Wednesday, September 27, 2006

Gas Prices Manipulated
To Aid GOP
Power-Holding Bid?


Some food for thought, supporting the suspicions many of us have concerning a political agenda behind the sudden drop in oil prices being suspiciously timed as part of an attempt to make potential voters less angry about their circumstance and feel more secure in how their world is being run. (Full text below.)

TREASURY SECRETARY'S FIRM MAY HAVE PLAYED MAJOR ROLE IN GAS PRICE DROP

LE METROPOLE CAFÉ - In yesterday's WSJ in Section C there is a very,very interesting item in the article, Some Investors Lose Their Zest ForCommodities. The article notes that over that past few months, commodityfunds have been liquidating commodity holdings. But here's the stunner:
"Consider the Goldman Sachs commodity index, one of the most popular vehicles for betting on raw materials. In July, Goldman Sachs tweaked the index's content by cutting its exposure to gasoline. Investors tracking the index had to adjust their portfolios accordingly – which sent gasoline futures prices tumbling."
Prior to Goldman's July GSCI revision, unleaded gas accounted for 8.45%of the GSCI. Now unleaded gas is only 2.30%. This means commodity fundshad to sell 73% of its gasoline futures to conform to the reformulatedGSCI. . .

Here we have Goldman, qua keeper of the commodities index, manipulating
markets simply by adjusting index components. It is noteworthy inseveral respects.

First, we are used to the notion of them front running
market sensitive information announced by third parties, but here aglorified hedge fund - albeit one dominating central banks and financeministries worldwide - maintains market-moving indices itself. . . .

Second, it lends credence to the theory that the current well-publicizedcommodities decline is just a well-timed, well-orchestrated head fake tobenefit the incumbents in the run up to the midterm elections - someonenoted recently that Bush's ratings vary inversely with gas prices...

The suspicion's been with me since at least September 7th, so it was interesting to me to see some buttressing of the argument.

3 Comments:

Blogger Highlander said...

James Kunstler has an interesting theory --

" Now, a matter of speculation circulating in the rumor-stream of the Internet is the idea that some large entity (i.e. the US government) has managed to manipulate the oil markets in order to calm the voters down prior to the fall elections. Personally, as I have expressed countless times, I am allergic to conspiracy theories. Oil prices are not actually set by the oil companies or the exporting nations. Prices are set on the futures and spot markets, where major buyers of crude bid on either short-term or long-term contracts for the stuff, in order to run their enterprises in a rational, businesslike way. Earlier this summer they bid the prices up.
Some buyers may have simply dropped out as the price of oil exceeded their practical ability to pay -- and by this I mean mainly the governments of Third World countries. This would represent significant demand destruction, but the pain incurred by people in Third World economies would likely occur off the "radar screen" of the US news media. (How many Americans, for instance, are up-to-speed on the horrific economic suffering in Zimbabwe?).
Don't look at China for demand destruction. Its oil consumption actually grew by 15 percent this year.
If there is demand destruction in the US, it has not shown up yet in the overcooked and overspiced statistics emanating from the federal agencies -- though the housing slump-or-crash-or-whatever is beginning to make an impression on economy-watchers. There is otherwise no evidence that fewer cars are clogging the Capital Beltway or the Santa Monica Freeway.
But here's one thing I wonder: what if the number one user of oil products in the US had laid in huge inventories of the stuff earlier in the year and has lately withdrawn from bidding in the futures and spot markets? I am speaking of the US Military. It would make sense, against the background of Iran rattling its nuclear capabilities, and the Israel / Hezbollah affair, that the US armed forces filled their tank farms to the max this summer and are now stepping back from bidding on any additional oil for the time being. This could be easily "managed" by the people who run this massive organization -- namely, the President, the Secretary of Defense, and the rest of the civilian authorities based in the executive branch of the government. They don't have to consult with congress on their oil purchases.
I apologize for veering into conspiracy territory on this -- and I don't have a shred of evidence that this is happening. It's just a thought, a caprice, a "wild hair," a theory. Surely there is some enterprising graduate student or trust fund nerd on the peak oil web sites who might investigate this dark notion. Has the US military gone on an oil-buying vacation as we head toward the elections?"

3:37 PM  
Blogger Highlander said...

Sorry, let's try that again, with better formatting:

" Now, a matter of speculation circulating in the rumor-stream of the Internet is the idea that some large entity (i.e. the US government) has managed to manipulate the oil markets in order to calm the voters down prior to the fall elections.

Personally, as I have expressed countless times, I am allergic to conspiracy theories. Oil prices are not actually set by the oil companies or the exporting nations. Prices are set on the futures and spot markets, where major buyers of crude bid on either short-term or long-term contracts for the stuff, in order to run their enterprises in a rational, businesslike way. Earlier this summer they bid the prices up.

Some buyers may have simply dropped out as the price of oil exceeded their practical ability to pay -- and by this I mean mainly the governments of Third World countries. This would represent significant demand destruction, but the pain incurred by people in Third World economies would likely occur off the "radar screen" of the US news media. (How many Americans, for instance, are up-to-speed on the horrific economic suffering in Zimbabwe?).
Don't look at China for demand destruction. Its oil consumption actually grew by 15 percent this year.

If there is demand destruction in the US, it has not shown up yet in the overcooked and overspiced statistics emanating from the federal agencies -- though the housing slump-or-crash-or-whatever is beginning to make an impression on economy-watchers. There is otherwise no evidence that fewer cars are clogging the Capital Beltway or the Santa Monica Freeway.

But here's one thing I wonder: what if the number one user of oil products in the US had laid in huge inventories of the stuff earlier in the year and has lately withdrawn from bidding in the futures and spot markets?

I am speaking of the US Military. It would make sense, against the background of Iran rattling its nuclear capabilities, and the Israel / Hezbollah affair, that the US armed forces filled their tank farms to the max this summer and are now stepping back from bidding on any additional oil for the time being. This could be easily "managed" by the people who run this massive organization -- namely, the President, the Secretary of Defense, and the rest of the civilian authorities based in the executive branch of the government. They don't have to consult with congress on their oil purchases.

I apologize for veering into conspiracy territory on this -- and I don't have a shred of evidence that this is happening.

It's just a thought, a caprice, a "wild hair," a theory. Surely there is some enterprising graduate student or trust fund nerd on the peak oil web sites who might investigate this dark notion. Has the US military gone on an oil-buying vacation as we head toward the elections?"

3:50 PM  
Anonymous Anonymous said...

No idea.

Could this have any kind of impact on Canadian elections as well?

11:49 AM  

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