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Oil Price Manipulation?
By JLP | September 4, 2008
There was a very interesting article in today’s Wall Street Journal about how regulators are looking at oil price manipulation. From the article ($):
…regulators are concerned that companies may be reporting inventory levels that benefit their own trading positions but that may not be accurate, people familiar with the regulators’ thinking say.
Unexpected drops in oil inventories reported each Wednesday by the U.S. Energy Information Administration can spark price spikes on the main oil futures benchmark on the New York Mercantile Exchange. A company could theoretically underreport barrels in its tanks, for example, at a key hub to suggest oil is scarcer than it really is, and then sell its physical oil at a premium when oil prices jump on misleading news.
Another concern is whether companies conduct some physical oil sales and purchases solely to influence short-term pricing on oil futures markets.
I think there’s no question that this kind of stuff went on. Yes, oil is up due to increased demand, but should it have been up that much? And, should the market have seen such big swings in the price of oil? It will be interesting to find out what regulators uncover (if they uncover anything).
While we’re on the topic of oil, I thought this article from earlier this week was interesting too. Apparantly Iran was seeking to cut oil production due to the recent drop in oil prices. Iran is a member of OPEC. OPEC’s president earlier this summer said that the price of oil was up due to speculation and the value of the dollar, NOT because of supply. Now Iran wants to cut production in order to keep oil prices up. Interesting…
I just hope the recent drop in oil prices doesn’t cause us to get too comfortable. Like many commenters have said on my other oil posts, a LONG-TERM solution is needed. We need to be investing in alternative sources of energy and drilling for our own oil. Let’s just hope lower oil prices don’t cause us to lose focus.
Topics: Oil |
