[newman1979]

The oil inventory is fraudulent by 50 million barrels. It is easy to defraud NOC's by getting a loan of oil and not repaying it. Get a loan of SPR stuff and not repaying is government fraud. The IEA is probably double counting 30 million barrels. Blooomberg kicks in by not reporting the problems in Mexico, UK, Norway, or understanding Ghawar issues. The Goldman Sachs and Morgan Stanley participation has been reported. The oil companies hedge and sell stock options, then reload in November. Traders sell shorts and tell tall stories to support their actions, and go long in November. If all the the above was bases on signals or agreements it would be criminal. The fact that an election to decide if oil should continue to be all powerful is at hand, and $58 is a better sales point than $78.
It is no wonder that every oil producing exporter does not want to sell any oil to this country for less than $70.

[joewp]

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'V')ery odd, isn't it?

[MonteQuest]

$this->bbcode_second_pass_quote('joewp', '')$this->bbcode_second_pass_quote('MonteQuest', '
')
So, you are saying that all investors/speculators want a republican Congress and Senate no matter what?

[MonteQuest]

$this->bbcode_second_pass_quote('rockdoc123', ' ')Day to day oil prices are based on emotion in the trading pits which is in turn based on scant data and rumours.

[joewp]

$this->bbcode_second_pass_quote('MonteQuest', '
')Speculation is not manipulation.

[DantesPeak]

Gasoline prices hit bottom for the year almost exactly on Election Day, says the EIA - but that was probably was just a coincidence!

U.S. Energy Information Administration Weekly Gasoline Prices

[DantesPeak]

And price manipulation of the unleaded gasoline contract is impossible, well at least up until 2002:

$this->bbcode_second_pass_quote('', 'B')P faces US futures trading charges
FT
By Jeremy Grant in Washington

Updated: 8 minutes ago

BP has been told by federal regulators in the US that it could face civil charges alleging price manipulation in unleaded petrol futures trading on the New York Mercantile Exchange.

BP said on Wednesday CFTC staff had recommended that action be taken against the company involving trading on one day in October 2002 in unleaded petrol futures on Nymex, the world's largest energy exchange.

Some lawmakers are increasingly concerned about the ability that large energy companies and pipeline operators may have to influence crude oil and natural gas prices through the interplay between storage, trading of the physical commodity and trading of futures on those commodities on exchanges.

[Fences]

Wouldn't it be fair to say that there is or has been price manipulation either right now, or sometime in the past?

Only about six months ago prices were soaring, any headline news that mentioned problems in oil supply (pipeline corrosion, the Israel-Lebanon war,...) caused price spikes to almost 80 dollars pb.
To me, that's indicative of a very thight supply and demand balance.

Nowadays, prices are dropping below 60 dollars pb, OPEC has to cut production by 1.7 million bpd to maintain this price, at the same time the dollar has seriously dropped in value.
To me, that's indicative of oversupply

Which one is true??
It's clear that only one of both situations, so close to each other in time, can be the truth, so I'm assuming price manipulations either now or in the past.

Worst case scenario would be a real situation in the past and serious price manipulations now. To me, it would mean the s* will hit the fan very soon now.

Best case scenario would be a real situation right now (oversupply) and serious price manipulations in the past.

In either case, the biggest questions are how, why and by whom (who's to benefit?).
I would think artificially high prices are easier to obtain then abnormally low prices, so my bet is on the best case scenario.

Anybody any suggestions?

[MonteQuest]

$this->bbcode_second_pass_quote('Fences', 'W')ouldn't it be fair to say that there is or has been price manipulation either right now, or sometime in the past?

[kathaksung]

437. Manipulate oil price (9/20/2006)

After Bush took the presidency, he created a huge budget deficit, and a huge trade deficit as well. The deficit will cause a big inflation. So Federal Reserve has to raise the interest rate to deal with it. In June 2006, the overnight interest rate was raised to 5.25%. The Federal 10 years treasury bill was 5.25% too. The 30 years fix mortgage rate reached its recent high: 6.93%. Although this rate is still low viewed from history, it touches off a down turn of the real estate market. Because the price of house is stretched too tight that a tiny increase of the mortgage rate will cause a big change.

Feds hold a large quantity of houses in my case, they tried their best to keep the property value. What we saw are: Federal Reserve stops its step to raise the interest rate. Oil price declined. The rate of bonds goes down. So does the mortgage rate. From June to September, the bench mark rate of Federal funds stays at 5.25%. The rate of 10 year treasury note drops to 4.73% from 5.25%. The 30 years mortgage rate is 6.44% now.

Today you only pay 4.73% interest rate for a ten years long term loan but have to pay 5.25% rate for an overnight loan. Does that mean there will be no inflation within ten years? Or even mean there is a deflation? With common sense you know it's impossible as long as the oil price doubled in one year. All these were done by Feds to protect their property value so you saw these strange phenomenon.

1. Oil price.
The result of a big trade deficit is that foreign countries hold a large amount of US dollar. When US has not enough goods or assets to exchange these dollars back, it has to think of a way to make these countries to keep the dollar instead of dumping it. One way is to push up the oil price.

A country which consumes one million barrel of oil a year has to keep 30 million dollars in bank (when oil price is at 30 dollars/ barrel) Then how much should it reserve if the oil price jumped from 30/barrel to 60/barrel? It has to double its dollar reserve to 60 millions. So large amount of dollars were locked up in bank as oil payment (Dollar is the appointed currency in oil trading.)

Now you know why the oil price jumped so high. It is used to solve the deficit problem of US. To delay the US financial crisis. Who benefit from it?
(1) Oil export country.(Though much of them are Islamic countries which US dislike. There is no choice.)
(2) Speculator (mostly oil groups). They bought in large quantity of future contracts in a short period. Say, from 30/bar to 60/bar, the average price paid was 45/bar. Then when the market was steady at 60/bar to 75/bar, they sold it at average of 67.5/bar. Their profit is 22.5/bar.
(3) Federal Reserve and US economy. Federal Reserve can avoid to pay a high interest rate in order to lure the dollar in. US can avoid a financial crises.

The loser is always the average people. They have to take the final cost - a higher gas price.

But it's a double side sword. High oil price will also cause inflation to force the rising of interest rate. When it endangers real estate market, then we saw a dramatic decline of oil price. (from 75/bar/Aug 3 to 60/bar/Sept 19, a 20% decline in 6 weeks.) After all, the interest of Feds, is above everything else.

To keep in mind that when the oil price went up this year, it's not that oil supply was in shortage. And when the oil price drops recently, it's not that there is less demand. It's not a market economy any more. It's an artificial manipulating market.

Greenspan knew it. But he could only say what he was allowed to say.
Quote, "The former Fed chief also detailed how investors, rather than users of oil, have come to set the price of oil through purchasing futures contracts."

[kathaksung]

438. Deal to save real estate market (9/25/06)

2. Manipulate interest rate of mortgage loan and 10 years treasury note.
The most important factor to influence the housing market are the interest rate of mortgage loan and 10 years treasury note. Feds try their best to lure investors to buy US bond. The rate of mortgage loan drops after the decline of the rate of 10 years treasury note. But there is a big deficit in US foreign trade. To ask foreigners to invest on a weak dollar, you have to give them incentives. Here are the incentives(or payment) to the three big buyers of US treasury notes.

1. Japan.
To release its political and military power. New Premier of Japan likely will change the Pacific Constitution which US Occupation troop has compelled on Japan after World War II.

US let Japanese auto makers selling more car in the country. There used to be a compromise in market share between US and Japan. But this time Japanese car broaden its market share in large scale without a hitch. The result is that Ford and GM had to close dozen of its factory and lay off tens of thousands of workers. Toyota will replace GM to be the No.1 auto maker in the world next year.

2. China.
Political benefit. The pro-independence President of Taiwan - Chen Shui Bian - was in trouble since March. There is a series of scandals revealed in government officials and his family. Chen himself is investigated in a corrupt case. He may step down at any time.

China is allowed to manipulate the exchange rate of currency. The result is it becomes No.1 in trade surplus on US.

Sell profitable assets to China. China is allowed to purchase PC business of IBM. There were other attempts too. (China has tried to get Maytag, Unocal. Though it failed, the original deal were arranged by Feds, I think.)

3. Oil export country.
Dubai's effort to buy the company which controls six major US ports failed. But it was compensated in another not so high profiled deal. Few people noticed later Dubai successfully bought a U.K. company with U.S. plants that make military equipment . (Doncasters' nine U.S. plants, which make parts for tanks and military aircraft )

[pogoliamo]

High oil price means high demand for dollars, even more so if the oil price hike was "unexpected". But it also means weaker dollar. There you get the problem, so it can only be temporary solution - I have been on this position for years now. On the other hand low prices are not sustainable keeping in mind the fundamentals. So what then?

VOLATILITY. Oil prices will do the boogy-boogy dance in 2007.

[evilgenius]

Word is the Chinese want higher interest rates on the bonds they buy going forward. Something has to give. Oil has to fall. If oil doesn't fall then average Americans would not be able to pay all of their bills every month.

Yeah, that's right, the Fed may just raise rates in '07. Heartless!

[kathaksung]

$this->bbcode_second_pass_quote('evilgenius', 'W')ord is the Chinese want higher interest rates on the bonds they buy going forward. Something has to give. Oil has to fall. If oil doesn't fall then average Americans would not be able to pay all of their bills every month.

Yeah, that's right, the Fed may just raise rates in '07. Heartless!

[kathaksung]

439. The exchange rate of Chinese currency (9/30/06)

China has kept the exchange rate of its currency against dollar for more than ten years. The undervalue of Yuen lowers the cost of Chinese products. It created a huge trade deficit for US. That deficit surpassed $200 billions last year. Many economists said that made US losing millions of job opportunity. But to raise the Yuen's value will cause an inflation in US since now so many merchandise are imported from China. That would force the interest rate going upwards. Feds wouldn't allow such thing happening. So China could stick to its fixed exchange rate.

China did raise Yuen's value by 2.1% on 7/21/2005. It coincided to second London bombing. Obviously it was part of Feds' plan in their framing case. The framing case went soured, and further revaluation of Chinese currency postponed.

This March, the huge trade deficit against China caused an angry storm in Capital Hill. A bipartisan bill to slap a 27.5% tariff on all Chinese products would be proposed if China kept on manipulating the currency. But at the end of March, the plans for the bill dropped. Sen.Charles Schumer and Lindsey Graham, the most relentless critics of China announced cease fire. They said they would revive the bill in September if the condition not improved.
The interest of US had to give way to the interest of Feds.

Today is the last day of September. Yuen climbs up 1% and something since then. Far from the 25% to 30% revaluation the senators want. Where is the tariff bill and the voice of lawmakers? None is heard. Because the home prices dropped in August - the first year-over-year decline since 1995. So go away tariff bill. Go away trade deficit. (Even if China likely will swell its trade surplus a 20% this year) Feds need help.

There is a historical current account deficit and trade deficit for US. Oil price has doubled this year. The inflation and high interest rate is unavoidable. Yet the interest rate of 10 year treasury note drops to 4.6%. Compare with the 5.25% of overnight federal fund rate, It's absolutely abnormal. Another strange thing is, I saw rare media reporting any explanation for this absurd phenomenon. Economists have no idea what it is. I here offer people a window how Feds manipulate all these. For their interest in real estate market, they abuse their power to make a mess in economy. As everything is tightened to the extreme point, US is facing a depression.

[AirlinePilot]

Whats with the numbering thing K????

Curious.

[Jack1234567890]

How come the cost of the oil goes up and at the same time oil company earns record profits?
Shouldn't the profit margin get smaller when the cost is higher?
I have look into some answers, but I'm still confused. I heard it has something to do with percentage markup.
It would be awesome if someone can explain to me in details.

thanks.

[ohanian]

The big assumption that you had made is that "the cost of oil has gone up".

Who says that the cost of oil has gone up? The price of oil has gone up but the cost of extracting oil from the ground (from existing old wells) have not.

Why did the price of oil go up?

Supply and Demand. Demand kept on rising while Supply remains more or less the same. Have a big guess what would happen to the price of oil.

[Rabbit]

Oil used to be thought of as something like water. You put a hole in the ground, pump out and much as you can and make what ever profit you could from it. Now those people that supply oil are figuring out that there is only so much oil and it is more like gold then it is like water. We are about to see those people that have and control oil become the richest people on the planet. Some may even start to hold off on producing oil because they will learn that it will be worth much more then longer it sits in the ground.

There has been a small increase in the cost of bringing oil to market as the easy to get at oil has been extracted. As more expensive, deeper wells are drilled, these costs will continue to go up. Most of the increase we will see is due to a loss of competition. Ten years ago, there was much more oil on the market then could be used by the consumers. Right now today there is only enough oil coming out to meet demand.

In the future less oil will be extracted and the growing population will want ever more energy, resulting in sky is the limit prices.

[mistel]

OK, let me take a shot at this.

I invite more knowledgeable people to correct me.

Crude oil in America is now trading at about $75 a barrel. Very few of those contracts are ever filled. The vast majority of the futures contracts traded are mere speculation and are closed before delivery. Exxon-Mobil and other large oil companies do not purchase oil this way, BUT THEY USE THESE PRICES TO SET THE PRICE AT THE PUMP. They would have long term contracts with various governments where they have mineral rights where they can extract oil far cheaper than $75 a barrel.

Crude oil on the Nymex is like beer in a strip joint, aspirin at a 7/11, popcorn at a movie theater, food in an airport,.... you get what I mean.

Peter