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Bruce Krasting

Bruce Krasting

I worked on Wall Street for twenty five years. I was an FX trader during the early days of the 'snake' and the EMS. Derivatives…

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Chevron Data Proves Oil Companies NOT Speculators are Driving up Oil Prices

Some poor wally over at Chevron accidentally released the company’s crude/distillate trading results for the year. An effort was made by the company to squash the information. Dow-Jones said, "the hell with that" and went public with the info.

Not surprisingly, Chevron is doing just fine in its oil trading business. They show year to date gains of a very tidy 360 million. I find it amusing that they are making such a bundle. The President said a month or so ago that he was going after the speculators who he thinks are driving up the cost of energy. Look no further Mr. President. It’s the oil companies that are driving up prices and making a bundle in the process, not some ‘locals” who trade crude futures in Chicago.

Speaking of making a bundle in oil trading it’s worth taking another look at the SPR oil sales that Obama ordered to “reduce the price at the pump”. This chart looks at LLS (Louisiana Light Sweet) for the past month.

Sweet Crude Oil Spot Price

Note that as of Friday’s close of $116.49 we are now above the level for pricing before the SPR sales (June 22). Therefore one would have to conclude that nothing of lasting value was accomplished by the effort to manipulate markets.

The government sold off 30 million barrels to the LLS market at the very favorable price of 107.20. Comparing that to Friday’s close gets a loss to the SPR of $280mm. Keep in mind that it only took a few weeks to get these gains, so the folks who played in the deal made a bundle.

Given that sweet crude is now above where it was on June 22 we have to anticipate that the deep thinkers in D.C. may well try another round of oil sales. If they do, it will have the same results. Big Oil will make a bundle, gas prices will not go down at the pump and the ‘owners’ of the SPR (all Americans) will get ripped off again.

There is the possibility that the bright folks who dream up these silly plans will come to their senses. They might just do the ‘right thing’ and preserve the SPR for what it was supposed to be for in the first place; an emergency. I doubt that will be the case. Gas prices are going to be going up in the next few weeks. Given that the ‘Deciders’ have absolutely no other options (monetary and fiscal policy is now dead in the water) they may well take the step to manipulate energy prices again. It won’t work the next time either.

There is no way to determine how much money was made by the principals who bought the SPR oil. We know what price they paid and we know how much oil each company got. We don’t know when/if they sold it. On the assumption that the inventory profits were all retained, the paper gains would look like this:

Oil company paper gains

What’s $280 million amongst ‘friends’? By the way, they don’t pay taxes on this crap either.

At some point someone in D.C. is going to defend the decision to sell crude reserves from the SPR. I can’t wait. This effort to manipulate the economy produced no meaningful results, other than to make some fat cats fatter.

By. Bruce Krasting




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  • Anonymous on July 19 2011 said:
    OPEC, Libya and the laws of supply and demand are not responsible for high gasoline and oil prices. The oil price is dictated by the fraudulent "round-trip" trades of the "dark pool" trading in the Intercontinental Exchange (ICE) in Atlanta. The international Big Oil/big banking cabal owns ICE. ICE operates outside of U.S. law. The Commodities Futures Trading Commission has no jurisdiction over ICE, bribed by Big Oil. ICE's energy traders and speculators can ratchet-up the oil price anytime they feel like it, for their own profits and on the behalf of Big Oil, through the use of "round-trip" trades. Google the "Global Oil Scam." ICE is a super Enron. Oil is too critical a resource to be controlled and manipulated by greedy traders, greedy refiners, greedy speculators and greedy corporations.

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