Rise in Oil was caused by Manipulative Speculation
Posted
Sep 05 2008, 12:30 PM
by
Andrew Horowitz
Rating:
Earlier this year, the parabolic rise of oil had once again shown just how penguin-like analysts can be. The news was filled with "pundits" predicting prices to go to $150, $175 and even $200 by the end of the summer. All were based on the theory that China and other emerging markets were outstripping supply and the unrelenting demand will last indefinitely.
The idea that speculation was driving prices was buried under the loud roar of obfuscating supply/demand conversations that were taking place in print, radio, TV and podcasts. Worse still, the mention of manipulation of the oil markets was set aside as crazy talk by lunatics (like me - See June 27 update) who were grasping at an idea that had little evidence and was even less popular. Why? Because that would have killed their golden goose!
Want proof? All we have to do is to look at the beginning date of the reversal in the prices of oil and see the sharp downturn to acknowledge that there is an odd coincidence. Of course there is that possibility that just as the Energy Act of 2008 was passed/ratified, global demand dropped off along with the consumption projections for China and India.
The fact is that the reverse in prices started much too soon after the Farm Bill was enacted and put into law to be any coincidence. This is because the law effectively closed the Enron Loophole. It immediately halted the uncontrolled rise in oil prices as the energy speculators who were manipulating, particularly through the unregulated Intercontinental Commodity Exchange, were sent running for the exits. Does anyone really believe this was all about supply/demand anymore?
The chart below shows how the dateline is way too coincidental to discount the reality of speculative manipulation being a root cause for the rise. If you are interested, below that is a summary of the sequence of events and a summary of the voting
that took place to ensure the passage of this important bill that has
embedded in it, the Energy Act of 2008:
(Click to enlarge)
Chronology and details on the passage of H.R. 6124 (House Committee on Agriculture):
On June 18, Congress overrode the President's veto on H.R. 6124, the
Food, Conservation, and Energy Act of 2008, ensuring that all parts of
the Farm Bill are enacted into law. Previously, Congress had passed
H.R. 2419 over the President's veto, containing 14 of 15 Farm Bill
titles.
- The bipartisan House vote on H.R. 6124 was 317-109. The Committee press release can be read here.
- The
House vote on H.R. 2419, which took place on May 21, was 316-108. The
Senate vote of May 22 was 82-13. The Committee press release can be
read here.
- On
May 20, 2008, Congress sent H.R. 2419, the Food, Conservation and
Energy Act of 2008 to President Bush. The bill passed the House of
Representatives with a vote of 318-106 on May 14, and passed the Senate
with a vote of 81-15 the following day. You can read the Committee
press release here. (Correction: Previously listed as May 21)
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