Turns out according to CBS 60 Minutes that Morgan Stanley was the nation’s biggest oil company. We were all paying a $2/gallon tax to rich investors. The collapse probably saved us money in the long run. For those of you who thought the market was being manipulated – you were right!
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For those of you who thought the market was being manipulated – you were right!
Duh.
Little or no oversight, regulation, or auditing with trillions of dollars flowing. Well big surprise. That neocon BS about goverment regulation equalling goverment interference caused this. I don’t favor a nanny state, but let’s not put the kids in charge of the cookie jar either.
OMG you got to be joking. There is plenty of regulation in the oil and futures trading businesses. Oil prices dropped simply because demand dropped when the whole economy tanked. Duh.
As a taxpayer I’m happy to have bailed them out of any bad trades MS and kin made when their oil bubble popped via TARP. We needed to save the financial system so it could live to screw the people another day.
#2, What people fail to realize is that if the goobermint hadn’t bailed out these companies they wouldn’t have tried that again because they wouldn’t be in business any longer.
Deregulation is ok as long as people are willing to pay for their mistakes. Deregulation combined with taxpayers propping them up when they screw up is asinine.
I am not a stocks sort of person, but I have to say that this video is the first time I have EVER heard of any potentially legitimate reason for the futures market (farmers). Even that is not financially sound as the weather could completely obsolete any prediction.
Spekrlation, if you had watched the show last night you would be knowledgeable in the subject matter. It was stated in the show that the price of oil and gasoline went UP as demand went DOWN. The price of oil went down because the big players got out of the oil speculation business.
Sperky:
Oil prices dropped simply because demand dropped
It did? Who stopped driving all of a sudden? Who stopped consuming oil all at once?
#8,
[Tinfoil Hat On]
Personally, I think it was artificially lowered so people would have more money to spend at Christmas.
[Tinfoil Hat Off]
If it was all speculators, then why did the prices drop? If there was money to be made, why didn’t they keep bidding up the prices? Why take a loss?
#10 — what was never discussed was the closing of the “Enron loophole.” THAT is why prices dropped. Also the fake trading centers in London and Dubai were also never mentioned. There was a lot of details left out of the story.
I always amazed when a bunch of experts are required to explain something that everyone already knew.
The market did follow the law of supply and demand. It was the demand that was artificial. Speculators were creating the demand by buying, selling and re-selling the same futures contracts at higher and higher prices.
Since the demand was artificial, the prices could not be sustained, and the real market demand forced the price to return to normal levels.
Leveraged purchased of futures contracts helped drive up the price. If you can buy 10X your investment, and you have a $1 billion or more to throw into the market, you can easily out-bid the real buyers.
Prices were being manipulated on the transatlantic “dark” markets via the Intercontinental Exchange (ICE), which is based in Atlanta. At one point, there were as many trades on this exchange as on the New York Mercantile Exchange (NYMEX).
The 2008 Farm Bill, passed in June, re-authorized the Commodity and Futures Trading Commission (CFTC) to oversee the transatlantic trades, and it was soon after that oil prices began to drop, as the manipulators didn’t want to face jail time. This was the closing of the so-called Enron Loophole.
The fact that the banking collapse began a few months later made me suspect that the banks were driving up oil to try to rescue their debt.
I work in Commodity trading industry and we do not trade at NYMEX although when in early 2008 the price gone up and up and up our business was going down and the supply was doing down and as we deal directly with end buyer we knew that the price was driven by traders with deep pockets but its been done time and time again and no matter what industry. So when you live in uk and paying nearly 3USD per litter of 95 Unleaded and you know that the real cost of it is 40 cents …. makes you want to walk
Your headline is a big duh! We’ve known it and said it for a long time. And speculation was mentioned over a year ago too.
Remember, the more business is removed from a local business, the larger it gets, the more this is true: Big Business isn’t amoral, it’s unimoral. That is, it only has one moral, making money. And anything that stands it the way of that goal will be ignored; anything that furthers that goal is acceptible. Thus, the larger a business gets, the more regulation and oversight it needs. The corollary to this is the smaller a business is, the less oversight and regulation it needs. That small mom and pop operation the get incentives to being small. They should have less paperwork. This is the way it should be. It’s not the way it is.
There are two ways of defining big business. The bigger the business, the more money it generates. The bigger the business, the more employees it has. Both should trigger making the business follow more oversight and regulation. And yet, when you are at the top, you really get less regulation and oversight. Thank you neocons from Nixon onward for this corruption.
But so many ‘experts’ were telling us the prices are going up because the world is running out of oil, peak oil and all that.
#8 I did. Turned in my 23MPG American car for a 35MPG Honda. Lowered my thermostat from 72 degrees to 70 & dropped the night temp. too.
All simple things that help us reduce our dependency on foreign oil
Thanks Marc, guess I can now stop taking my paranoia pills.
Investors, for a time, replaced the power of supply and demand of the commodity with the trading on the commodity’s value. The same thing happens all the time per Bob’s quote “price was driven by traders with deep pockets but its been done time and time again”. Is 60 Minutes not explaining that during it’s broadcast just as unconscionable?
#15, gmknobl You say it well. Regulation for small business should be less and the oversight reserved for big business.
Last year I was audited by my state tax commission. He looked at 3 years worth of every receipt I paid in my office looking for unpaid use tax. He found about $240 in unpaid taxes from internet ordering of toner cartridges, computer parts, etc. He told me he spent about 3.5 weeks of his time examining my paper trails for taxes due to the state. 40 x 3.5 = 160 hours and he collected $240 in additional tax revenue. That worked out to $1.50 per hour of his time making sure I was compliant.
I loved the story last week about how they had run out of oil tankers to store supply and lo the market crashed. Hmmm, I don’t think hyperbolist speculation has ceased just yet.
# 13 nathaniel said what I was going to say.
Those guys would sell their grand mother if she had value.
Those guys should be locked up. How did this world get so Nice, Nice. These crooks were bailed out. Will Madoff get a bailout?
Ya figure. Now all the money has gone out of energy futures to cover margin accounts.
# 16 MikeN said, “But so many ‘experts’ were telling us the prices are going up because the world is running out of oil, peak oil and all that.”
The “experts” being environ wackos. The same ones screaming about global warming, er, cooling, er, change…
Mike and Paddy, you need to find a better group of experts to tell you things.
I recall the MSM screaming that this didn’t make sense as a supply/demand issue, and congressdicks on both sides, especially those with Texas roots, claiming this was all just normal markets. The right-wing was especially ardent in the claim that this was supply/demand. I clearly recall that Rush L dickwad railing at the liberal media for not understanding how the markets work.
So my suspicions were right all along, and those market apologists on Tv had been lying to us. As soon as the Home Mortgage industry started going bust, the oil prices started to rise. And I knew that this couldn’t be mere coincidence. I speculated (but NOT with money) that the major speculators had gotten out of finance and into oil and farm crops. And BTW, cereal prices are continuing to go up in spite of the drop in gas and oil prices. But they’re blaming the rise, ON gas prices. Odd the price of food DIDN’T fall with the fall of gas prices. So you know where those big speculators are NOW! In the crop commodities.
I hope this CBS report turns up on YouTube, but so far is hasn’t. Would someone upload it there, soon? Thank you.
# 27 Olo Baggins of Bywater said, “Mike and Paddy, you need to find a better group of experts to tell you things.”
Don’t worry, I don’t listen to the enviro nuts.
The problem with this story is that it is told from an American only perspective and omits other factors that amplified the price swings. What they failed to mention when comparing prices of oil over time is that value of the US Dollar also dropped though the floor during this time, then recovered.
Even though oil is traded in US dollars, at some point those dollars need to be exchanged overseas. When you sell a barrel of oil for USD$50, and now it only gets you half of the Euros, Yen, Rubles, or whatever, then the price will go up.
I think absolutely this is theory of speculators driving the price up is true. But it became a self serving cycle (hence, a bubble). Investors had money that was not doing much on in stocks and securities. The value of the US Dollar was falling. By buying oil contracts, they get some protection from the falling dollar, and they hope they can also turn around and the make that a profit.
The actual oil consumers, such as gas stations, home heating oil, etc, had to compete for that oil against these investment funds. The cold hard fact is that the investment funds can out bid the consumers.
The theory about the “no place to store it” is also true, but only a smaller factor for the price run up. The companies that took delivery of oil and shipped it discovered that the the price fluctuations were so rapid that they made an impact on during the time it took to deliver a ship of oil. So they did what was in their best interest. They slowed down the ships. Every day a ship of oil was at sea meant that ship’s cargo became more valuable, to the point where the profit gain exceeded the cost of sitting on the oil.
But that too could not be sustained. Eventually they did run out of places to park oil and had to deliver it. The US dollar recovered, and demand did truly drop. I certainly could see it in the traffic (or lack of traffic) I saw on the Los Angeles freeways. People were simply not driving.
The same forces that joined together to drive the price up so fast turned around and drive it down with the same way, only in the other direction.
In fact, the downward price was amplified even more by the collapse of the US economy. The speculators had killed the Golden Goose. Oil doesn’t operate in a vacuum. It impacts the price of everything.
I can’t help but also wonder if the fighting in Gaza is partly driven by the Hamas and Hebollah paymasters in Iran and KSA trying to drive the price of oil back up. After all the 1973 war was very profitable for them.
This crap is why we need to go to electric cars and invest in a nuclear power generation system in this country. Our energy needs are too important to leave to whims of market manipulation and enemies of our state.
#27 – Olo
>>Mike and Paddy, you need to find a better
>>group of experts to tell you things.
I’m not sure about Lyin’ Mike, but Paddy-RAMBO has connections at the highest levels, both in the Federal government and among pillars of industry. Heck, he as rearranged ornaments on Condi’s desk!
So,
as a third party, I can BUY OFF ALL the corn on paper, and HOLD it, until the prices go up, and SELL IT when NOBODY can find corn at a SUPER profit..