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Emmanuel I.S. Ajuzie Headshot

Which Is It, Crude Oil Price, Features Oil Price, or Spot Price of Oil?

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I work at a place that is set up to represent and improve the livelihood of the underrepresented, marginalized, and middle class of our society. To see public and private actions and policies that are deepening their unenviable plight and not comment on them will amount to a serious betrayal of not only my conscience but the tenets of this noble country and its founding principles advocate. Based on the inscription on the Statute of Liberty, we have and hear, "Give me your tired, your poor, your huddled masses yearning to breathe free." What is the call for, to increase their poverty and pain or lift them up out of poverty and deprivation?

On October 9, 2013, I published a HuffPost articles titled, "Gas Prices: Should They Continue to Rise?" The following excerpt is from that article:

"The question is, why? In another place, I suggested that oil is the only commodity that has the power of spreading its price effects throughout the economy at the same time. No other commodity has that type of influence on our economy and the economy of the world. If that is true, why do we treat it the same way as we treat other commodities at the New York Stock Exchange and other similar exchanges all over the world? After several suggestions from this author and others to the Commodity Futures Trade Commission (CFTC) to put some limit on how oil is traded, they appear not to respond positively. The suggestions were based on the results of research on the effects of oil speculation on distinct variables in the economy.

The fact is that as long as gas prices remain high, no amount of stimulus policy will revive or improve the job market. Those who do not have the access to make money from rising oil prices will be spending what little they have to buy gas to get to work and will have much less to buy the products workers are producing. As long as inventory remains on the shelf, no one will hire workers to produce more, thus a stagnating labor market and constant bickering by lawmakers on how to create jobs and grow the economy. You create jobs the moment you reduce gas prices at the pump. People will have more disposable income to spend on purchases of goods and services, thus igniting the need for workers to produce more."

We can claim that the predictions of that post and others before have been vindicated. Jobs are not being created as we would want it and the economy is not growing as expected. It is still impossible to believe that oil prices and, subsequently, pump prices are rising at alarming rate. It is unfortunate that our financial news media are contributing to the escalation of prices. They fail to tell us which oil price is actually hurting consumers. Is it crude oil price, oil futures prices, or spot price of oil? For those who are not familiar, spot oil prices, which they don't mention in their articles, is the one that is hurting the economy. That is the one we called speculatory price of oil in our paper on "Oil Speculation" (Ajuzie, et. al, 2009). It is the one quoted daily on Yahoo finance page, come from the New York Stock Exchange (NYSE), and is the highest of all the others they publicize in their writings to confuse the ignorant masses who, because they do not understand, are disproportionately bearing the burden of their inordinate ambition at personal wealth accumulation.

These are some of the inconsistent titles they gave to their recent articles the same day, February 13, 2014:
1. Oil below $100 after weak US retail sales (Associated Press),
2. Oil reclaims $100, supply rise keeps gain in check, (MarketWatch), and
3. Oil futures settle at highest since late December (MarketWatch).

In the same marketing period and time, one paper is telling us that oil has fallen bellow $100 after weak US retail sale while another is telling us that oil reclaims $100 and supply rises to keep gains in check. How can oil fall because of weak retail sale and rise to $100 with supply rising to keep gains in check? One might be close to being irrational to think that way. First, oil was slightly above $100 the day they were writing about, February 13, 2014. Second, one wonders how oil is related and is reacting to weak US retail sales. Even if there is a relationship, those two do not work hand-in-hand. In other words, there is no immediate positive relationship between the two. If retail sales are weak, that would mean that consumers are not purchasing as they should. A significant part of the reason, as stated before, is that a percentage of their wages is going to purchase gas at rising prices and they have less to spend on goods and services. We have to remember that their income is not adjusted to make up for the shortage in their disposable income (income after taxes) due to increases in gas prices. How can supply rise keep gains in check the same time? Putting it in understandable terms, I assume what they are saying is that when oil price rises to $100 supply of oil also rises to stop gains or profits. Oil is not like water in bottles, which price and quantity can vary instantly with price variations.

Again, this brings us back to the question, which oil prices are they talking about, crude oil prices, spot oil prices, or futures oil prices? Unless they stop the deceit in publishing what they are paid to publish but don't quite understand or understand and pretend not to, we are bound to fall into unfortunate economic "deterioration" instead of growth. Can we require that the NYSE publish daily crude oil prices or oil futures prices and not spot oil prices? They cannot claim that they are all the same. I collected the individual data sets during the cited 2009 research. If there are no separate data sets for these oil prices, you know that we are in a more serious economic condition than we thought.

The actual news should have been that spot price of oil rose to $100 at the NYSE on Feb. 13, 2014. As I have stated elsewhere, this spot price is the one that gas pumps use to determine their daily or periodic price adjustments. Some individuals have gone and removed the raw oil price data used in the paper cited above. As we watch the continuing spike in oil prices, we might just be forced to publish the converted data used in the study to show that of the two oil prices used in the study, crude oil prices and spot prices of oil, the highest throughout the 86 observations or months is the spot price of oil. Crude oil prices were everywhere lower, meaning that if crude oil prices are the ones actually quoted on the NYSE, gas pump prices would be much lower.

A good example, again, is in Jefferson City, the capital of Missouri, where the colluding distributors monitor those spot oil prices very closely and change their prices the instant they go up. As soon as they saw that spot price rose to a little more than $100 on February 13, 2014, one gas station increased its pump price for regular gas from $3.09 to $3.15. One asks, how can that be when they have not yet received delivery of gas from anywhere at that price? That was the highest price in the neighboring cities in the state. Immediately I got to my mail box, I received a mail from someone running to keep his office in congress telling me how if an opponent is allowed to win, things would be different than he thought I would expect. This person is not alone. The question is, what are they doing to prevent the gouging of national wealth by a few of them regardless of what the masses who support them are going through to feed their families, keep their homes, and buy gas to get to work? It is embarrassing, isn't it? Unfortunately, because of the cost of bargaining and collective action, the people pretend ignorant and suffer in silence.

In a previous post, I stated that at one point, the U.S. Commodities Futures Trade Commission (CFTC) asked that I contribute to their limit position paper on oil speculation at the NYSE. Based on the research cited earlier, I asked them to put a limit on oil speculation of between $60 and $90. I know that they are not obligated to take my word. But one thing that is difficult to understand is that they have not done anything. They have decided to give speculators free reign over spot oil prices. Believe me; many would be strongly supporting this government entity that monitors and regulates NYSE operations if they can tell us why they allow things to continue the way they are after every evidence points to the destructive impact of oil speculation on the sputtering economy. It could be that the actual policy initiatives of the government are what many have been complaining about. They are written by big bank CEOs and big corporation executives who are positioned to gain from the implementation of the policies. On the other hand, they support policy makers financially in their political aspirations.
Sometime last year, the King of Saudi Arabia blamed oil speculators for the rises in oil prices. The argument that oil companies battle with the problem of profitability and are forced to raise prices is incredulously doubtful following their behavior. If they can trim down the bonuses they pay their chief executive officers, they would certainly increase profits. When the ordinary middle class and poor Americans are struggling to make ends meet, a CEO is complaining that $3 or $10 million bonus at the end of a year, which in some cases mirrors their annual wages, is not enough. What of the ordinary middle class worker who works hard to maintain the profitability of the company? How much bonus is he/she paid for the hard work? Something tends to be fundamentally wrong with that picture. The unfounded excuses they create to raise oil prices will gradually bring down the economy unless they change their speculatory tactics.

Why is it that after a long period of unprecedented monetary policy initiative of $85 billion monthly expenditures to buy back government securities -- granted that it is being trimmed down -- we have not witnessed a significant economic growth and still arguing about the direction of job creation? The answers are provided in my previous blogs on the HuffPost. It would be fantastic if everyone were to work selflessly and tirelessly to promote the economy of the country loved and admired by all. "Ask not what your country can do for you but what you can do for your country (JFK)" Do we have adherents at the top 1 or 2 percent of the population who have been accused by many of systems manipulations and self aggrandizement to the detriment of the poor and middle-class Americans?