Thread: The scoop on gas.

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For anybody in the mood to do a little reading,Here's the first installment of Ed's Article:


"There’s a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." — National Gas Week, September 5, 2005 as reprinted in the US Senate Permanent Subcommittee on Investigations’ report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006

Fiddling While We Burn

There it is in plain sight for everyone to see, exactly what I’ve been reporting for the past few years: Many individuals who are investing in oil and natural gas futures are going out in the media and trying to convince the American public that either we are out of oil or there is a serious supply shortage of crude against worldwide demand. The question is: Does it surprise you to discover that the US Senate investigated the rigging of the oil market by speculators in the summer of 2006 – and concluded that there was no supply and demand problem with oil? Did you know that their conclusion was that speculators were responsible for a 70 percent overcharge in the price of oil in the months leading up to the summer of 2006?

This from page 1 of the Executive Summary of that Senate investigation, there is this one troubling line: "Today, U.S. oil inventories are at an eight-year high, and OECD (Organization for Economic Co-operation and Development) oil inventories are at a 20-year high."

That’s odd because, in 2006, just like today, the media reporting covered the serious international shortage of oil and justified oil’s high price. Even more troubling is that the House of Representatives held a hearing this past December, ominously titled "Energy Speculation and Price Manipulation." How did it pass under the radar that both the Senate and the House studied the issue of price manipulation in our energy markets and both concluded that it was unregulated, massive trading in one futures market that was really driving up the price of oil and natural gas? And given that conclusion, why has Congress done nothing about it?

Investors Make the News, Literally

A week ago Goldman Sachs issued a new investor note, suggesting that somewhere between six months to two years, the price of oil could go into a "super spike" and prices jump as high as $200 per barrel. It became the major story of the night. Ignored in the reporting frenzy was that many legitimate and well-respected oil analysts dismissed Goldman Sachs’ prediction as groundless.

Get ready for the next shock to your system. In the past month we have added 11.9 million barrels of oil into our stock reserves, giving us 32.3 million more barrels of oil than we had on hand January 1. On May 5, we found out that for the second time in as many years, Iran was storing its excess crude oil on tankers in the Persian Gulf, because it had run out of storage space in the desert and was awaiting buyers for its heavy crude. That same day Saudi Arabia cut the discount price for its Arabian Heavy crude to $7.45, hoping to entice more buyers for immediate delivery. We didn’t hear that news, either.

While researching my third article for BusinessWeek online about the world’s oil situation in 2008, I asked for the most current report from Oil Movements. Because the oil industry is not transparent, Oil Movements tracks every tanker at sea, from both OPEC and non-OPEC oil countries, along with their cargoes’ final destinations. Anne O’Shea responded immediately to my request with their report dated May 8, 2008. Just so you will know, oil shipments are up from a year ago in almost every class, including Middle East oil in transit and Non-OPEC in Transit. The only class of oil shipment that has declined is covered on page 3 of that report. That chart is labeled, "4-Week Changes in Westbound Oil at Sea."

That’s right, shipments of oil headed west have shown serious declines during the month of April, down 800,000 barrels per day in the week before the publication of the report. Now, let me give you the first line from under the Westbound Oil shipments chart: "In the west, a big share of any [oil] stock building done this year has happened offshore, out of sight."

Could this be true? Oil Movements, the unimpeachable source for finding the real world situation on oil transits, is saying that oil is being hidden offshore, not declared in inventories? Yes, that is exactly what they are saying.

That same week our refineries cut their production runs back to 85 percent, down from 89 percent a year ago, to trim more gasoline out of our stock reserves, to increase their profits per gallon.

National Short-Term Memory Loss

It’s amazing how quickly we forget our recent history. Congressional hearings in 2001, blasting certain Wall Street executives for using the media to sell the public on stocks in order to bid up the price – so their firm could divest of its shares without taking a beating. Meanwhile, other trusted advisors pushed stocks that were fundamentally worthless, because their affiliated banks had large loan agreements with those companies.

The year before Enron had been caught manipulating the California energy market, even forcing rolling blackouts across the northern part of their state apparently just for effect – to support their claim that there just wasn’t enough electricity to go around. Again, we now know that claim was untrue. It was Enron shutting down certain power generation plants, while placing bets on their unregulated energy futures market. The net cost to California consumers was almost $8 billion.

It didn’t end there. Amaranth Advisors, a hedge fund, literally was cornering the market on natural gas futures, to make it appear that there was a shortage of natural gas, when the Commodities Futures Trading Commission told Amaranth to liquidate its position on the NYMEX because its bidding had already moved natural gas prices far beyond the reasonable limits of supply and demand. Now, remember this name: ICE, short for Intercontinental Exchange – the "dark futures lookalike market."

Once the CFTC told it to back off its natural gas futures contracts, Amaranth simply shifted gears, got out of the NYMEX, placed its massive bets outside of government regulation in ICE and managed to drive natural gas futures to $8.50 per MBtu.

As the Senate investigation into the manipulation of the energy markets showed, "Amaranth – the day before they failed, natural gas was about $8.50; the day after it failed, it went to $4.46 MBtu." That’s right, one major hedge fund managed to double the price of natural gas simply by loading up on futures contracts; when the government told them their bets were unwarranted, they simply moved their monies to a futures exchange that was unregulated. Only when Amaranth failed did natural gas prices fall back to what was considered normal for supply and demand.

Sadly, like oil today, when this was happening we were being told that natural gas supplies were tight worldwide. That statement simply wasn’t true.

Dark Future

Likewise, British Petroleum was busted for manipulating the propane market in the winter of 2004 and fined $373 million. Of course, in Texas, under deregulation of our public utilities, our electric rates can be set using the futures market for natural gas, so the manipulation of the natural gas market spelled trouble for us. Consider this, by 2006, according to Power to Choose, electricity rates for us had climbed to 15 cents a kilowatt-hour due to the high cost of natural gas. But, that was the exact same time period that Amaranth was proven to be manipulating the market and sending natural gas futures through the roof. Two months later the hedge fund collapsed and natural gas prices fell. Therefore, most Texans paid higher electric bills for Amaranth’s manipulation of the natural gas market.

Professor Michael Greenberger of the University of Maryland, a former board member of the Commodities Futures Trading Commission, testified in front of the House Committee on Energy and Commerce on December 14 of last year. Under discussion that day was the manipulation of the energy markets and prices, but Professor Greenberger added these comments: "Three, four months from now, you’re going to have a hearing on the subprime meltdown, and you’re going to find that the very same legislation [deregulating energy] deregulated something called collateralized debt obligations, CDOs." That legislation, friends, directly ties the mortgage meltdown to the high price of energy today.

It was called H.R. 5660, the Commodities Futures Modernization Act of 2000. At first this bill went nowhere in the House, not even up for debate. Then, a few months later, late one night a 242-page bill written by Wall Street lawyers, with the exact same name as the former House bill, was quietly added to an 11,000-page appropriations bill, and the Enron loophole was created. The power behind that bill was one Texas Senator, one Texas Congressman and their wives.


Continued (Part two to follow, I hope)

the reason the politicians don't do anything about our oil crisis is the foreign countries have enough of our money to wreck our economy overnight if we upset them by developing our own oil.

those 20k windmills i was looking at are looking better all the time..

Great article, Jim! I've read and heard most of those facts over the years but this is a good stitching together of the bigger picture. Do you have a link to Mr. Wallace's article?

Thanks,

Chris

Dont worry ,its set and predicted to hit 12 to 15 a gallon by the end of 2009.....

'Squawk Box' Guest Warns of $12-15-a-Gallon Gas

A little global warming clean up bill and we are at 7 to 10 a gallon .

Senators Warn Bill Could Spike Gas $1.50 to $5 a Gallon

Whats the quote from the bible ,they will slave all day for a cup of rice.....

Originally Posted by skids72

Great article, Jim! I've read and heard most of those facts over the years but this is a good stitching together of the bigger picture. Do you have a link to Mr. Wallace's article? Chris

Chris, I totally overlooked your posting somehow and your question as to whether I had a link to Ed's article. Sorry 'bout that! I read it when it was first published and intended to cut it out but it seems to have jumped into the recycle bin by itself (that means my wife pitched it) but I located it at:

http://www.star-telegram.com/ed_wall...ry/659081.html

if that's of any use to you.

I have corresponded with him (Ed) by email several times at wheels570@sbcglobal.net on this subject and others.

My posting was the article in it's entirety.

Most of those nitwits in Washington are loudly blaming the oil companies for gas prices because of their high profits.

Well ...... THEY'RE THROWING ROCKS AT THE WRONG DOG, DAMN IT!

God bless you, Ed Wallace. You're telling 'em!

In addition to the announcement by the lovely Maxine Waters ("I will socialize ... uh ... nationalize ... the oil companies.... Turn them over to the government'"). Before that, the wicked witch of the West (referring to the 38 billion profit Exxon/Mobil reported) said "AS PRESIDENT, I WILL TAKE THAT 38 BILLION DOLLARS AND PUT IT INTO ALTERNATE FUEL RESEARCH."

So she's going to seize lawful profits made by a private company and use them as she chooses? I wouldn't put it past her to try.

I wrote to Michael Burgess (my congressman and one of the good guys) and enclosed Wallace's article. He may well have seen it already. Surely there are at least a few people in Washington who have the b-b-b ....guts to raise a stink about crooked speculators and the fact that they are dragging the economy down the sooey-hole.


Jim

A bit of information about Mr. Wallace -

Ed Wallace Deflates the Hype on Oil and Gas
Business Wire, April 28, 2008

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* Link

Award-Winning Commentator's BusinessWeek Columns on Energy Challenge Conventional Wisdom by Washington and the Mainstream Media, Attract Widespread Readership

DALLAS -- Groundbreaking reporting on energy by Ed Wallace, an award-winning business journalist and broadcaster in Dallas-Fort Worth, has thrust Wallace into the forefront of the national discussion over oil supplies and skyrocketing gasoline prices.

In two April columns for BusinessWeek magazine*, Wallace was the first to challenge Washington and the media's contention that prices for gasoline and crude oil are rising because of a decline in global inventories and stronger demand.


In reality, Wallace reported, speculators have largely driven the price for oil on the futures market to record levels. In addition, he wrote, demand for oil and gasoline is actually falling, and on April 1, U.S. gasoline reserves are at their highest levels since late 1992--all during a time when refinery production had been intentionally cut to force up the price of gasoline.

In a related story published in the British Telegraph on April 24, Lehman Brothers affirmed Wallace's analysis, stating that energy supply is outpacing demand growth as the world economy cools.

Wallace's BusinessWeek columns, which appeared on April 1 and April 23, struck an immediate chord with readers. The first article drew more than 430,000 page views and more than 800 comments, staying among the Top Five most-read articles for almost three weeks.

The analyst and broadcaster's conclusion that oil and gas prices are being driven by speculation--not market fundamentals--isn't the first where Wallace has challenged the conventional wisdom on energy or automotive issues. In another BusinessWeek article in April 2006, he sharply criticized corn-derived ethanol as a gasoline substitute, calling ethanol an economic boondoggle that would lead to higher food prices and deteriorating air quality. The ethanol article was the most e-mailed story worldwide in the weekend after it was published.

Wallace has gained a reputation in the automotive and energy industries for taking controversial stands which prove to be true over time. In the 1990s he wrote other groundbreaking stories on energy and transportation issues for media outlets. Among them was a 1993 article about the harmful effects on the environment of MTBE, the controversial gasoline additive. Wallace was responsible for finding the flaws in the federal government database on the Ford Firestone issue - reporting which later drew praise from Tire Review magazine.

More recently, Wallace was honored after speaking at the Scona 53 conference on energy at Texas A&M University in February. Appearing with a number of experts including Azerbaijan Ambassador Yashar Aliyev, former Virginia Sen. George Allen, and ExxonMobil Senior Vice President Mark Albers, Wallace was given the Olin Teague Award for the conference's best presentation.

A disciple of the pioneering writer and business consultant Peter Drucker, Wallace approaches his work single-mindedly. "I try to find the obscure and overlooked story that denotes a permanent change in an economic or business paradigm," he says, "and then draw out its impact to a logical conclusion."

Based in the Dallas-Fort Worth area, Wallace holds a Gerald R. Loeb Award for exceptional business journalism from the Anderson School of Business at UCLA. His column heads the Sunday Drive section in the Fort Worth Star-Telegram, and he is a member of the American Historical Society. The automotive expert for KDFW Fox4 in Dallas, Wallace also hosts the top-rated talk show, Wheels, for 570 KLIF-AM in Dallas-Fort Worth, and has one of the most viewed web sites (www.insideautomotive.com) for information and breaking news in the automotive industry.

For more information or to schedule an interview on automotive or energy issues with Mr. Wallace, please phone 214.763.8076 or e-mail wheels570@sbcglobal.net.

He's an interesting guy.


Jim

OK all you non-commital, know-nothing, can't-see-past-your-noses peckerheads out there......here's your chance to get up off your hindside and do something constructive. I can't believe there were only 3 people brave enough to jump up on my chest during my tirade.....but anyway, here's your chance......email your congressman and demand they and their colleagues rescind H.R. 5660, the Commodities Futures Modernization Act of 2000.
https://forms.house.gov/wyr/welcome.shtml

I'll even help you with the verbage:

The Honorable ______ _________
My family and I believe the exorbitant price of gasoline at the pumps is a direct result of H.R. 5660, the Commodities Futures Modernization Act of 2000 being tagged onto the back of an 11,000 page appropriations bill in the wee hours of the morning when nobody was looking and which was subsequently passed. This bill allows commodities futures speculators to drive up the price of crude oil and thus the price of gasoline without any control over their actions by the Securities and Exchange Commission. THIS MUST BE CORRECTED. DO IT NOW.
_________ __________ (your name)
____________________ (your email address)
______ -______ (your zip code)

Send this same message to them EVERY DAY and urge others that you know to do the same. Send this plea to everyone on your email list. Make a copy and hand it to everyone you encounter in everyday conversation. If you'll just do this one little thing, I think we can expect to see some action on it.

Originally Posted by techinspector1

OK all you non-commital, know-nothing, can't-see-past-your-noses peckerheads out there......here's your chance to get up off your hindside and do something constructive. I can't believe there were only 3 people brave enough to jump up on my chest during my tirade.....but anyway, here's your chance......email your congressman and demand they and their colleagues rescind H.R. 5660, the Commodities Futures Modernization Act of 2000.
https://forms.house.gov/wyr/welcome.shtml

Send this picture along with your letters! New International Symbol for Gasoline

Its not life is over and we will all die ,its more like the country is heading a direction we did not choose or vote on,there is a media blackout on whats happening and its going to happen like it or not.....is more what i was saying ,not the sky is falling mentallity.
Our rights are going out the window ,our opinions mean nothing to the elected officials and we are being lied to ,bold face lied to and kept in the dark on purpose and anyone who sayes this is happening gets fired /black balled and is called anti American ............

Ohh here is the top official and he says ..............
http://www.youtube.com/watch?v=8EWwr...eature=related

Originally Posted by shawnlee28

Its not life is over and we will all die ,its more like the country is heading a direction we did not choose or vote on,there is a media blackout on whats happening and its going to happen like it or not.....is more what i was saying ,not the sky is falling mentallity.
Our rights are going out the window ,our opinions mean nothing to the elected officials and we are being lied to ,bold face lied to and kept in the dark on purpose and anyone who sayes this is happening gets fired /black balled and is called anti American ............

Ohh here is the top official and he says ..............
http://www.youtube.com/watch?v=8EWwr...eature=related

Perfect......just friggin' perfect. The head idiot in charge.

Originally Posted by Big Tracks

...

http://www.star-telegram.com/ed_wall...ry/659081.html

...
Jim

Thanks, Jim!

-Chris

The Air Car - zero pollution and very low running costs

this is why people should look into ron paul. honestly hes about the only one who wants to start taking care OF US! and not the world.

Originally Posted by gassersrule_196

this is why people should look into ron paul. honestly hes about the only one who wants to start taking care OF US! and not the world.

Scooter, I agree with you. Ron Paul makes sense. Mitt Romney makes sense. But did they end up in the front running? No, a maniacal, insane, dilusional, illogical liberal socialist woman and a know-nothing , dilusional, illogical, liberal socialist Negro (I'm being nice here) ended up in front on the Democratic side and a know-nothing, illegal alien-loving old man ended up on top at the Republican camp. This country has gone mad. It's over.