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Speculators are those trained individuals who -- with advanced knowledge of supply, demand, and the effects on each by current events -- buy and sell oil at risk to themselves.
Arcadia Petroleum trader James Dyer has been accused of engaging in the three-month scheme in which the company's subsidiaries purchased millions of barrels of oil in 2008, driving the price to artificial heights that year. In one of the largest cases pursued by the Commodity Futures Trading Commission, the Washington-based agency is seeking to recover illegal profits and triple damages, which could amount to $US200m ($190m). Mr Dyer, a former chief oil trader for BP, retired to live in Brisbane in 2003. He came out of retirement in 2006 to join Arcadia, which is owned by Cyprus-based holding company Farahead Holdings. When The Australian approached Mr Dyer at his luxury home in Brisbane yesterday, he declined to comment.
Also named as defendants in the US District Court action are fellow trader Nick Wildgoose, Arcadia's Swiss and British arms and Oklahoma-based Arcadia affiliate Parnon Energy. The CFTC alleges that, in early 2008, the two traders bought millions of barrels of oil, creating the illusion that supplies were critically low at the US's central oil hub at Cushing, Oklahoma, driving up the value of derivatives they held. After the traders pocketed the profits on those contracts, the regulator claims, they executed a similar scheme in reverse, dumping the oil they had purchased back on to the market and profiting in the derivatives market.
Commodity trader James Dyer near his suburban Brisbane home yesterday.
It is alleged the traders continued their scheme until April 2008, ending only when they learned of the CFTC probe. Mr Wildgoose could not be reached for comment. Paul Forrester, of Chicago law firm Mayer Brown, said the case would "likely turn on whether there is enough here that you can infer the causal relationship" or whether the defendants could say there were "other things going on in the market". Cushing's oil-storage tanks are key to setting global prices because they are the delivery point for the main oil-futures contract traded on the New York Mercantile Exchange, which is the world's most heavily traded oil contract and a benchmark for prices.
Early in 2008, supplies in Cushing crashed to about 15 million barrels -- their lowest level since 2004 -- making them especially sensitive to signs of a shortage. CTFC alleges that, from January 2008, Arcadia subsidiaries bought a majority of the West Texas Intermediate oil expected to reach Cushing the next month. "Once WTI reached artificially high prices . . . defendants allegedly engaged in additional trading activity -- selling more WTI derivatives short at the artificially high prices," CTFC said.
Source
US targets trader over oil scheme...
US targets trader over 'illegal' $47m oil scheme
May 26, 2011 - A BRISBANE commodity trader is being pursued by US authorities who claim he orchestrated a massive manipulation of global crude oil prices that netted more than $47 million in unlawful profits.
"Rolling blackouts affecting 97,000 customers hit the San Francisco Bay area on June 14, 2000, and San Diego Gas & Electric Company filed a complaint alleging market manipulation by some energy producers in August 2000. On December 7, 2000, suffering from low supply and idled power plants, the California Independent System Operator (ISO), which manages the California power grid, declared the first statewide Stage 3 power alert, meaning power reserves were below 3 percent. Rolling blackouts were avoided when the state halted two large state and federal water pumps to conserve electricity.
On December 15, 2000, the Federal Energy Regulatory Commission (FERC) rejected California's request for a wholesale rate cap for California, instead approving a "flexible cap" plan of $150 per megawatt-hour. That day, California was paying wholesale prices of over $1400 per megawatt-hour, compared to $45 per megawatt-hour average one year earlier.
On January 17, 2001, the electricity crisis caused Governor Gray Davis to declare a state of emergency. Speculators, led by Enron Corporation, were collectively making large profits while the state teetered on the edge for weeks, and finally suffered rolling blackouts on January 17 & 18. Davis was forced to step in to buy power at highly unfavorable terms on the open market, since the California power companies were technically bankrupt and had no buying power. The resulting massive long term debt obligations added to the state budget crisis and led to widespread grumbling about Davis' administration."
One of the energy wholesalers that became notorious for "gaming the market" and reaping huge speculative profits was Enron Corporation. Enron CEO Ken Lay mocked the efforts by the California State government to thwart the practices of the energy wholesalers, saying, "In the final analysis, it doesn't matter what you crazy people in California do, because I got smart guys who can always figure out how to make money."
"This story ends as it began: with unrequited lies, deception and fraud. Three sentences inserted into the National Energy Policy report reveal: 1) the White House knew the California crisis was man-made; 2) knew the power companies were manipulating the market in California; 3) and knew these facts at the time the people of California were being fleeced by the scam; 4) yet the Bush White House did nothing to stop the fraud.
A special prosecutor should be appointed by Congress to investigate this whole matter as well as what Mr. Bush and Mr. Cheney knew and when they knew it."
Great article from Yahoo! News on why oil speculators aren't the scapegoats the left and the right make them out to be.
Speculators are those trained individuals who -- with advanced knowledge of supply, demand, and the effects on each by current events -- buy and sell oil at risk to themselves.
Take a look and let me know your thoughts.
Whenever oil prices rise the gov't is always looking for a scapegoat: oil companies, speculators, etc. It is an ancient witch hunt.
Whenever oil prices rise the gov't is always looking for a scapegoat: oil companies, speculators, etc. It is an ancient witch hunt.Ah, yes.....how could there POSSIBLY be a connection between oil-prices & oil-companies, huh??
Opec's oil ministers are expected to raise their output quotas when they meet in Vienna today, but analysts cautioned that this would not necessarily translate into more supply for the market. Saudi Arabia, the de facto leader of the oil producers' cartel, will propose the first upward revision of quotas for almost four years, with the support of Kuwait and probably the United Arab Emirates. Those countries assess that high oil prices are damaging their interests by harming the global economy and curbing future demand.
Last month, the International Energy Agency said there was a "clear, urgent need for additional supplies" from Opec. A barrel of Brent crude, the most important benchmark, sold for $116.78 on Tuesday, compared with an average of $80 last year. Mohammed al-Hamli, the UAE's oil minister, warned of a still tighter market. "We have to meet and look at the numbers before we decide. We need to really look beyond the second quarter -- it's going to be tight," he said in Vienna.
The most relevant number is the projected "call" on Opec's crude. As the refinery maintenance season ends, this figure is expected to climb in the course of the summer. Opec's usually cautious secretariat estimates that the "call" will rise by 2.1m barrels per day between the second and third quarters, meaning that inventories will decline by 1.1m b/d if output stays unchanged. Saudi Arabia and its allies believe this requires higher production, particularly as Libya's civil war has removed a net 1.3m b/d from the market. The kingdom's Rabigh refinery, able to process 400,000 barrels of crude per day, will return to service later in June after maintenance. This alone may necessitate more Saudi production.
"They will increase quotas probably by between 1m and 2m barrels per day," said Amrita Sen, a commodities analyst at Barclays Capital. Opec's present constraints bind 11 members -- Iraq is still exempt -- to produce no more than 24.85m b/d. In practice, the countries in the system pumped 26.15m b/d in April, according to the IEA, or 1.3m b/d over the limit. If quotas are raised by anything up to 1.3m b/d, they would only formalise the existing level of overproduction, without allowing a real increase in *supply.
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U.S. crude jumped $1.70, or 1.7%, to $100.81 a barrel. Oil prices were trading down about $1 just before the OPEC announcement. The price of brent crude - the European benchmark - rose 1.2% to $118.20 a barrel. OPEC's quarterly meeting was widely watched by analysts. The cartel had been under intense pressure to raise production as oil prices approached $120 a barrel last month. But cartel members were unable to reach a decision to do that, with at least three members reportedly holding steadfast against any production increase. OPEC ministers said they'll take another three months before considering any increase in oil output, according to CNN.
A senior delegate from a Persian Gulf state told CNN he was stunned by the outcome. OPEC produces about a third of the world's 88 million barrel-a-day output. While oil prices spiked on the news, they may have risen even if OPEC decided to increase output, said Ray Carbone, an oil trader in New York. Right now the world doesn't need any more oil, said Carbone. If OPEC had increased production, that would mean the cartel would have less spare capacity to increase output when the global economy really heats up and there is a true shortage.
"This is a well supplied market," said Carbone, noting that prices for futures contracts several months out are more expensive than current prices. "I don't know what the market would have done with that oil right now." He blamed Wednesday's price spike on investors looking for any excuse to buy crude. Oil prices spiked earlier this year on supply-demand worries amid signs of a strengthening global economy and ongoing violence in the Middle East. OPEC members themselves, particularly Saudi Arabia, contested the notion that the world was short on oil supplies. Wall Street speculators were more to blame for the jump in prices, they argued.
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Put us all into those little tin cans so that we don't live long enough to collect Social Security or the Health Care we paid into our whole lives. Pretty good scam huh?Speculators? How passe.
Now the head of Obama Motors wants a extra buck a gallon tax to help nudge buyers towards their very expensive Volts. Who needs a free market when the government owns its own car company?
Speculators? How passe.
Now the head of Obama Motors wants a extra buck a gallon tax to help nudge buyers towards their very expensive Volts. Who needs a free market when the government owns its own car company?
drill baby drill
