Prices are not determined by the fundamentals in a manipulated market they are determined by oil being an “Asset Class” which is code word or a euphemism for giant Casino in New York instead of Vegas.In a simpler world of fewer trades, where commodities futures can be monitored closely by a conscientious overseer, manipulating the market would be more difficult. But in the modern, ultra-high volume speed-of-light trading by the giant banks with minimal oversight, the smart money bets on the smart manipulators.
...The price of oil, and as such gas is determined not by supply and demand factors, but by whether Goldman Sachs (NYSE: GS) or Morgan Stanley (NYSE: MS) or J.P. Morgan (NYSE: JPM) puts $400 million on Black or Red, the literal Oil Roulette game of the big banks... If Goldman Sachs puts $400 million on Black prices go up, if they put $400 million on Red prices go down, as simple as that, this is actually how the price of oil is determined, nothing more and nothing less. _Dian Chu
...lets just abolish the SEC and the CFTC, as they are completely useless. Furthermore, since all markets are ripe with manipulation, essentially the wild-west; why not reduce government costs by cutting funds to these two agencies entirely. They serve no real purpose when markets are corrupted everyday with Fake Orders, Dark Trading Pools, High Frequency Trading Algos, and the like except to further government costs & bureaucracy while strictly providing the illusion of fair markets. These organizations are a complete joke, and have been for decades!
... _Dian Chu
If you combine Dian Chu's reasoning above with Andrew McKillop's thinking featured in this Al Fin Energy article, you may begin to see a pattern developing.
Even in an era of relative oil oversupply, markets can be tweaked so as to bring oil prices further upward -- until it is time to let them drop again.
It is difficult to deny that global oil markets have become the equivalent of casinos, with all the big players standing around the wheel, placing bets and exerting small bits of control over the ball, here and there, now and again, over and over again.
As for US government oversight, fuggidduhbowdit! The Chicago outfit only wants to make sure that it gets its piece of the action.
Update: Dian Chu expands her argument on her own site
There are many indicators suggesting that big governments and large intergovernmental agencies are very content managing a world where data transparency is limited to those on the top, politically and economically.
This has generally been the case in Asia and Europe (and for the UN, World Bank, and IMF), but is becoming increasingly the case in the US under the Obama administration, also known as the Goldman Sachs administration.
If ever the world was in need of a "Fair Witness" of Heinlein fame it is now. Never before has global economics been in the balance like it is now. North America used to be buffered economically by a super strong and growing middle-class, not anymore. It may be pie in the sky to think that the concept of a fair witness could ascend pettiness, greed, ideology and self-interest, but something needs to give. The analogy of oil markets to casino's is so apt, because if we can boil it down to a single word that would "rigged". Pun intended.
ReplyDeleteThe futures market has turned into a casino, with the winnings fixed in the house' favor. What started as a method to let producers and buyers hedge future prices has turned toxic. But it can be easily fixed. Require buyers of any futures contract to take physical delivery. The hedge function still works, the manipulation is over.
ReplyDeleteJP Straley