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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 | 5 Comments »
September 4th, 2008 at 3:18 pm
There are so many factors in the price of oil, it is very hard to pinpoint the factor that is effecting oil today. Long term we need to realize the price will go up, due to increased consumption in the world.
September 4th, 2008 at 3:35 pm
I’m not sure if this is happening in the US but here in Toronto I’ve been watching the price of Gas and the price of Oil and the drop in the price of oil hasn’t had as big a dent in the price of gas. I think there’s a lot of profit taking happening in that industry and maybe even some gauging. Have you noticed that the price of gas has been dropping in tandem with the drops in the price of oil or are the prices of gas lagging a bit too much?
I really wish that the oil companies that are profiting so much from the high oil prices started investing this money into alternate energy sources. They’ve got the capital to help push the switch to alternate energy and profit on it at the same time (eventually the alternate energy sources will become viable where will they stand then?)
September 5th, 2008 at 8:17 am
WSJ reported maybe as long ago as 2 years, about the time oil prices were rising, that Saudia Arabia had so much UNSOLD oil that they were storing it on tankers which is a very expensive proposition. While oil may be harder to find and produce I find it hard to believe that oil prices and their dramatic rise is strictly due to supply and demand. It just doesn’t work that way.
September 7th, 2008 at 1:15 pm
It’s a bubble.
IT IS A BUBBLE.
Why is this so hard for people to understand?
Oil is a traded commodity, therefore it can be subject to a bubble just like any other traded product.
March 16th, 2009 at 7:02 pm
thank you for thiis interesting ticket, if only peopple understand what you say
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