The criticism of the speculator-driven bubble theory is coming overwhelmingly from the left and the more moderate parts of the libertarian right. WHEEEEEEEEEEEEEEEEEEEEE!
I'll offer this. If you go to DailyKos and input "oil speculation" in the search function, you get 317 returns in diaries over the last quarter.
Many if not most have titles like:
http://www.dailykos.com/storyonly/2008/6/1/113658/9735
Yes, the high oil prices are due to SPECULATION
blaming the faceless business world for all woes is pretty classic behavior of the angry left.
I have to say I do not share your definition of the word "Many"; at least not as regards titles. I also note that, with the exception of mainly Jerome's diaries, "many" (my definition) of those diaries are not exactly attracting a torrent of comments.
I'm just saying I'd be loath to point to DKos as un undistorted or undistorting window into leftist thought.
you are the media you consume.
Would that be a "Conspiracy"?
Of course not: these are fine firms with the best lawyers money can buy.
Certainly I believe that markets have been much more volatile in the past - until hedge funds moved in with massive market power - than they needed to be, and that much of the huge profits made by BP and Goldman in this period were made from this.
Such trading conduct is not "speculation" - it is "acceptable" market manipulation.
I suspect - and I may well be wrong and paranoid and all of that - that a deeply opaque combination of forward sales by BP on the one hand, and speculative fund positions on the other through Goldman - may be holding the Brent/BFO complex artificially high.
As we recently discussed, it really does not take that much money to underpin prices of BFO production of 70 cargoes a month, and to hype as necessary in the Press.
Not a million miles away from the way the International Tin Council held up the tin price for years.
And if demand DOES continue to rise and/or production flatline (which is where the ITC went wrong, as high prices brought in new production) then they would be OK, and BP would be able to continue to run an interest-free overdraft against the market (if that's what they are doing, of course)
oil is screaming because there is no way to bring it down anymore other than demand destruction. Since people take a while to take real steps (move out of drafty old buildings with no insulation or buy a hybrid), it will take a while.
HiD:
It's not like you don't have a lot of bad feeling from your personal experience with failure of regulation.
That's a presumption on your part. In the immediate aftermath - yes, I did feel as you probably would have if you'd been shafted the way I was.
That was seven years ago and a lot of water under the bridge since then.
I stopped being judgmental about them years ago. They do what they do because that's what "Profit Maximisation" and the Corporation as a legal form mandate.
I don't condemn sharks because they kill, or scorpions because they sting. It's what they do.
BP and Goldman have long had the same Chairman - Peter Sutherland - and other common directorships of long standing eg Lord Browne - Fact.
Both make very large - but opaque - amounts of money from energy trading, and have been doing so for long enough for those responsible to rise to the top at Goldman - Fact
Goldman co-created and co-funded the dominant ICE platform, and BP made the earliest and biggest liquidity commitment - Fact.
BP have a long history of dodgy trading - Fact.
Goldman - like most of the rest - were involved in the systemic manipulation of settlement prices at IPE - Fact.
Does that make the BP and Goldman relationship a "Conspiracy" ?
Well, that's what you appear to think I'm alleging.
The answer is, I'm damned if I know, but it wouldn't take much to find out.
GS is not run by Peter Sutherland. It's run by the same group of partners that have been in charge of the energy trading area since about 1993. He doesn't even appear to sit as an outside director on the main Board.
http://www2.goldmansachs.com/our-firm/about-us/leadership/board-of-directors.html
He's the titular head of the London office (Goldman Sachs International). That's nothing like the seat of power in New York. I doubt the energy desk ever sees the old boy.
Does that make the BP and Goldman relationship a "Conspiracy" ? Well, that's what you appear to think I'm alleging.
Not exactly. I find your writing on this subject to be a classic "conspiracy theorist" screed. You can point to many links between the two, but no hard evidence of coordinated action. When you constantly link two company names in works with titles such as "Oil Market manipulation", it's hard to believe you are not implying both illegal behavior and coordinated action. I'll not put words in your mouth, but there's hardly any need. You make it very clear you think they are working together.
You also ignore the large number of other players in the game. Do they dance while your master manipulators call the tune? Hardly. The fact that both make money in the same market proves nothing. All the long term players make money or they'd be gone.
I'll ask again. If the BFO market is being rigged to high price levels, where is the oil going? Why is no surplus being built up? Is there no "peak oil" effect in play as this diary suggests? What do you think the "real" or "fair" price of oil is? Why are there no large differentials to the cash markets other than for super heavy sours? Exactly how are the manipulators doing what they're doing?
As for your pointing to fiddling the settles on the screen markets. Those work both to move the settles up and down around what the market might have been otherwise. Players pricing in bbls try to move the market down. Those selling, up. There's no reason to jam prices high and keep them there.
For wet oil producers, sure they love high prices. But even here you point out BP is structurally short. Why would they wish flat prices to be high and stable? They're killing their refining side for what reason?
We're at these levels because of:
You make it very clear you think they are working together.
I do, and I think that their relationship has underpinned their mutual profitability these last 10 to 12 years.
You clearly don't.
What do you think the "real" or "fair" price of oil is?
The market price is the market price. Nothing "fair" about it.
You give lots of cogent reasons why you think the high price is justified. I've said often enough I think Peak Oil is here and now.
How that translates to price, I have no idea. If the market price is being held artificially high then it will collapse - if it isn't, it won't. I guess time - and the results of the companies - will tell.
As for your pointing to fiddling the settles on the screen markets.
The scam I blew the whistle on was seven to ten years ago: I've no idea what the games are these days.
Agree
if it isn't, it won't.
Disagree - there are other possible reasons for a boom-bust cycle than market manipulation, or speculation. They all boil down to delayed feedback. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
The oil price could collapse if demand suddenly wanes and there's a fear it won't rebound soon. Spec length flees. Hedgers rush to lock in down the curve and no one buys. We could end up in a heavily backward market as the prompt remains tight. We'll see. But in this scenario, a price drop does not make your case for you.
As you well know, I am in no position to provide any.
Sure, BP and Goldman may be just good friends.
....and I've got a bridge to sell you...
