Global Oil Scam and Speculation in Oil Futures

Oil Prices Hit Highest Level Since Sept. 2008

We may never know for sure the combination of circumstances that brought on energy crisis of 2008. But one factor was almost certainly the Commodity Futures Modernization Act of 2000, which allowed unprecedented levels of speculation in oil futures by investment banks and pension funds, bringing the familiar boom-bust cycle home to the gas pump. [Drill Now? Try Regulate Now, Wall Street Journal, April 7, 2010]

March 4, 2011

AP - Oil prices hit a 29-month high Friday after the government said the nation's unemployment rate fell to 8.9 percent in February.

The Labor Department said the economy added 192,000 jobs last month. That suggests more people will be driving to work at a time when world oil supplies are under pressure because of the Libyan crisis and unrest in the Middle East.

Benchmark West Texas Intermediate crude for April delivery gained $2 at $103.91 per barrel in New York. The price jumped to $104.64 per barrel earlier in the session, the highest level since Sept. 29, 2008.

Gasoline prices have shot up an average of 35 cents per gallon since an uprising in Libya began in mid-February. A gallon of regular unleaded gained another 4.4 cents overnight to a new national average of $3.471 per gallon, according to AAA, Wright Express and the Oil Price Information Service.

Pump prices are soaring much faster than analysts expected, as a wave of rebellions sweeps across North Africa and the Middle East. Prices should peak between $3.50 and $3.75 per gallon this spring, according to Tom Kloza, OPIS chief oil analyst.

In Libya, tensions escalated further on Friday as forces loyal to Moammar Gadhafi used tear gas to repel protesters in Tripoli. Most of Libya's oil production has been shut down because of the crisis, and experts say the country's oil fields will be threatened as long as there's no clear leader in charge.

Saudi Arabia has increased production to make up for the loss of Libyan crude, but a lengthy struggle could put significant pressure on world supplies. Traders are still concerned that the unrest in North Africa, which already has ousted leaders in Tunisia and Egypt, will encourage pro-reform protesters to dig in and further challenge neighboring regimes in the Middle East.

North Africa and the Middle East are home to the largest oil producers in the world and export a quarter of the world's oil.

Oil prices rose Friday as anxious traders prepared for the weekend. Two weeks ago, oil surged more than $7 per barrel in electronic weekend trading, and prices are again climbing on the expectation that oil will jump before Monday trading begins.

Oil is getting more expensive as the economy of the world's largest oil consumer, the U.S., appears to be improving. Last month, employers hired at the fastest pace in almost a year, pushing the unemployment rate down to the lowest level since April 2009. Retailers reported surprisingly strong revenue gains in February and businesses ordered more manufactured goods from U.S. factories in January.

The Energy department said this week that petroleum demand has grown for four straight weeks, resulting in unexpected drops in the nation's oil and gasoline supplies last week.

"The economy just seemed to be getting its mojo back," PFGBest analyst Phil Flynn said. "The question, now, is when will higher energy prices take that mojo away?"

Analysts say the economy can probably stay on the upswing as long as oil stays below $120 per barrel. If it goes higher, and pushes up the cost of fuel, consumers could rein in spending, commuters may opt for public transportation and car pools, and leisure travelers will probably vacation closer to home.

"That's when it really starts to do damage," Flynn said.

If oil rises to $150 or more per barrel, and holds at that level for months, it could trigger another recession, economists said.

In other Nymex trading for April contracts, heating oil added 3 cents at $3.0777 per gallon and gasoline futures gained 2 cents at $3.0429 per gallon. Natural gas gained 2 cents at $3.795 per 1,000 cubic feet.

In London, Brent crude added $1.42 at $116.21 per barrel on the ICE Futures Exchange.

Latest Surge in Oil Prices Sends Stocks Lower

The surge in world food prices can be attributed to the “financialisation” of commodities due to the Commodities Futures Modernization Act of 2000. The game changed for commodities the minute the legislation passed -- ten years ago. That doesn't explain the surge this year but it does explain the increased volatility of the last decade. [Don't Blame Bernanke: Here's Who's REALLY To Blame For Surging Food Prices, Business Insider, October 12, 2010]

March 4, 2011

AP – Stocks fell Friday as worries about another jump in oil prices overshadow a solid report on the U.S. job market.

Crude oil rose more than 1 percent on Friday to trade above $103 a barrel, its highest level since September 2008. Markets have been rattled over the past two weeks as higher oil prices threaten to undermine the economic recovery.

The Dow Jones industrial average dropped 100 points, or 0.8 percent, to 12,154. The Standard & Poor's 500 index fell 12, or 0.9 percent, at 1,319. The Nasdaq composite index fell 17, or 0.6 percent, to 2,781.

The Dow Jones industrial average slumped 323 points over three days last week as the conflict in Libya deepened. Investors worry that the uprisings that have already toppled regimes in Tunisia and Egypt could spread to major oil-producing countries in the region and disrupt the flow of crude.

Citigroup Inc. fell 2.5 percent and Goldman Sachs Group Inc. fell 1.6 percent, after Bank of America analysts trimmed their earnings forecasts for the two banks. Turmoil in the Middle East and North Africa was a central reason. The analysts expect investors to turn more cautious with their cash, which would lead to a drop in the banks' trading revenue.

News on the U.S. labor market was encouraging. The Labor Department reported that employers added 192,000 jobs in February, in the range of what economists expected.

The unemployment rate dipped to 8.9 percent from 9 percent the previous month. The rate has dropped for three months in a row and is now at its lowest level since April 2009.

"They're tugging at each other, employment and oil," said Jack Ablin, chief investment officer of Harris Private Bank. "Oil is high enough that it has to be a concern. The longer it remains at this level the greater the chance that it upends our recovery."

The monthly labor market report followed other signs this week that the job market was gaining strength. The government said Thursday that the number of people applying for initial unemployment benefits fell to 368,000. That's the lowest level since May 2008. The surprising news on unemployment claims helped lift stocks on Thursday. The Dow Jones industrial average had its biggest gain since Dec. 1.Oil prices hit highest level since Sept. 2008.

Crude oil began trading on the NYMEX in 1983 and is currently the most traded commodity on the exchange and has been for some time. The NYMEX, or New York Mercantile Exchange, is the world's largest physical commodity exchange and handles billions in agricultural commodities, energy products, metals and other commodities. These commodities are traded on the floor of the exchange and via electronic trading systems.

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