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The Price Of Oil

January 12, 2009 10:17 AM

The historic swings in oil prices last year were the result of financial speculation from Wall Street and not supply and demand. Steve Kroft investigates.

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by Mikery1985 July 16, 2009 12:01 PM EDT
OK. So much has been said about speculators manipulating or not manipulating the markets that I see some trends. The folks that would want to take advantage of others manipulations argue that there is nothing wrong here and it is all a political ploy--so that they can attempt to capitalize--kind of greedy isn't it? Those folks would argue that they should gain from an obscene situation that effects the whole society. But anyone that wants to argue for regulation or oversight is soundly beaten or accused of ignorance of the real issues (enter "acreditor"). The 60 Minutes piece was not meant as a educational primer on markets. It was intended to give us documented evidence that some people that have/or hopefully had the ability to control the oil markets in their favor. And to "i_did_not_vote_for_obama" it is now July and no big spike in oil proces has happened. I think you missed that one. The EIA (to which I have been paying attention for over ten years) has data and reports galore to indicate the case made by the 60 Minutes piece is correct. I don't believe that the data that they provide monthly is politically motivated. If anyone cares to look it up it is available at: http://tonto.eia.doe.gov

Now, the demand is the same this year as last, that supply is days ahead of last year and still the price went up for the summer adjustment. It wasn't as high as last year but still it went up. How can anyone with a brain and any critical thinking skills ask us to believe that the free market is at work here? Supply/demand is not driving the price adjustments. The refineries are only operating at 85-89% capacity and still the supply is increasing. The demand is basically flat. So if the free market principals are in control, the price should trend down until a balance point is reached, which hasn't happened yet. The price should still be dropping. But it isn't. So, more than meets the eye or more than what we expect is going on.

To expect that any less control or regulations will be enacted is ludicrious. We need to put the same kind of controls in place to regulate the important commodities that affect our economy as the stock market has. Automatic "stop-points" when wild swings occur. This should serve to smooth out any big spikes like when short sellers have to cover their a@@'s.
Thank you.
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by I_did_not_vote_for_obama March 3, 2009 4:33 PM EST
This is Great!
Our country, including the left winged CBS emphatically blamed George W Bush and Dick Chaney. Since they are not in this report of the commodities market, should you not publically apologize? An make note: the new administration will send oil prices through the roof?.very very soon. Please report on that one too. Thank you for the opportunity, I will notify Shawn Hannity as well.
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by aceditor January 14, 2009 10:08 PM EST
4) Speculators can''t drive the price up and hold it up if supply/demand isn''t tight. An artificially high price will swamp the markets with product and quickly! When the Hunts tried to corner the silver market the market was swamped with silver coming out of safe deposit boxes. It took economic collapse to tip the balance to lower oil prices.
5) production, unlike the claims of the piece, did indeed fall. In fact, as price rose during 2007, both U.S., Persian gulf and worldwide oil production was below 2006 levels. As the super spike began in 2008, the Persian Gulf region increased production roughly 10% to capture the high prices. What is alarming is that U.S. production again fell (could not capture high prices) and worldwide production gained only 6%. despite what the 60 Minutes piece said, world demand for oil waned only slightly during the spike period and production was only then ramping up. Let''s not forget, in Q2 2007 demand fell only to accelerate again to record highs 6 months later.
6)"How could the 60 Minutes crew have missed all of these things?"

Because they are part of the elites. Elites believe that anytime the price for oil goes up it is because of "greedy'' speculators. Curious that the recent collapse in oil prices does not seem to be have been caused by greedy speculators who are shorting oil.
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by aceditor January 14, 2009 10:07 PM EST
This actually was at terrible piece of journalism. Here are the comments from financial site Seeking Alpha which explain why:
1) No one has ever been able to explain how speculators can influence spot prices without taking delivery. The reason is that they can''t. It''s an absurd assertion.
2) References to the volume of futures trades as "evidence" that speculation is driving prices is equally stupid. For every buyer there is a seller. The volume of sells increased at the same rate as the volume of buys.
3)The $25 dollar rise in oil on Sept. 22nd was horrendous journalism, and it is obvious they have no clue what caused it. I was watching the spot and 2 forward month contracts when that happened. Within 30 seconds, the reason for that rise was quite obvious. The current contract was due to expire that afternoon. Shorts were forced to cover. There was little volume because the real trading was occurring in the next forward month. So a short squeeze occurred. The next day, the oil contract switched months, and the price was back where it was.
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by ugalri January 14, 2009 7:59 PM EST
Your viewers might like to see a segment on the current disparity between rbob (wholesale gasoline futures) and the price at the pump. The difference currently is often near or above 100%. Historically it has been below below 25%.
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by chrisrising January 14, 2009 5:22 PM EST
Very interesting!! I think however that if we each had the money and energy to invest in oil we would. Everyone wants to be financially secure..it doesn''t matter who you are or how much you have. I''ve invested in real estate and have seen awesome returns..others invest in small business they start..Either way.. I think there is a correct way to do it.. "The Pizza Delivery Millionaire" by Rick Vazquez is a great book and tool to start paving the way for your future and I encourage anyone who is hesitant to start your own business to take a leap of faith! Invest in yourself first.
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by jporcelli2 January 14, 2009 3:53 PM EST
Yes, speculators were in the market, and had to sell off to meet margin calls from their clients, but it still doesn''t remove the issue of falling production rates in almost all the major oil producing countries. You should do a story on Mexico''s Canterell field and how that will impact both the US and Mexico''s economies. Don''t let market signals fool you.
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by lawalker101 January 14, 2009 3:43 PM EST
Well, it is about time that someone wrote about this! I have been waiting for over a year for an explanation. Thank you 60 minutes! I look forward to updates as to what will be done about this. Please stay on top of it for the public''s sake! This is the good side of journalism.
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by oneauta January 13, 2009 10:54 PM EST
Thanks for the report and connecting some of the dots. Deregulation of banking = speculation on oil futures = financial losses = loss of funds to loan = lending crisis = $700 Billion Bailout to purchase "poor performing assets" = funds to acquire competitors = deregulated monopoly in the financial market; not to mention that the workers will be footing the bill.
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by moneyteacher January 13, 2009 9:58 AM EST
Expect all commodities to go up. Especially imports. This is more a consequence of a weakening dollar than anything else. Its called inflation.

http://moneywisdom-gold.blogspot.com/
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by almega8 January 13, 2009 3:23 AM EST

Questions:
The Feds need to investigate the incomes and tax reports of the major oil companies during the historic 2008 gasoline price spike. Such an event had to be planned, and for a purpose.
1. Which oil companies paid out unusual amounts of the dollars during/following gasoline price spike period?
2. Were the huge amounts paid out traceable to foreign biz-powers/oil suppliers? To whom paid? To whom among Oil Companies not immediately paid?
3.Were the huge amounts that were paid out traceable to the Obama Election Campaign, indirectly or otherwise?
4.Obama had unlimited dollar resources during the Election . . . where did they originate? Through whom?

The mysteries of both, cause of the oil/gasoline price spike and source of Obama''s unlimited Election Resources, are historically related by time; and, along with the unusually large size of the Election Pot, will be forever suspect as helping Obama to buy the Election results.

5. Who is powerful, honest and patriotic enough to investigate?

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by tims1224 January 13, 2009 2:33 AM EST
please follow-up this article, if no-one becomes accountable in the next wave of politicos we will be in the same mess.
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by mike60min January 13, 2009 12:55 AM EST
It was good to see this program. However, what you did not mention was the laws passed by Congress that contributed to the economic meltdown and what it was named and who was the backer. Namely, the Commodity Modernization Act of 2000 with the help of former Texas Republican Senator Phil Gramm ot corner energy markets. You touched lightly on the Gramm-Leach-Billey law passed in 1999 that was pushed through, to deregulate banks, the laws that were established to prevent bank failure since the Great Depression . This law was also pushed through by Phil Gramm. Bush said the price of oil was simply a "Supply and demand". The American People were lied to. Today, the 18 months of $300 a month gas bill for families has spilled over and families are trying to pay off their credit cards of the oil purchased at $4 a gallon and no money for new cars.
Goldmans Sachs CEO was Henry Poulson, the guy in charge of the US Treasury, who just "secretly" distributed $Billions to his bank buddies including Goldman Sachs to "buy out the competition". I hope 60 minutes, in the very near future, expose these thieves of American wealth for the benefit of the likes of Hedge Fund managers and Goldman Sachs. It wasn''t Enron,it was Phil Gramm who pushed the laws through Congress paid off by Enron and conspirators like Hedge Funds who made a lot of money. Our government has sold out its people for the few who made $Trillions with the passage of these two laws.
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by smc021-2009 January 13, 2009 12:38 AM EST
Thank you for your report which should have been so obvious to anyone with half a brain when it was occurring. But then again I guess that is not what the persons repsonsible for regulating these things have is it?
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by smc021-2009 January 13, 2009 12:36 AM EST
Thank you for telling us the truth which should have been obvious to the regulatory agencies when it was happening.It was to me and I don''t have an MBA or Phd in economics. It is so ironic or pathetic that the very entities that were *** the American taxpayer had to be bailed out by them when their game felll apart. What a government we have we might as well put a bunch of chimpenzees in their and let them govern.
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by abstractor1 January 13, 2009 12:28 AM EST
Great segment on explaining the price of oil. I have personally been involved in examining title in the oil field as well as the housing/commercial market. I have been bounced around in the title insurance world as well as the oil business. I have moved from town to town for 28 years. I have suffered through the ups and downs of both markets. One year ago I had to find another job because the real estate market in Minneapolis had gone sour. Now I can''t sell my home in MN because of a hyped-up market created solely on greed that flopped. After moving back to the oil field in 2008 to keep my family alive, we are now facing the oil business going sour -once again created by an artificial market. At what point is the U.S. going to bail out the people that have been beat up by all of this? I think that Ex-U.S. Senator Phil Graham should have been interviewed to explain his part in sponsoring legislation that essentially deregulated energy commodities trading for companies like Enron and Morgan Stanley. Not to mention all the U.S. Senators and Congressmen supposedly representing their states that voted for this deregulation. Market manipulation must be stopped. Wall Street, bankers and financiers need to be held accountable for this devastation. If we don''t take action to stop this theft labeled "free market," then we are to blame. Where''s the money??
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by sangdalen January 12, 2009 10:47 PM EST
Transferring more of our hard earned dollars to the super rich. Great! If this doesn''t stop there WILL be a revolution.
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by sangdalen January 12, 2009 10:46 PM EST
Transferring more of our hard earned dollars to the super rich. Great! If this doesn''t stop there WILL be a revolution.
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by sangdalen January 12, 2009 10:44 PM EST
Transferring more of our hard earned dollars to the super rich. Great! If this doesn''t stop there WILL be a revolution.
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by labenimkreig January 12, 2009 9:25 PM EST
They leave out a major factor of currency exchange. When more and more counties are exchanging in euros and the dollar causing the price to go up. The fall is due to this market fluxuations. Is is so low now due to people getting out.
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