The Banks are controlling the price of your oil/gas as they create the contango they benefit from!
This is a revisited issue as big media still has not got a grip on this yet. We will now make a case direct, to the point and to the people as it is not MOOT !
First we need to be sure you understand the terms we are using. It is a bunch to take in but worth it.
Oil Market Contango– A difference in the spot price and the futures price of oil that allows a company to buy spot oil and hold it to later deliver at the higher future price. And for a profit over what the spot price plus warehousing cost total. (more info and even more)
Department of Energy Inventory Report (DOE-EIA) Link to late May report Short Term Energy Outlook
Preface to Banks in the oil market:
Morgan Stanley Story-1 Story-2 – Citigroup Story-1
A story Summarizing The Super Contango of late Jan 2009 & Investors want to get in the action with the banks
So now if you have understood what I have just pointed out, the short would be that-
The banks are heavy investors in oil markets both directly and indirectly through companies they own and those that they have controlling interest such as Morgan Stanley having controlling interest in a tanker group and give loans to including owning and renting tanker company’s and storage facilities along with owning or having heavy stake in the insurer of the investments and tanker/storage.
Hey there is nothing normally wrong with taking advantage with the opportunity to make money in the futures market except when you can manipulated it. But should this really be a bank business, buying/trading oil futures and holding/delivering/insuring oil ? It seems to me that we busted a couple of brothers for doing this with the silver market in the early 80’s.
How?
The inventory that sits off shore in tankers is not only an insurance risk for pirate take-over but this oil is not part of the inventory reports that is a big determination of the future price of oil when it is traded in the futures market.
So when you read these reports, keep in mind it is easy to think there will not be enough oil for delivery 3 months from now when you are not looking at all of it. If you do a deeper google you will find that currently there are no tankers to rent. They are all being used but not all for delivery, but for storage. Only Iran has tankers available, but they will not rent them. No More Storage.
So it is a self perpetuating ever increasing price unless there is a sudden shock of the system as happened in the fall of 2008 which I contend is what got the banks in so much trouble in the first place. I truly believe they could have handled the bad loans if not for the collapse of the oil market and all the oil they had sitting on tankers docked off some other shore. They are just blaming it on the latter. If you will notice the only banks that are in really deep dodo are the ones that play the oil markets in the first place and the insurance co’s that insure the investments again most likely owned or controlled by the same banks.
Even an idiot would know that when the price of oil was over $100 a barrel, it was going to be a horror story for the world economy. However these are not immediate cause/effect. It normally takes about 5-7 months to feel the effect of today’s jolt in energy prices as measured by the total economy. They call it trickle down economics !
The masters of the Legal Magic Idea…
If you remember a company called “ENRON”, they had hired some pretty crafty folks that were about to do this for them, as they had the know-how to shape the books to do this legal and all. Problem is they went belly-up before they got the chance and these smart folks became the most valuable on Wall Street as Enron Collapsed and the banks were the high bidders for their talents.
So what can be done before the banks become the next Enron or are they already?
First, I do not like the idea of a bank playing in the futures market with companies that they own/control. I do not like the idea that they own anything other than the assets of loans. I do not like the idea that they loan the other companies they own the money to do the deed. They are a bank not an investment brokerage conglomerate. Break‘M–Up. More important now is that they are doing this with the aid of Federal Bail-Out Tax-Dollars.
Second, Reform/Re-Structure the energy inventory reporting system as other investment company’s may do the same even if the banks were out of the market. After all these crafty folks Enron had discovered will be looking for work again. Investors/You/We need to know what oil is sitting off shore waiting for a pirate to hijack and who insures it and who owns the insurance company. We will get accurate future/spot pricing when inventory reports are accurate.
Third, if all this is just to legal to do anything, then lets change that !
Tell someone ! Spread the word, your congressman is not interested yet. Only if his/her chances of re-election are interrupted will he/she start to give back the PAC money they receive from the banks and their subsidiaries and sing a new tune.
Most likely we will not get any action until oil surpasses $120 barrel mark again and this is likely to happen without the aid of a thriving economy and will most likely insure we never achieve it. If I consider the previous rise rate and the current price I would say that it will only take 17 to 22 months for oil to be over $100 a barrel again barring any geo-political disasters.
I got a inside word that Electric Demand is down 20% from a starving economy mostly as industrial use has declined and how much less oil are we using? About 18% Less Than when oil was $25 a barrel. If you watch the price charts, it just keeps inching up in the futures market and then to the spot market which is not normal except within the last 4 or so years as it has been going on. Overdrive of oil futures after a hoard and hold of undelivered spot oil continues to perpetuate on itself without end until it hits a measurable devastation on the economy, and then no doubt the futures market, and a collapse of the entire system as other investors get in on the action cutting the spread for the banks.
Will the banks tumble again if there is a sudden shock to the economy that most likely will once again be caused by the high price of oil? Will taxpayer funds be used to prop them up again? Keep your eyes on the demand side of oil for the early indicator of the next bankrupt banks and economy but I would say the same time you are figuring it out will be the day major investors will be getting out.
Sorry all you oil company haters, yes they too were/are bidding on their own futures but it is the banks working the deed here.
I can’t help but get a vision from the movie “Mad Max – Return To Thunderdome” and Master Blaster controlling the energy along with everything else because of it.
Please remember, you did hear it here first !