60 Minutes: Oil Prices Manipulated

CM Punk · Jan 12, 2009

HejiraHenry said:

Funny how the mortgage meltdown supposedly demonstrates the need for more government intervention in markets (when the opposite is more likely true) but the "energy crisis" is the result of Big Oil and Big Evil Government being in cahoots.
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The elite have to make sure that the working class is properly fucked somehow, so they set it up to fuck us both ways. Just in case.

Twoback · Jan 12, 2009

Boom_70 said:

Interesting segment on 60 Minutes tonight:

http://www.cbsnews.com/stories/2009/01/08/60minutes/main4707770.shtml
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Manipulation and speculation are two different things.
Speculation is legal, though we all can eventually pay a price for it. Whether there should be greater controls could be debated.

I Digress · Jan 12, 2009

Can this surprise anyone?

cranberry · Jan 12, 2009

Speculation is, however, one of the primary tools for market manipulation.

The Big Ragu · Jan 12, 2009

cran, Speculation is simply investment. A speculator assumes the risk of a loss in return for an uncertain possibility of reward. Without speculation you can't have a commodities market.

Isn't saying speculation is a primary tool for market manipulation akin to saying that marriage is a primary tool for divorce?

Again, though, there is no evidence of any oil market manipulation.

Magic In The Night · Jan 12, 2009

GoochMan said:

harbinger said:

GoochMan said:

If ever there were a time to bring back the public hanging, it was for Ken Lay and those Enron thieves.
Generally speaking, more and more of these stories are going to come forward. I'm still a bit amazed that Madoff is among the living.
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And it's none of our business who Dick Cheney met with when he formed that energy policy.
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Don't get me started.
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Or me. The most important pieces of paper from that administration and guarded as if they contain the horrible truth about this administration. As they do, no doubt.

harbinger · Jan 12, 2009

The Big Ragu said:

Again, though, there is no evidence of any oil market manipulation.
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Huh? Did you actually read that piece?

Masters believes the investor demand for commodities, and oil futures in particular, was created on Wall Street by hedge funds and the big Wall Street investment banks like Morgan Stanley, Goldman Sachs, Barclays, and J.P. Morgan, who made billions investing hundreds of billions of dollars of their clients’ money.

"The investment banks facilitated it," Masters said. "You know, they found folks to write papers espousing the benefits of investing in commodities. And then they promoted commodities as a, quote/unquote, 'asset class.' Like, you could invest in commodities just like you could in stocks or bonds or anything else, like they were suitable for long-term investment."
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Morgan Stanley isn't an oil company in the traditional sense of the word - it doesn't own or control oil wells or refineries, or gas stations. But according to documents filed with the Securities and Exchange Commission, Morgan Stanley is a significant player in the wholesale market through various entities controlled by the corporation.

It not only buys and sells the physical product through subsidiaries and companies that it controls, Morgan Stanley has the capacity to store and hold 20 million barrels. For example, some storage tanks in New Haven, Conn. hold Morgan Stanley heating oil bound for homes in New England, where it controls nearly 15 percent of the market.

The Wall Street bank Goldman Sachs also has huge stakes in companies that own a refinery in Coffeyville, Kan., and control 43,000 miles of pipeline and more than 150 storage terminals.

And analysts at both investment banks contributed to the oil frenzy that drove prices to record highs: Goldman's top oil analyst predicted last March that the price of a barrel was going to $200; Morgan Stanley predicted $150 a barrel.

Both companies declined 60 Minutes' requests for an interview, but maintain that their oil businesses are completely separate from their trading activities, and that neither influence the independent opinions of their analysts. There is no evidence that either company has done anything illegal.
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Asked why [Enron] wanted a deregulated market in oil futures, Greenberger said, "Because they wanted to establish their own little energy futures exchange through computerized trading. They knew that if they could get this trading engine established without the controls that had been placed on speculators, they would have the ability to drive the price of energy products in any way they wanted to take it."

"When Enron failed, we learned that Enron, and its conspirators who used their trading engine, were able to drive the price of electricity up, some say, by as much as 300 percent on the West Coast," he added.

"Is the same thing going on right now in the oil business?" Kroft asked.

"Every Enron trader, who knew how to do these manipulations, became the most valuable employee on Wall Street," Greenberger said.
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You can't possibly read that and believe there wasn't manipulation going on.

cranberry · Jan 12, 2009

The Big Ragu said:

cran, Speculation is simply investment.
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....until it is used as a tool within a scheme to manipulate a market. Which is why there need to be regulatory protections in place and why there is need for legislation like the Glass Steagall Act, whether or not Phil Gramm concurs.

Fenian_Bastard · Jan 12, 2009

The Big Ragu said:

I was wrong, Boom... I didn't predict the worst financial crisis in living memory.
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Because your ideological adherence to untenable economic theory based on a crackpot iinterpretation of human nature rendered you unable to conceive of the possibility of it. There were plenty of economists in the reality-based communoity who saw it coming. Nobody listened, of course, because most of the business press was worshipping The Almighty Market.
As to the thread head, well, what can I say but,

Unpossible!

The Big Ragu · Jan 12, 2009

harbinger said:

The Big Ragu said:

Again, though, there is no evidence of any oil market manipulation.
Click to expand...

Huh? Did you actually read that piece?

Masters believes the investor demand for commodities, and oil futures in particular, was created on Wall Street by hedge funds and the big Wall Street investment banks like Morgan Stanley, Goldman Sachs, Barclays, and J.P. Morgan, who made billions investing hundreds of billions of dollars of their clients’ money.

"The investment banks facilitated it," Masters said. "You know, they found folks to write papers espousing the benefits of investing in commodities. And then they promoted commodities as a, quote/unquote, 'asset class.' Like, you could invest in commodities just like you could in stocks or bonds or anything else, like they were suitable for long-term investment."
Click to expand...

Morgan Stanley isn't an oil company in the traditional sense of the word - it doesn't own or control oil wells or refineries, or gas stations. But according to documents filed with the Securities and Exchange Commission, Morgan Stanley is a significant player in the wholesale market through various entities controlled by the corporation.

It not only buys and sells the physical product through subsidiaries and companies that it controls, Morgan Stanley has the capacity to store and hold 20 million barrels. For example, some storage tanks in New Haven, Conn. hold Morgan Stanley heating oil bound for homes in New England, where it controls nearly 15 percent of the market.

The Wall Street bank Goldman Sachs also has huge stakes in companies that own a refinery in Coffeyville, Kan., and control 43,000 miles of pipeline and more than 150 storage terminals.

And analysts at both investment banks contributed to the oil frenzy that drove prices to record highs: Goldman's top oil analyst predicted last March that the price of a barrel was going to $200; Morgan Stanley predicted $150 a barrel.

Both companies declined 60 Minutes' requests for an interview, but maintain that their oil businesses are completely separate from their trading activities, and that neither influence the independent opinions of their analysts. There is no evidence that either company has done anything illegal.
Click to expand...

Asked why [Enron] wanted a deregulated market in oil futures, Greenberger said, "Because they wanted to establish their own little energy futures exchange through computerized trading. They knew that if they could get this trading engine established without the controls that had been placed on speculators, they would have the ability to drive the price of energy products in any way they wanted to take it."

"When Enron failed, we learned that Enron, and its conspirators who used their trading engine, were able to drive the price of electricity up, some say, by as much as 300 percent on the West Coast," he added.

"Is the same thing going on right now in the oil business?" Kroft asked.

"Every Enron trader, who knew how to do these manipulations, became the most valuable employee on Wall Street," Greenberger said.
Click to expand...

You can't possibly read that and believe there wasn't manipulation going on.
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I can believe it... if you can show me any evidence of it.

That is a "connect the dots" story that leaves too many gaps between the dots.

The world oil markets are large, diverse and have many players. Why does Morgan Stanley trying to make money on the wholesale market for a much-demanded commodity translate to market manipulation? Where is the proof of it?

Morgan Stanley is a flea in the world's oil market. It can store 20 million barrels, as the story said. Put that in the context of 1.25 trillion barrels of known oil reserves. How can Morgan Stanley -- or anyone else -- fix a price. They were controlling a miniscule percentage of the world market. Even that 15 percent of the market it says they control in New England wouldn't be enough to fix prices just in New England, unless they were conspiring with their competitors.

They'd have had to be conspiring with thousands of other players in the world market to even make a dent on the global price.

Is that possible? Sure. But where is there any proof of that? I'll believe it. But show it to me.

Fenian_Bastard · Jan 12, 2009

My god.
It's like arguing with a Maoist at this point.

Inky_Wretch · Jan 12, 2009

Ragu, how do you explain the price peaking at a time when supply was growing and demand shrinking? Simple market forces don't account for that, do they?

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