," Greenberger said. "Once you have the market dominated by speculators, what you really have is a gambling casino." 4
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Criminal oil company theft largest in history; need to be starved out |
We are in the midst of one of those swings now, one made worse by the Israeli saber-rattling rhetoric over Iran’s nuclear program. Let me go on record stating categorically my firm conviction that Israel will not engage in a direct war against Iran nor will Washington. But the effect of the war rhetoric is to create the ideal backdrop for a massive speculative spike in oil. Some analysts speak of oil at $150 by summer.
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Big oil company whore: Hillary "the Hag" Clinton saving for grampers |
Curiously, one of the real drivers of the current oil price bubble is the Obama Administration’s economic sanctions recently imposed on oil transactions of the Central Bank of Iran. By pressuring Japan, South Korea and the EU not to import Iranian oil or face punitive actions, Washington has reportedly forced a huge drop in oil supply from Iran to the world market in recent weeks, giving a turbo boost to the Wall Street derivatives play on oil. In a recent OpEd in the London Financial Times, Ian Bremmer and David Gordon of the Eurasia Group wrote, “… removing too much Iranian oil from the world's energy supply could cause an oil price spike that would halt the recovery even as it does some financial damage to Iran. For perhaps the first time, sanctions have the potential to be ‘too successful,' hurting the sanctioners as much as the sanctioned.”
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BP's Deepwater Horizon destroyed the Gulf of Mexico |
The issue of unbridled and unregulated oil derivatives speculation by a handful of big banks is not a new issue. A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “…there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.”
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Like Exxon Valdez Alaska spill, Gulf will never recover |
Where is the CFTC now that we need such limits? As Senator Sanders correctly noted, the CFTC appears to ignore the law to the benefit of Goldman Sachs and Wall Street friends who dominate the trade in oil futures.
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Public becoming wise to ripoff, going solar |
http://www.telegraph.co.uk/news/worldnews/middleeast/iran/9142688/US-tells-Russia-to-warn-Iran-of-last-chance.html