May 30, 2008
Elaine Meinel Supkis
Oil prices are falling because the Federal government told the big traders they are being investigated for conspiring to artificially drive up prices by cornering the futures markets. This is very much like the Hunt brothers cornering the silver markets. The Senate is going after these pirates, too. I hope they also investigate how the Fed Reserve enabled all of this by dropping interest rates well below inflation. Also, investigators learn that the opponents of wind farms are being supported by the Oxbow corporation which represents oil, coal and gas energy producers.
During continued volatility in oil prices, federal regulators said yesterday that they had been investigating crude oil trading, storage and transportation for the past six months with a focus on possible "futures market manipulation."
The Commodity Futures Trading Commission, which normally keeps investigations confidential, said in a statement that it was "taking the extraordinary step of disclosing this investigation because of today's unprecedented market conditions."
I was wondering why oil prices suddenly turned downwards. I thought either there was a conspiracy from the top officials to persuade the biggest investment houses to knock it off or else. It turns out the good old threat of being arrested did the trick. As usual. I keep pointing this out: the best way to stop criminals or careless people who think they can get away with murder is to arrest them. But Bush and Cheney, our oil soaked presidential duo have not been arrested. Lord knows, they can be picked up for obvious Nüremberg violations.
Now I wonder, did someone leak this investigation to the Big Guys? Because the price of oil peaked and then began to drop alongside gold before this press conference announcing the investigation. Whenever we see bubbles form we know we are seeing some form of market manipulation or enabling that should be illegal or should be made illegal. The job of governments is to regulate things so bubbles do not pop up all the time. Not enable this.
This takes me to another topic: many people have fallen for the siren song that any regulations are evil and the market works best unregulated. An army of Randists cling to this bizarre and stupid idea. Economic chaos, economic free-for-alls are extremely dangerous! The Wild West was dangerous. The idea that civility and public collective well being are bad is a stupid idea. No civilization lasts very long based on chaos and frenzy feeding.
I notice in the comments section on this news site I run, there are people who think a system that is run on a no-interest, no controls system will be paradise. I assure everyone, that will be hell. The problems with our entire system today is due to lack of controls, lack of a gate keeper who prevents things from going crazy with everyone grabbing at money no matter how. The destruction of the gold gate keeper opened the door to making excessive money via speculation on nearly everything on earth including very much, the weather. This casino attitude has replaced the sober banker ethic.
Back to energy: it is the fundamental basis to modern civilization. When it is used for speculative bubbles, it causes very serious damage to the entire economic system. I was personally very worried when the price of oil collapsed in the 1990s. I figured taxes on gas should rise to prevent a bubble in the auto industry. We had the bubble, of course. It was a sudden surge in gas guzzling behemoths that ballooned literally in size.
The US had made headway in auto efficiency via the luxury tax which was tacked onto big gas guzzling cars. But trucks and SUVs were outside this regulation control. So buyers shifted to that market so they could guzzle gas. The government should have imposed regulations on the new market. But instead, for political reasons, the government was unable to do this. Many Americans lobbied Congress to protect the unregulated gas guzzling vehicles. And so our importation of oil shot up as the price dropped. This increase became invisible vis a vis our trade deficit numbers.
But now it has exploded in our face. Most of the US public are now utterly at the mercy of economic forces they, themselves, created. Unable to see their own complicity in this, they are now yelling for regulations to save them. So the government is now belatedly stepping into the energy markets to do this. The broken system is not easy to repair. Auto dealers are now refusing to take in ANY SUVs on trade ins, for example. Detroit fought hard to keep SUVs and those stupid pick up trucks, outside of regulations. Now they want some sort of regulation of energy markets so they can keep on trucking. Only even they are shutting down rapidly. Yesterday, one quarter of GM hourly workers took the company buy-out offer and are leaving. The Auto Workers Union is dead.
About pick up trucks: I have used them for work much of my life. I was very unhappy about everyone and their brother buying these work vehicles and using them as cars. Trucks traditionally were very cheap. Once the mania came in the door, out the door went cheap trucks. They now had to have all the fittings, trimmings and goofy things cars have. So the price soared and trucks became very expensive. This still annoys me greatly. I never minded driving uncomfortable trucks. It was MACHO. Now, they are sissy cars and are not nearly as durable as the older trucks. Hey, I can't rebuild my old diesel truck forever! I hope this mania dies for good and trucks go back to their work horse status.
The Dubai Gold & Commodities Exchange will launch trading of crude-oil futures on Tuesday, a timely move given the astronomical prices for oil and talk of U.S. regulation of speculators in the commodity markets.
Prices for crude peaked above $135 a barrel Thursday in electronic trading on the Chicago Mercantile Exchange Globex platform. See Futures Movers. Record prices over the past several months have raised questions over manipulation of the market.
A U.S. Senate panel listened to testimony on May 20 that said financial speculation by institutional investors and hedge funds in the commodity markets are contributing to energy and food inflation.
The US regulations will, of course, drive commodity traders overseas. The US must deal with the global oil problem the right way: cutting consumption.
Data: BP, Nationmaster
We see from this graph, per capita consumption in the US is gigantic. And Canada is #2 but they are a net oil exporter. Canada may consume as much oil as they wish. But not the US! We also have the world's biggest trade deficit. The anarchy theorists all overlook the need for taking care of the common good. When our own government refused to use taxes to control oil consumption and auto making, when they allowed the balloon in SUVs and pick up trucks to run riot, they endangered ALL of us. The common good requires stopping exactly this sort of 'free choice'. The market place is the last place on earth to settle affairs via a free for all! It just never works in the long run. Basically, the auto markets were misled as to future conditions by the availability of oil as we approached the peak for pumping oil. As smart Hubble Peak analysts predicted. The government, looking into the future, had to break the back of the SUV markets before this market drove us off a cliff.
In this particular graph, I plot the price of oil over the course of this decade. The top line is the price of oil measured in U.S. dollars. The middle line is the price of oil priced in euros. And the bottom line? What you see is very flat. That’s the price of oil and gold. And it's very - you see it's very, very flat.
Now, let's step back for a second, and ask what if the dollar became just another currency. What do I mean by ‘just another currency’? I mean a currency that behaves like all the others, with a positive relationship between depreciation and inflation, and most importantly, between depreciation and interest rates.
In other words, if a currency depreciates, interest rates in the market go up. That's not science fiction. We're experiencing this right now. The Fed is pushing down very, very hard with short-term rates, the federal fund rates. But if you look at medium- and longer-term interest rates in the market, they are headed up.
Oil and gold never go up exactly in tandem but tend to balance each other eventually. Gold is prized by many oil pumping nations so this concert isn't surprising. They have more money from oil, they bid up the price of gold. This is probably why the debate about gold and its place in the economic/monetary system is being revived at long last. This Resource Investor article is a good read. The writer notes that the Fed is PUSHING DOWN on interest rates rather than raising them when oil and gold are shooting upwards. Interest rates should be going up. The Fed knew this because they rapidly raised rates in 2005-2007. The present drop is pure panic.
And is a problem in oil markets. If the Fed slams the door shut in the face of all the pension funds, they HAVE to find a place to go. And in this case, the only place is commodities. They will now flow into Wall Street but that will be a fake bubble, not one based on future optimism.
A new lobbying firm for the group opposing a wind farm off Cape Cod filed a federal document last month reporting that its work for the Alliance to Protect Nantucket Sound is partially funded and shaped by an international energy conglomerate.
The disclosure represents the first documented financial connection between the group opposing the wind farm and Oxbow Corp., which mines and markets energy and commodities, including coal, natural gas, and petroleum.
The Alliance to Protect Nantucket Sound immediately decried the filing as a mistake, and the lobbying firm later amended it in the US Senate Office of Public Records to eliminate the reference to Oxbow.
The environmental movement is mostly 'Not In My Backyard' elitism. I once said on TV, 'This really means someone else's back yard becomes the junk yard.' The US moved its industries to China and then chastises China for pollution problems. China has responded by threatening to shut down factories that are connected with US corporations. The excuse that things like windmills are ugly is being used by people who accept a thousand ugly things that surround them on a daily basis. We 'edit out' things we don't admire. And the sudden shock of seeing windmills means the people looking at these will focus on them and be horrified.
In Japan, these same things are viewed by many animators as beautiful objects! For example, a favorite screen shot for Japanese animators is the lowly electrical pole with transformer boxes:
As my photo shows, it can be viewed as an art object! I framed my shot to be like many Japanese drawings of this sort of thing. Lately, the Japanese artists have latched onto the concept of wind mills and use them to punctuate scenes with shots of the wind mills turning majestically and slowly in the breeze. They obviously think these are beautiful. The US whiners who complain about this are content to drive around paved roads or build their houses smack in the middle of nature and think this is perfectly lovely. But when radical environmentalists burn down these mansions, the people who want nice views blow up and scream and call the more radical people 'terrorists'. Heh. Either we have renewable energy or we die. Eat that with your view of the ocean!
Plans to help two million elderly and vulnerable people cope with the soaring cost of gas and electricity bills have been dismissed as inadequate by consumer groups and charities.
Ministers are planning to introduce new legislation to force energy companies to share data with regulators, so customers can be directed to the best value deals.
As usual, the elderly and infirm will be asked to die. It is simple: the government can tax energy overall and then give subsidies to the poor and elderly. This is socialism. And a good thing, too. Unless people are totally heartless and figure, it is OK to have people starve or freeze to death all around us. I assure everyone, third world countries are terrible to live in unless you insulate yourself from the masses. Which means, live like the elitists on Cod Island.
Thousands of Silverjet customers have been stranded or have lost money after the business class-only airline this morning admitted it no longer had the cash to continue flying and suspended operations.
The airline, which has only been in operation since last year, is the latest to fall victim to soaring jet fuel prices.
And yet another airline crashes and burns. The fallout from high oil prices will prune back the weeds that have overgrown air travel. People hop skip and jump all over the place. As a train lover, I hate this. And think it is very environmentally destructive. Not to mention noisy and interferes with the weather by creating clouds as the turbulence from a jet disturbs the natural rate of cloud formation.