Government's Oil Investigation 6 Months Underway

WASHINGTON — Federal regulators are six months into a wide-ranging investigation of U.S. oil markets, with a focus on possible price manipulation.

The Commodity Futures Trading Commission says it started the probe in December and is taking the unusual step of publicizing it "because of today's unprecedented market conditions."

Crude prices have risen more than 42 percent since early December, when they hovered below $90 a barrel. Gasoline prices are nearing a national average of $4 a gallon, up from about $3.20 a year ago.

The agency said details of the investigation remain confidential.

Comments

[Harrier]

I use to work for Exxon. The Abu Grahib investigation did not cover anyone in intelligence or subcontractors in intelligence that performed torture. Instead the investigation went to those not conducting interrogations. As a result 99.99% of the torture was not investigated.
Similarly, big oil, was allowed to consolidate, install networks that monitors gas stations so that each time an owner tries to raise prices, Exxon increases the owners cost so they can collect the profits for themselves, hurting station owners. With big oil conspiring together, 174 refineries were shut down for the purpose of reducing refining capacity-Even with twice the supply, gas prices would not change. Additives aren’t needed. Big Oil already has processes in place to eliminate this cost to consumers. Big oil makes profits on those additives. Every lawmaker on the hill knows and will tell you of the collusion of the oil industry and auto. Every law maker on the hill will also tell you the oil industry fights tooth and nail against every effort to protect the environment for alternative energy that is not nuclear or that cannot be controlled or monopolized. The only smart person who figured this out was Carter. His efforts kept prices down to reasonable levels for 20 years, but the country paid the price over the short run. If you sit on your butt and do nothing, this will continue to happen. This investigation will go nowhere by design- It’s just another show in an election year.

[scottyboi84]

We're suffering here in Central New York. Our cheapest gas is on an Indian Reservation 30 miles away, and as sad as it is, the price in the city I live in are 4.10, 4.15 on average it is worth the savings to drive the 30 miles to get the discount price. I've owned my car now for 18 months, and when I first got it, it was $35 to fill the tank from empty, now it is easily $55 to fill the tank from empty! That is outrageous! That is way too much of a rise for the amount of time that has passed. Do you think that there is price manipulation? Meanwhile, Washington doesn't seem to be hurting from the high gas prices, except the fact that they get harassed by people that want some relief, and why is that? Because we pay for their gas too, through our taxes and through their expense accounts. Great feeling, isn't it? That we juggle and struggle to get our own gas tanks filled and even, if we just buy less groceries, can manage to fill the tanks of the very people whom are supposed to protect us from this kind of gouging!

[sparkey]

The oil companies will tell the so called investigators to feel that bulge in their pockets, the one in their side pockets, not the hardly noticeable one in the front. If they want the one in the side pocket to get bigger, then no wrong doing will be found. Anything else, and the one in the side pocket will be smaller than the bulge in the front. The gutless wonders will do as they're told.

[KillTheMessenger]

There sure is a lot of bitching going around. But I don't see people buying Prius and Civic hybrids in droves. If you don't even want to exercise the single best option you have to improve your household spending on gasoline, what's all the fuss about? Are we waiting for a magic hand to come down from heavens with a giant hose and fill up the oil reservoirs? Sounds like a plan... that won't succeed.

[Gary47]

THIS government investigating the oil industry. Yeah right.

[hoodydoody]

Here we go ............government in bed with industry. It is called fascism.
Propaganda combined with a paramilitary police state like Mussolini's Black Shirts. Like Richard Nixon's DEA. That's right the DEA is here to enforce laws that guarantee a monopoly for corporate drug companies while the drug czar gets one billion dollars per year to convince us it is for our own good. Like our parents used to say before they spanked us, "this will hurt but it is for your own good."

The Oil companies have had there way with Washington since early in the last century. Fascism folks, plain and simple. Quit calling yourselves free Americans. We are a corporate owned American police state.

[outnow]

Good Book out on TEAPOT DOME. That was the first time an oil man truly owned a president. Unfortunately, it was not the last.

Nixon made Elvis an "honorary" narcotics agent. What a joke. Harry Anslinger outlawed hemp to expand his powers of the Treasury Department. Then there was Prohibition. The war on drugs allows the government to go into foreign countries. Most people do not read enough history to even understand what is happening.

[WIpatriot]

Read Engdahl:

http://www.globalresearch.ca/index.php?context=va&aid=9042

[outnow]

The International Commodities Exchange was set up by the Enron Loophole. Using the computers of the New York Stock Exchange but situated in London, they system allows a non-regulated future's market. The loophole was lobbied by McCain's Chief adviser on economics, Phil Grahmm so that Enron could manipulate the energy futures market and nobody would be able to access information about who is manipulating the market. The "German Elders" have signed a petition to end this market scam.

[WIpatriot]

How many people know that Phil Grahm is THE Grahm of the LGBA?

[GreedyOldPsychopaths]

Patriot, Engdahl's a great source for filtering out the BS (thanks) and Ray Learsy here at HuffPo is another shinning light on the subject too.

Having worked for one of the big three oil companies for a number of years, I know firsthand the BS they are capable of producing. In the 1980s/1990s they printed their own money when the price per barrel exceeded $19. There were times when we (corporate capital) couldn't spend it fast enough, seriously, and actually brainstormed projects to spend the budget by the end of a year. Even without payback! I can only imagine what they're doing now with their record profits.

[Rule Of Law]

Greedy, with your background perhaps you might know:

1. how much money it takes to produce a gallon of gas.
2. how many gallons from a barrel?
3. and if it was like printing money at $19, can we assume that their capitalization costs were covered a few years ago and that this is all like finding El Dorado?

[EinChicago]

I'm not as skeptical as most others here. The CFTC is pretty fine happy usually and if they think there has been manipulation, the CFTC has never been shy to try and fine everybody and anybody involved. Plus, don't forget CBOT/CME, CBOE and NYMEX are all private entities with shareholders. While I don't for a second think this gives them any morals or accountability, it does create a "et tu brutus" marketplace where they will gladly fall upon each other to try and pass blame. If there is any chance that there will be evidence of manipulation, especially in this political climate, they will fall all over each other trying to pin the blame on each other.

[EinChicago]

And one other comment; even the CFTC is going to have a hard time ignoring the price manipulation given the basic undeniable fact that as of this bubble, oil futures are now averaging more than spot contracts. In other words, it's costing more to buy a promise of delivery of a barrel of oil in 6 month stime than it would cost just to buy a barrel of oil.

[outnow]

Don't worry, the invisible hand of the free market will correct all things. You must have faith that there is no harm in a little manipulation here and there. All things are delivered by the invisible hand. It's attached to God's own arm. It's totally equitable and moral.

[DrDemon]

Oh Pleeeeeeeeeezz!

What a waste of Time, Gas & Money!

[vippy]

Exactly, they caused this mess. The Commodities Future's Modernization Act is behind this
and they have the nerve to deceive us more and people are lapping it up. Congress and
their lobbyists are making money while they screw us and then they tell us we have peak oil,
devalued dollar, etc. anything but the reality! Write to your congress to rescind the future's
market trading and go back the way we used to trade, not on paper, but by real supply and demand.

[blueshield]

"The Committee will now return to its secret investigations. Anyone with information helpful to the Committee should print this information on bearer bonds of mixed denominations and deliver them wrapped with oil futures contracts to the address noted in the Press Release."

[CaptainHowdy]

Ho Hum.... another whitewash that will amount to nothing.

[seeker1of2truth]

As an 'average American' I'd sure like to be paying the 'average price' per gallon! Unfortunately,
in Orange County (Southern Callifornia) within a 1/2 mile of each other, on the same street
I pass 4 gas stations going to work and coming home:. 1) closest to the freeway $4.25 a gallon,
2) next closest to freeway $4.17 a gallon, 3 & 4) 'kitty corner' from each other and about 1/4 mile
from freeway $4.15!

I have to go out of my way to find the absolute cheapest gas station which is still over $4.00!
Seems like time to buy a bicycle!

[1differentdrummer]

But it's the law of supply and demand, haven't you read that? They have the supply and if you want gasoline you pay the price they demand.

[GreedyOldPsychopaths]

Yes, it's called the Seven Sisters oil cartel.

[balance]

Why would they publicize it, 6 months into the investigation, if there was no evidence of manipulation?

It seems to me, that if they didn't have anything, they wouldn't go out on a limb, effectively, to try to cool the frenzied speculation in this oil bubble.

There would be even more damage to larger institutional investors heavily invested in commodity index funds, if the bubble inflates to even higher, premature extremes, and then finally pops.

In terms of psychology, perhaps in the back of the minds of some speculators, yes -- there may be price manipulation going on (after all, for example, how much would it cost to hire mercs or pay off nigerian rebels, to create an explosion at an oil facility, just as oil was teetering again last weekend)?
If there is price manipulation, speculators may consciously refuse to admit it, but subconsciously factor in such a possibility to "ride the wave" up. And this would feedback into the efforts of the manipulators to pump up the price some more. This scenario is a possibility that should not be ignored, and there should be NO discouragement of more scrutiny of the markets.

And basically, all this peak oil talk, and DEMAND/SUPPLY TRUTHINESS, obfuscates the oddly UNQUANTIFIED JUSTIFICATION for the extremely RAPID RATE of the price increases going on in the Oil (and perhaps also - grain) markets.

[balance]

(as a corollary comment--)

Is there too much leveraged investment money rapidly sloshing around, seeking "get rich quick" returns, creating too much turbulence in the commodities markets? (-- And formerly, also in the real estate market)

The evident effect is very costly damage to the real economy, as well as financial pain and economic injustice towards many middle class Americans.

That's a macro concern for a very rapidly evolving financial market, already awash with a great deal of instant-trade, highly leveraged & multiplied speculation, with ever more sophisticated computers, more abstract investment products, and extremely fast high volume electronic trading schemes.

[KillTheMessenger]

Peak oil does not make any economic predictions about how the markets react to opening scissors between demand expectations and supply reality. It is strictly about geological facts.

There are plenty of ad-hoc (and thus naive?) economic models which make assumptions about how the markets will react but in my personal opinion none of them have much merit and here is why: buying gas at the gas station, just like buying oil in the world wide oil market is essentially an auction process. The price is set by the highest bidder. The highest bidders in this auction can easily afford gasoline prices in the range of $20+/gallon. Society at large in the developed world can probably live with $10+/gallon because Europe is probing $8/gallon as we speak without falling apart.

Beyond these extremes large fractions of the population will have to cut back on their consumption, but below there is little incentive for people to conserve ($4/gallon leads only to a couple of percent of savings as we now know). From that alone I would expect the price to rise quite fast to a level of extreme pain until, finally, a measurable (10%+) market response will set in. We aren't there, yet. In essence we are barely grazing the effective price of gas in 1910 or in 1973.

[EinChicago]

Your entire post could be narrowed down to "peak oil does not have anything to do with teh current situation".

Shorter, plainer and much more accurate.

[EinChicago]

And if peak oil theory is correct, one of teh main contributors is doofuses who do thing slike drive a Prius in the US, knowing that every single compenent and part of that car, including the assembled car itself was manufactured outside the US and then transported, at massive fuel cost across great distances to reach the US. Heck, I live in Chicago, and I could buy a behemoth like a Jeep Commander and still have created a smaller carbon footprint for the first 5 years or so because the car was built in Belvedere, IL and not transported on a big old diesel burning ship from the other side of the world.

transportation of goods and globalization is the biggest cause of rising fuel demand. Instead of taking oil from texas to produce plastic goods in Louisiana factories which is then shipped for sale in New York, we know take oil from the persian gulf, transport it around teh world to China to make plastic goods, which are then transported to south america to be assembled into a prius and then transport it yet again for sale in New York. There may be a slight labor saving, but teh transport idfferential is huge.

[vippy]

Exactly, those people who lost their shirts last year in the oil market now are shifting to the
other commodities like food, which we need and cannot do without. It is your congress, baby,
so please, let us attack them to reverse the future's market. Our best chance is to vote them
all out by 2012, when re-election comes up.

[dadw5boys]

The Eroupeans are laughing now but wait till the PRIVATIEERS start TEARING APART THE BRITISH HEALTHCARE SYSTEM AND MAKING THEM PAY FOR MEDICAL CARE.

[EinChicago]

That already happend in the 70s and 80s.

[Erdgeist]

The financial institutions and banks, not to mention hedge funds who took it in the shorts, decided to get into commodities, like oil. For about 9 bucks they can leverage a 144 dollar barrel of oil. Not bad for a few minutes work. Some economists estimate that 60% of the price of oil is due to speculation. The bad news, welcome to a new bubble: the commodity bubble. The good news is for Britain. For the first time in more than 100 years, British living standards have risen above those of Americans! Way to go Republicans!