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Today's Perpetrators of Gas Pump Thievery
But hold your BPExxonMobilShellChevron horses right there. Supply and demand? The supply of crude oil has risen this year to its highest level in nearly two decades, even while the demand for gasoline has dropped dramatically, having fallen this month to a 10-year low. Let's see - supply up, demand down. That's a classic market formula for cheaper prices at the pump. Yet our prices have steadily moved up, rising by two-thirds since the beginning of the year (and by 60 cents a gallon in the past two months alone).
What's going on here is not the "magic of the marketplace," but some hocus-pocus by brand-name dealers. What might surprise you, though, is that the wheeler-dealers now jacking up our pump prices don't operate under the BPExxonMobilShellChevron brands - but the logos of Goldman Sachs, Morgan Stanley and other Wall Street traders that have been placing vast, unregulated, secretive bets on the future price of oil. They're playing an electronic casino game in a global "dark market" of exotic derivatives and credit swaps.
If this sounds vaguely familiar to you, it's because this is the same game that Wall Street played with subprime mortgages, leading to the present crash of our economy. And, yes, these are the exact same banksters that you and I are presently bailing out with our trillions of tax dollars.
Yet, there they go again. By pooling money from sheltered hedge funds, sovereign state funds, offshore accounts and other super-wealthy investors, speculators like Goldman and Morgan have quietly been buying trillions of dollars worth of oil derivatives - which essentially are bets that oil prices will rise to a certain level by a certain date.
Unlike those investors who actually purchase contracts for future delivery of oil, there is no limit on how much money these gamblers can put into the oil market. Nor do they have to report to anyone how much they have bet, even though their massive infusion of money is totally and artificially distorting the real value of petroleum.
As CNBC television's top energy correspondent, Sharon Epperson, reported last month, "It's this money flow - rather than the fundamental supply-demand data - that's driving oil prices higher."
Why is this allowed? Because the Commodity Futures' Modernization Act of 2000 included a provision that was quietly tucked into the law by then-Sen. Phil Gramm, R-Texas, specifically prohibiting any regulation of such commodity-based derivatives. Among the enthusiastic backers of this legalized thievery were Robert Rubin, the Wall Streeter who was Bill Clinton's treasury secretary, and his protege, Larry Summers, who is now Barack Obama's chief economic advisor.
This bipartisan cabal created a speculative mechanism that's presently sucking money out of your pocket with every gallon of gas you pump. Meanwhile, every dollar that Goldman, Morgan and the rest use to inflate oil prices is a dollar they are not investing in real economic activity that could create middle-class jobs.
Of course, Wall Street culprits are trying to keep their involvement hush-hush. When a McClatchy newspaper reporter approached Goldman Sachs about it, the response was terse: "Goldman Sachs declines to comment for your story."
As Woody Guthrie wrote in a song about outlaws: "Some'll rob you with a six-gun/Some with a fountain pen." It's time to regulate Wall Street's gas-pump thievery - and to put a few of the perpetrators in jail.
- Posted in
50 Comments so far
Show AllGoldman Sucks.
Strange isn't it how the names of Gramm, Rubin and Summers keep popping up when someone writes about what caused this debacle, how corporations are still robbing folks and how this administration continues to ignore the real and urgent problems in favor of more corporate help. More bill's where our Corporations are the winners.
Thats the "Change" they believe in.
The first good thing these people have ever done -- raising the price of gas. I'm hoping they raise it by another $5.00/gal.
Agreed.
The fairest way to do this would be through stiff fuel taxes offset by reductions in other taxes that hit lower incomes. But there is no chance of this happening, so whatever raises the fuel prices to reflect their environmental impact is fine with me.
YES! Stiff fuel taxes - use the proceeds for public transportation and to pay down the debt.
I would point out to you that in many parts of our country higher fuel prices would be a tremendous burden on the poor, especially the working poor. Not much better for the average American worker.
Public transportation, while fine for cities and many suburban areas is simply not practical for a vast number of our citizens. Nor are very small fuel efficient cars which would break up on many rural roads.
Though perhaps a commuter tax commensurate with higher fuel taxes would be fair,would it still not fall hardest on those least able to afford it?
I don't know how anyone expects to reduce fuel consumption without rising the price of fuel. The way to deal with the effects on low-income people is to restore the social safety net and reintroduce a strongly-progressive income tax to reduce inequality.
Most of the people who live in rural areas don't need to live there. They just want to avoid dealing with the problems of the cities and know that they can depend upon the rest of us to pay the price of their extra fuel consumption. I've been in rural areas of England where small towns with less than 100 people in them had hourly bus service. It's not impossible to live there without a car.
I think people in rural areas might say the same about city dwellers, they don't need to live there. They should get out on the land where thery could support themselves. Most of our problems seenm to be centered in the cities if you consider it.
England bears no resemblence to America. You could fit all England in some of our states. The distances here are vast.
Raising taxes is not a panacea no more than lowering them is.
But you could be right about raising fuel taxes another time, now would be a disaster.
"They just want to avoid dealing with the problems of the cities and know that they can depend upon the rest of us to pay the price of their extra fuel consumption."
Don't forget the overpriced apartments and houses while the rurals and suburbs are significantly lower to the point of pushing more people into travelling into the city. That needs to stop and/or businesses need to stop packing their jobs in the major cities alone. See my separate post on this.
In many cities like Pittsburgh and Buffalo, home prices are lower the closer you move in. Yes, there are jobs there.
The idea of 300 million people all engaging in subsistence farming in rural areaa is preposterous. Most rural dwellers are rural dwellers and heavy car users by choice - and old-fashoned racism is a big part of that choice - I talked to enough of them to know.
City living is the lowest carbon type of living there is. And paradoxically, city areas have far better access to locallly produces food via public farmers markets and CSA farms than sunburban or rural area are. Try to find some locally grown produce in the middle of Iowa.
Actually, it is the relocation of employment out of the central city and into "office parks" in the sprawling suburban areas that is the largest contributor to automobile use and transportation related global warming. All major employers should be required to locate only where frequent prublic transportation is available.
Visits the site carfree.com.
That's not true. Just visit the St Louis area and you'll find out.
"Public transportation, while fine for cities and many suburban areas is simply not practical for a vast number of our citizens."
Why not?
"Nor are very small fuel efficient cars which would break up on many rural roads."
Huh?
Yesterday, someone who lives in the Washington DC area shared the sad news of metro breakdown (deaths and tragedies) and that it could have been prevented. Preach public transportation all you want but for all those obscenely high fares with no improvements to show for it, forget it.
Most places I've lived in the US, rural roads are in better shape than inner city streets. This isn't rural Brazil or Colombia.
You are correct but you should also notice that these greedheads are keeping the price lower than its peak last year.
They want to keep it as high as possible but not high enough to energize public support for conservation and alternative fuels.
They have read the American mind correctly. Too many of us are solely concerned with our day-to-day convenience and will ignore long-term sacrifice in favor of short-term comfort unless we are forced to do otherwise.
Every day on the expressway, I see gas-guzzling SUVs flying by me at high speeds. The oil and gasoline companies are winning this game.
q
smipypr
In the post-Commodity Futures Modernization Act world, the tangled web of derivatives - arcane and unregulated as they are - produce huge commissions for the likes of Goldman, Morgan Stanley, and the rest of the pen-wielding thieves. Prior to "modernization", speculators were an important part of the market(s). I worked at a firm with over $650,000,000.00 in customer funds; the average self-directed account was around $10,000.00. Speculators at that level provided crucial liquidity to futures trading, especially in agricultural and treasury markets. Now swept away by large institutions and those lovely hedge funds, the small speculators, who would have exited markets quickly - either by design or by way of margin calls - are no longer around. The big fish have eaten all of the little ones, resulting in the aggressive consumption of taxpayer dollars to satisfy what is at best a theoretical hunger, and at worst, a RICO-worthy criminal enterprise.
" ... the average self-directed account was around $10,000.00. Speculators at that level provided crucial liquidity to futures trading, especially in agricultural and treasury markets."
Crucial liquidity. Yep. That's how its sold to the little guys. Providing liquidity to the markets with their $10K accounts. Another name for these account holders is LOSERS. I made a (very) few dollars trading currencies a few years back but found out very quickly I did not have the stomach for commodities "trading" (gambling). I have a very close friend (of 51 years) who was a commodities broker. I KNOW how the "game" works, and believe you me, the small traders are the "game" that gets eaten alive in a very short time.
Re EKATON June 24th, 2009 1:20 pm
One of the pithiest pieces of life wisdom I ever got was this: if you're in a poker game for more than 15 minutes and you don't know who the fish is, you're the fish.
Jethro Tullamore
Oh so true!
It is GREED pure and simple. When will it stop? Probably never but it sure can slow down if good people stop standing by while bad things happen. I would like to have every bill (or provision) submitted by former Senator Phil Gramm examined and considered for repeal. His name comes up way too often as a source for economic problems in this country.
Thank you Mr. Hightower; there are too many issues going on at once that people seem to forget that while we're losing our jobs and homes, that's still not enough for these bastards. Their greed can only grow and people need to wake up NOW!
Crude stays the same, while the pump price keeps going up.
Now I know why!
"By pooling money from sheltered hedge funds, sovereign state funds, offshore accounts and other super-wealthy investors, speculators like Goldman and Morgan have quietly been buying trillions of dollars worth of oil derivatives - which essentially are bets that oil prices will rise to a certain level by a certain date."
So the big money guys are doing nothing more than literally buying and selling pieces of paper whose "value" is determined by the price of an "underlying" commodity. Well, not literally paper, but literally buying and selling "valuable" bits and bytes on hard drives.
" ... Phil Gramm, R-Texas, specifically prohibiting any regulation of such commodity-based derivatives. Among the enthusiastic backers of this legalized thievery were Robert Rubin ... Larry Summers ... "
Hmmm... Gramm, Rubin and Summers... hmmm...
What you said.....plus "Hmmm... Gramm, Rubin and Summers... hmmm..."
You are so correct. And the corruption is on both sides of the aisle still.
Sioux Rose
EKATON: And I think it bears mentioning that the same contrivances also bet futures of food products that then drive up their costs, so that 3rd world impoverished persons cannot afford the barest staples, all to satisfy the Phil Gramm crowd and those who have tied capitalism to a depraved unchecked greed-fest/masquerade. That's even worse than the manipulation of gas prices. I think they want to tap into the July 4 traveling crowd and families with planned summer vacations. So prices are rising to take full advantage of this group.
"EKATON: And I think it bears mentioning that the same contrivances also bet futures of food products that then drive up their costs"
Yes. This needs to be emphasised much more. These "too big to fail" people are betting and gambling not just on subprime mortages, not just on oil, but on pretty much anything and everything, including milk, grains, and other food staples.
From the article:
"It's time to regulate Wall Street's gas-pump thievery - and to put a few of the perpetrators in jail."
Heartily agreed, but how?
Earlier in this piece, Hightower writes, "Why is this allowed? Because the Commodity Futures' Modernization Act of 2000 included a provision that was quietly tucked into the law by then-Sen. Phil Gramm, R-Texas, specifically prohibiting any regulation of such commodity-based derivatives."
So as blatant a ripoff as it is, it appears to be legal. As smipypr has alluded to RICO, perhaps he or she would follow up with details as to how it would apply.
Urban liberals (who probably have access to public transport)should think twice before they eagerly look forward to higher gas prices, by taxes or by the usual price rigging. Please consider that in most rural areas there is little public transport and little prospect of any in the future. Many rural working folk must maintain a car to be able to work at all, perhaps for a minimum wage, and often have to commute long distances. This would be one more burden in a time of growing economic difficulty.
Tony Vodvarka
You build a 1000 lb, 20 hp vehicle and limit your speed to 45 mph, and contract with your local farmer for sustainable biodiesel. You get 160 to 200 mpg, zero-carbon transport at a penny a mile.
Ray Berthiaume
Why don't we read about that Japanese car that runs on tap water?
I was wondering why gasoline prices were going up when they shouldn't have been. Thanks to Jim Hightower, I get it now. So much thievery and corruption in this land - with taxpayer money going to the robber barons - whew, mercy, it simply boggles the mind.
Thanks, Jim. Excellent.... as always.
How bad does it have to be before we call it economic warfare?
USans demonstrated a willingness to enslave themselves to elites over and over past few years, after M. Moore's Sicko revealed USans pay 2x the cost of healthcare elsewhere, and with the last giant increase in gasoline prices to over $4/gal while big oil raked in massive record profits year after year. And then the general commodity speculation rackets during the reign of Darth Viper and the Imperial Chimp, with the price of some food quadrupling. I bought popcorn for 8 cents a pound a few years ago, and now it's 45 cents. For those reading these progressive sites trying to figure out what's going on and what to do about it, we're all arriving at the same conclusion after we see enough evidence. The problem is USans swallowed the PR/ad/marketing bait, hook, line and sinker, to consume without thinking. Obviously we have to start thinking, individually, and switch our economic exchange away from the elites and to our local communities. Demand best value in the markets. Contract with your local farmer for food/fuel/materials. Contract with your local craftsmen for building things you need. Specify sustainable practices in the contract. Now you have a better idea? Let's debate. You noticed how the gas priced dropped for the 2008 elections? USans ought to have kicked the elites ass by voting third party progressive. It's actually much easier to vote third party in the elections than individually changing our consumption habits, but we need to do both. So need we repeat the obvious electoral strategy for 2010? Try writing in Green party candidates in all elections, eh? Got a better idea?
Beyond the banksters' thievery, which is of course obscene, there is the obscenity of the automobile itself -- short of the nuclear bomb, perhaps the most destructive technology humanity has ever devised... If thievery will keep these things off the road, more power to the thieves... It's difficult to have any sympathy for American drivers whining about the high price of gasoline.
Whether they realize it or not, automobile owners are enlistees in an ongoing war against the rest of the world -- beyond the damage to Mother Nature, yearly carnage equal to a major war: 1.5 million killed worldwide in car accidents, 40 million injured -- and in the Third World, mostly pedestrians.
One reason Americans were so easily led into Iraq, despite all the lies and blatant misinformation, is because like Cheney and the Oil Presidency, we knew there was big untapped reserves there... Until we abandon this technology, we're all imperialist warmongers, allied with the most rabid of the neocons...
It's tempting to blame the automobile because the idea is easy to grasp, easy to convey to the most people, at least in theory. The problem is blaming the auto is such a broad idea that we end up dividing the people into those who get the subtle idea behind the broad idea, and those who don't. The subtle idea is that we need APPROPRIATE use of the auto, i.e. much fewer btus processed, like 20x fewer.
Now conveying the more subtle idea risks alienating those indulging in the culture of ignorance/stupidity, i.e. those who wanted to have a beer with the Imperial Chimp. But we no longer have the luxury to accommodate them. They have to get a clue now. They have to join the culture of responsibility. So we best start advocating what really needs to be done - get going on the appropriate use of tools and the rest of the sustainable practices, and let the chimp squad get their clues.
Jim Hightower (as usual) has his facts and analysis correct. "They" are looking for every opportunity to rip "us" off. However, "we" are not entirely helpless and rather than just get mad, we ought to be creatively channeling our anger to "get even".
We could:
drive less by combining trips and planning our errands more carefully.
drive less by setting a bare-bones minimum amount that we will spend on fuel and once that fuel is gone not buying any more until the next payday.
drive less by using available public transportation, using a bicycle, car-pooling, or walking.
The beauty of these responses to the capitalist schemers is that as they starve us we can also starve them. But we have to stop being victims and start taking responsibility by such actions as I have indicated.
Poet
"Jim Hightower (as usual) has his facts and analysis correct."
He misses an important point: Not everything about the derivitives in question are on the upside for the investor. One can also lose one's shirt as well, no matter how big an organization you are. This has happened in recent history, namely during the very rapid plunge in prices only a few months back.
"drive less by combining trips and planning our errands more carefully."
"drive less by setting a bare-bones minimum amount that we will spend on fuel and once that fuel is gone not buying any more until the next payday."
"drive less by using available public transportation, using a bicycle, car-pooling, or walking."
All of the above make sense for individual and family budgets.
". One can also lose one's shirt as well, no matter how big an organization you are. This has happened in recent history, namely during the very rapid plunge in prices only a few months back."
Yes. And when one does lose one's shirt, one is then "too big to fail", and gets bailed out.
There is no assurance of this at all. Going forward, it is up to your benevolent federal government to decide, and it is not through losing one's shirt that one can become "too big". The author mentioned only two "investors" in the article by name, and made no attempt to show what proportion of the entire oil futures market their activities represent.
When these people loose their shirts, when they've lost everything and we're supposed to feel sorry for them, when they've been through the wringer, when they've taken a bath, when the shit hits the fan and splatters all over them ... they're still much better off financially than I have ever been or will ever be.
" they're still much better off financially than I have ever been or will ever be."
That assumes they properly manage their investment activities. Fact is options traders go bankrupt. That's why you and I don't participate unless we heed the common warnings about how you can end up losing far more than your original bet.
This is all besides the original point I made though. The outrage here had to do with investors making money while gas prices increase for the consumer. But that doesn't always happen. You can lose money trading options, and if that is happening the commodity itself is going down, not up, in price. It wasn't long ago when gas around here went down from around $4.39 a gallon to around $1.59. Speculation was the reason, and there was no outrage because it was good for consumers.
"Fact is options traders go bankrupt. That's why you and I don't participate unless we heed the common warnings about how you can end up losing far more than your original bet."
Your information is incomplete.
Options are originally "written" by an options seller. Anyone with a commodities account can write options. That means that the option is brought into existence by an individual and sold on the open market. In that case, the losses can be theoretically unlimited if the writer is called upon to produce for delivery the underlying commodity or to accept for delivery and pay the full contract price for the commodity upon which the option has been written, depending on whether it was a put or call option that was written. This happens when an options purchaser has decided to "exercise" the option. Options purchasers will never lose more than the original price they paid for the option. If the option goes up in price it can be resold at a profit. Profits in that case are theoretically unlimited. If the option goes down in price, it can be resold at a loss or it can be allowed to expire worthless on the "strike date". Because most options expire worthless, options purchasers usually deplete their accounts to zero.
Options traders who purchase and hope to resell at a profit often do go bankrupt. The fact is that most options expire worthless and the writers are never required to deliver or purchase the underlying commodity, and they keep the entire amount they originally sold the option for. The big options traders mentioned in the article are most likely to be options writers more than they are likely to be buying and selling existing options. I know this can all be very confusing but it is not true that "options traders go bankrupt". It all depends on the kind of options trading they are involved in.
We'll leave the topic of put options and call options for some other future discussion. Suffice to say that one purchasing a call option is betting the price of the underlying commodity will go up. If the price goes up they can sell the option at a profit OR they can purchase the commodity at the earlier lower cost. Purchasers of a put option are betting the price of the underlying commodity will go down. If the price goes down they can sell the put option at a profit OR they can sell the underlying commodity in their possession at the earlier higher price.
Commodities futures traders with large bankrolls, like Goldman Sachs, can manipulate the market. They can drive the prices up to an unsustainable level, sell at a profit, and then turn around and sell short because they know the commodity price is going down. All they require to make money is price movement. It matters not whether the price is going up or going down. This happens all the time.
"Your information is incomplete."
Of course it was, that which I chose to post that is.
"it is not true that "options traders go bankrupt". "
Of course it is true that they *can* and sometimes do, just a couple sentences earlier you said so yourself:
"Options traders who purchase and hope to resell at a profit often do go bankrupt."
"Commodities futures traders with large bankrolls, like Goldman Sachs, can manipulate the market."
Not consistantly. They can make trades that actually hasten the movement of the markets in a different direction than desired if they guess the future wrong.
"All they require to make money is price movement. It matters not whether the price is going up or going down."
Incorrect. They need the movement to *potentially* make money. But they must Correctly_Predict_The_Future, i.e., be on the correct side of the trading, in order to *actually* make money.
"This happens all the time."
Both losing and making money that is, yes.
So we are back to my original point, where the author of this article might have actually thanked speculators for the rapid drop that recently occured, but that angle wouldn't get much traction with anyone.
I am sorry but ever since those gas prices were artificially lowered after July 2008 and very suspiciously so, traffic congestion and major accidents have been getting worse day after day. I want to see more people kind enough to accept the idea of carpooling. I want to see metro buses and rails improved for all the obscenely high fare rates choking the customers. I want to see more businesses spread out and make it easier for more people to travel shorter distances to and from work or better yet let them work remotely from home like I do. Unfortunately, none of this will come until we raise the gas prices and give us shameless gas guzzling Americans a huge kick in the pants.
The spreading out of business will tend to have the opposite effect than you envision. It shortens the commut for only a handful of emplotyees, lengthens it for everyone else. And it makes the workplace impossible to service with public transit.
The congestion of the DC area is largely caused by the enormous sprawl of it's commercial areas, and the automobile-orientation of that sprawl - too low a floor-area ratio (FAR) along with far too much spacee dedicated to parking lots and associated roadways.
www.carfree.com
"The spreading out of business will tend to have the opposite effect than you envision. It shortens the commut for only a handful of emplotyees, lengthens it for everyone else. And it makes the workplace impossible to service with public transit."
That is completely untrue. I live in the St Louis suburbs but my office is in St Louis City so it's probably different from DC. Still, most people do not live close to their workplace and until the overall changes are made to increase the number of people closer to work or at least getting the chance to work remotely from home which I've finally gotten, "carfree" will remain a pipedream. And don't forget that the public transportation infrastructure all over the country has been privatized already when you look at obscenely higher fares and poorer quality. Carlawaters mentioned the metro tragedy in Washington and already it is being found out that this tragedy could have been prevented had the money being raked in had gone towards repairing and maintaining the infrastructure instead of to top management business perks. If spreading out businesses requires expansion in public transportation, so be it. Spreading out public transportation was long overdue and yet Big Auto and Big Oil have had all the advantages so far.
"The congestion of the DC area is largely caused by the enormous sprawl of it's commercial areas, and the automobile-orientation of that sprawl - too low a floor-area ratio (FAR) along with far too much spacee dedicated to parking lots and associated roadways."
And that's why businesses need to spread out and public transportation needs major reform as I just mentioned.
Over the last few decades, the term "gas pump" has come to mean the president's mouth - any president - as well as the operations of the two so-called major political parties and the skid row escort service known as the MSM.
I hate putting anyone on a pedestal but once again Jim Hightower proves to be one the best journalists on the planet. Powerful and right to the point as always.