GMan 3,569 Report Share Posted May 31, 2008 As if we didn't know/expect this was going on... http://news.yahoo.com/s/nm/cftc_probe_wsj_dc U.S. oil probes focusing on price manipulation: report NEW YORK (Reuters) - A U.S. regulatory probe into potential oil-market trading abuses is focusing on possible short-term manipulation of benchmark crude prices and the use of information related to important oil storage tanks to influence prices, the Wall Street Journal reported on Friday. The report comes a day after the Commodity Futures Trading Commission, under pressure from U.S. lawmakers to crack down on speculators they blame for pushing energy prices to record highs, said it would step up market surveillance. The CFTC announced a nationwide investigation into energy trading last December, but is in fact pursuing several oil investigations, many of which relate to one another, the Wall Street Journal reported, citing people familiar with enforcement priorities of the agency. It has expanded its probe into alleged short-term manipulation of crude-oil prices via a widely used price-reporting system run by Platts, a unit of McGraw-Hill Cos (MHP.N), the newspaper reported. The probes appear to focus on gambits well known by traders in the opaque physical oil market, where trading a small volume of cash crude or gasoline during a short period when benchmark prices are set can yield big profits on derivatives positions. Oil traders say that these kind of leveraged trading plays -- which are generally not illegal -- were more common prior to the Enron melt-down and the California power trading scandal that triggered increased scrutiny of world energy markets earlier this decade, but rarely had a lasting effect on prices. However traders and analysts believe that increased investment from pension and other funds into commodities markets is partly responsible for causing prices to quadruple since 2004, with U.S. crude hitting a record high of $135.09 a barrel last week after rising by more than 40 percent this year alone. The Journal quoted CFTC enforcement chief Gregory Mocek as saying the agency has about 60 manipulation investigations open in various commodity markets. On Thursday the CFTC said it would expand its oversight of energy trading by tracking index funds, and had reached an agreement with the U.K.'s Financial Services Authority and ICE Futures Europe to share information. WINDOW TRADE, STORAGE TANKS One suspicion, the newspaper said, is that energy companies and traders have at times issued a flood of orders during the trading "window" used by Platts to determine its reported prices for physical oil transactions, then used the potentially distorted prices to make profits in other markets. According to the Journal, Platts has said its system has safeguards to protect against manipulation. Subpoenas on the matter have gone out in several stages, the report cited people familiar with the cases as saying. A Platts spokesman was not immediately available to comment. The Journal cited people familiar with the matter as saying the agency has also been questioning traders about similar activity in the jet-fuel market. Another area of concern for CFTC regulators is whether the owners of crude-oil storage tanks use their knowledge to make bets on oil-futures markets. In theory, the owner of a tank could issue misleading information about the tanks being full or empty, leaving the wrong impression about whether oil is in plentiful supply. Then they could make trades to profit on the misunderstanding. Regulators have long been wary of allowing any one company to gain too much control over storage tanks in Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange's light, sweet crude oil contract, the world's main benchmark. Government regulators forced BP (BP.L) to sell the Cushing storage assets of ARCO before allowing it to buy the U.S. company in 2001. BP is no longer the biggest tank holder at Cushing. (Reporting by Steve James; Editing by Jonathan Leff and Michael Urquhart) Quote Link to comment Share on other sites More sharing options...
Lance 228 Report Share Posted May 31, 2008 I don't expect much to come of this...we are screwed until at least next spring....maybe longer depending on who the next president is. Quote Link to comment Share on other sites More sharing options...
EH31 2,533 Report Share Posted May 31, 2008 i don't really read into all of this much, but what needs to be done to lower the prices? Quote Link to comment Share on other sites More sharing options...
the_truth 10 Report Share Posted May 31, 2008 Something I dont get: Product A is primarily found half way around the world. You must drill an extremely deep and expensive well to obtain it. Pump it out. Refine it. Ship it halfway around the world. Then we pay about $4 a gallon for it. Product B: Squeeze a cows udder. Ship it a few hundred miles. The government will even subsidize you obtaining it. Then we pay about $4 a gallon for it. Seems to me like Product A should cost way more than Product B. So why do we pay about the same for a gallon of gas as we do a gallon of milk. Quote Link to comment Share on other sites More sharing options...
Lance 228 Report Share Posted May 31, 2008 because you have to feed cows and burn gas to get the milk delivered? LOL...or you can just squeeze it fresh from Fatboy's left teet. Quote Link to comment Share on other sites More sharing options...
bucfan64 309 Report Share Posted May 31, 2008 People, especially liberals love to blame big oil for this problem, it goes much deeper than that. First of all the liberals literally put so many restrictions on oil refineries that today we have approximately 120 some oil refinereries in operation in America. Back around the late 80's and early 90's we had nearly double that many. Common sense economics tells me that if you have lower production and still a high demand that the price is going to go up! In addition to that the liberals don't want us drilling in ANWAR or off any of our coasts. What do they expect? In addition to blaming big oil for such HUGE profits, this needs to be considered. 1. 40 + Billion in profits sounds like a lot and it is but it only equals a 7% profit!!!!! 2. These same politicians that what to take Big Oils profits and give it to the people, which is pure socialism at it's best, is forgeting that only 1% of big oil is executive owned, over 50 percent is the average joe American that owns stock and the rest is money that is tied up in retirements and pensions. The liberals give the impression that BIG OIL is 3 or 4 guys sitting on a hill somewhere getting rich out of their mind.That simply is not the case.The fact is that retirements, pensions and capitalistic minded Americans will be the LOSERS! 3. These same liberals that are trying to win the poor, ignorant, uniformed citizens vote, tell the citizenry that they are going to STICK IT TO BIG OIL, in order to win votes. It sure as heck sounds good, but these same liberals are giving money hand over fist to BIG FARMS AMERICA, who just happened to make over 200% profit. THATS RIGHT 200% PROFIT IN 2007.Lets see 7% profit vs 200% profit. Why aren't they bitching about BIG FARMS? 4. The LIBERALS also earn votes by telling everyone that they are going to stick it to big oil by creating incentives for farmers to create ETHYNOL. Man this really gets the populace PUMPED UP, the liberals sure are our FRIENDS. What they don't tell them is that this SUPER ALTERNATIVE FUEL takes 1.2 gallons of REFINED OIL to produce 1 gallon of ETHYNOL. THIS DOES NOT MAKE GOOD NONSENSE! 5. Then they complain about the increase in the price of food. WHILE THEY subsidize and AGREE TO LET US BURN 40% of our CORN CROP! We are literally SETTIN FIRE to our food crop! God help us if these folks continue to have their way! Quote Link to comment Share on other sites More sharing options...
Guest BEAVERTAIL Report Share Posted May 31, 2008 Beautiful. Lately a lot of Liberals have been sticking it to Exxon, funny thing is Exxon owns 2% of the oil business. What they do does not effect the whole business and price... I would LOVE to see oil prices go down but it is not happening now, with a DEMOCRATIC congress. That is where it all starts, the President isnt vetoing anything... its the CONGRESS and Nancy Pelosi isnt doing crap. BTW, Ethanol is a JOKE. Quote Link to comment Share on other sites More sharing options...
Guest JJBrickface Report Share Posted May 31, 2008 Are we working on building refineries in the US? Quote Link to comment Share on other sites More sharing options...
Guest BEAVERTAIL Report Share Posted May 31, 2008 this was from a couple of years ago... but still somewhat relevant... Refineries making huge profits; yet nobody wants to build one (5 comments; last comment posted July 28, 2004 09:00 am) print | email this story Related Links Energy Information Administration National Petrochemical and Refiners Association By H. JOSEF HEBERT | Associated Press July 27, 2004 WASHINGTON - It's a good time to be in the oil refinery business. Demand for gasoline is high and profits are pouring in at a record clip. With that combination, you'd think oil companies would be falling over each other to build new refineries. Not so. There hasn't been a new refinery built in the United States in 28 years and more than 200 smaller facilities have closed. Refining never has been viewed as a cash cow by the petroleum industry, which complains about meager profit margins, hefty environmental costs and too much government regulation. But with gasoline prices hovering at $2 a gallon for much of this year, the country's largest oil companies and independent refiners are expected to report soaring profits from refinery operations in second quarter earnings this week. An early hint of the industry's healthy bottom line came last week from Sunoco Inc., which reported a $217 million profit from refining related business, quadruple the total from a year ago. It produced a record 43 million barrels of gasoline during the quarter. The refineries set production records during the first half of the year, including 8.6 million barrels of gasoline a day, but still couldn't keep up with demand, the American Petroleum Institute reported Tuesday. Still, no major oil or refining company appears eager to add a new refinery. Instead, more could close. A refinery in California is expected to shut its gates this fall. Two Texas refineries have been on the market for three years with no takers. And an offer by Saudi Arabia to help build several U.S. refineries brought not even a hint of interest on Wall Street. A new refinery project in Arizona has yet to break ground after five years of trying. "Today investors are in no mood for refinery building even if funding were available," Arjun Murti, managing director of Goldman, Sachs Co., told a recent congressional hearing on the dearth of U.S. refining capacity. Any executive who might pursue a new $3 billion refinery risks his company's stocks taking a hit, said Murti. In 1981 the country had 324 operating refineries; today there are 149. They have been running at an average of 96 percent capacity but are unable to keep up with demand. Only gasoline imports have prevented shortages and gas lines. But many of the closed refineries were, small, inefficient and "living on tax credits" when the country had too much refining capacity, says Guy Caruso, head of the Energy Information Administration. In fact, the large, efficient refineries not only survived, but have become bigger. Over the last six years, refiners added 1.2 million barrels of production capacity, equivalent to building one additional medium-size refinery each year, according to the EIA, which keeps energy statistics for the government. At the same time, demand grew by 1.4 million barrels a day. And efficiency improvements _ called "de-bottlenecking" within the industry _ can only go so far, industry experts said. Demand for refined products, especially gasoline, is expected to grow at an annual rate of 1.6 percent for the rest of this decade, requiring an additional 260,000 barrels a day of gasoline and other fuels each year, according to Goldman Sachs. With those kinds of demand forecasts, why is there no interest in building more U.S. refineries? There is the cost that is estimated at $2 billion to $3 billion in capital investment with no certainty that today's glowing profits will stay around, say economists. And, despite billions spent on pollution controls, refineries do not make pleasant neighbors. "Nobody seems to want to build a refinery in their back yard," David O'Reilly, chairman of ChevronTexaco, told a U.S. Chamber of Commerce luncheon the other day, deploring what he said was a regulatory and permitting morass and almost certain citizen opposition to any new refinery project. Given likely community opposition, an anticipation of a lengthy permitting fight and uneven expectations on a future investor's rate of return, "most companies are unlikely to undertake the significant investment needed to even begin the process" says Red Cavaney, president of the American Petroleum Institute. The organization represents the large oil companies in Washington. A new refinery can't be sold to Wall Street as a very profitable investment, industry executives maintain. "The 10-year average return on investment in the (refining) industry is about 5.5 percent, about what investors could receive by investing in government bonds with little or no risk," says Bob Slaughter president of the National Petrochemical and Refiners Association. But some independent refiners, such as Valero Energy Corp., have been able to reap considerably higher rates of return _ buying old refineries at bargain prices, as little as 20 cents on the dollar. Valero, the country's largest independent refiner based in San Antonio, Texas, has grown rapidly since 1997 by acquiring undervalued refineries, making environmental improvements and expanding capacity. Such was the case with its purchase of the Orion refinery in Louisiana. "We paid far less (for it) than the replacement cost. If we had paid full replacement cost for it, it would not be doing well at all," said Gene Edwards, a Valero senior vice president. Would Valero ever build a new refinery? "I don't see anyone building a refinery in the U.S. _ maybe overseas," said Edwards in an interview. Quote Link to comment Share on other sites More sharing options...
Lance 228 Report Share Posted June 1, 2008 I love how they say a new refinery would cost "billions"...well...how much money do you think they are making every 3 to 4 months? lmao. they will not build it because it would be shooting themselves in the foot...sooner or later all this is going to come out in the wash and someone will hang for it...wait and see. Quote Link to comment Share on other sites More sharing options...
Willie 10 Report Share Posted June 2, 2008 You can blame the liberals if you want, but bush and his cronies are still running things.... Quote Link to comment Share on other sites More sharing options...
GMan 3,569 Author Report Share Posted June 2, 2008 [ QUOTE ] You can blame the liberals if you want, but bush and his cronies are still running things.... [/ QUOTE ] And thank God for that because if the liberals were running things, it would be a lot worse... Quote Link to comment Share on other sites More sharing options...
bucfan64 309 Report Share Posted June 2, 2008 AMEN!!! Its a funny thing that the PRESIDENT IS RUNNING THINGS when THE CONGRESSIONAL MAJORITY is the DEMOCRATS. Who by the way, have DONE ABSOLUTELY NOTHING SINCE LAST NOVEMBER!!!!!!!!!!!!!!!!! The presidents approval rating is 17%, sad fact is that congress has a lower approval rating! I call it like it is, if it looks like a duck........ Quote Link to comment Share on other sites More sharing options...
Lance 228 Report Share Posted June 2, 2008 hate to be the one to break the news but they all suck. Quote Link to comment Share on other sites More sharing options...
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