Skip to main content

Common Dreams. Journalism funded by people, not corporations.

There has never been—and never will be—an advertisement on our site except for this one: without readers like you supporting our work, we wouldn't exist.

No corporate influence. No pay-wall. Independent news and opinion 365 days a year that is freely available to all and funded by those who support our mission: To inform. To inspire. To ignite change for the common good.

Our mission is clear. Our model is simple. If you can, please support our Fall Campaign today.

Support Our Work -- No corporate influence. No pay-wall. Independent news funded by those who support our mission: To inform. To inspire. To ignite change for the common good. Please support our Fall Campaign today.

Not Just Goldman Sachs: Koch Industries Hoards Commodities as a Trading Strategy

Lee Fang

 by The Nation

Over the weekend, The New York Times published its investigation of how Goldman Sachs has made a tidy profit by buying up vast amounts of aluminum and slowing the delivery through the ownership of vast warehouses. Many investment banks purchase physical assets, like pipelines or storage facilities, to gain better market intelligence for speculative trading. The Goldman Sachs strategy, detailed first by Bloomberg News and by Reuters in 2011, has

boosted the cost of aluminum, hitting both manufacturers and consumers with higher prices.

Worth noting: Koch Industries, a company often inaccurately described as simply an oil or manufacturing concern, is highly active in the commodity speculation business akin to the big hedge funds and banks like Goldman Sachs.

As Fortune magazine reported, when oil prices dropped from a record high in July of 2008 to record lows in December of that year, Koch bought up the cheap oil to take it off of the market. Koch leased a number of giant oil tankers, including the 2-million-barrel-capacity Dubai Titan, to store the oil offshore. The decrease in supply increased the price for consumers that year, while Koch took advantage of selling the oil off later at higher prices.

Koch Industries’ executive David Chang later boasted, “The drop in crude oil prices from more than US$145 per barrel in July 2008 to less than US$35 per barrel in December 2008 has presented opportunities for companies such as ours. In the physical business, purchases of crude oil from producers and storing offshore in tankers allow us to benefit from the contango market where crude prices are higher for future delivery than for prompt delivery.”

The company took advantage when the prices were low, but they also gained when the prices were high. A leaked document I obtained shows Koch among the largest traders (including Goldman Sachs and Morgan Stanley) speculating on the price of oil in the summer of 2008.

A presentation I also obtained, given to an industry association for oil speculators, describes Koch as the “world’s top five crude oil traders and actively trades about fifty types of crude oil around the world.” The presentation notes Koch “has trading operations in London, Geneva, Singapore, Houston, New York, Wichita, Rotterdam, and Mumbai.” Indeed, Koch Metals Trading Limited (a Koch Industries subsidiary) also trades on the London-based exchange detailed in the Times story from Saturday.

Koch’s role in commodity speculation has a long history, from introducing the first oil derivative in 1986 to lobbying lawmakers to remove limits on excessive oil speculation throughout the last two decades. I wrote a report on this subject, which you can find here.

© 2017 The Nation
Lee Fang

Lee Fang

Lee Fang is an investigative journalist and staff writer for The Intercept. He also founded the Republic Reform blog and is a frequent contributor to The Nation. He was previously a reporting fellow with The Investigative Fund at The Nation Institute, former Senior Investigator for United Republic, and a former investigative blogger for ThinkProgress.org. He is author of "The Machine: A Field Guide to the Resurgent Right" (2013). Follow him on Twitter: @lhfang

 

This is the world we live in. This is the world we cover.

Because of people like you, another world is possible. There are many battles to be won, but we will battle them together—all of us. Common Dreams is not your normal news site. We don't survive on clicks. We don't want advertising dollars. We want the world to be a better place. But we can't do it alone. It doesn't work that way. We need you. If you can help today—because every gift of every size matters—please do. Without Your Support We Simply Don't Exist.

'Outrageous and Shameful': Dems May Cut Paid Leave Due to Manchin's Opposition

Decrying the plan, advocacy groups vowed that "the American people are not going to allow that essential human need to be ignored and negotiated away behind closed doors."

Jessica Corbett ·


Open Letter Warns Trump's 'Big Lie' GOP Poses Existential Threat to Democracy

"Now is the time for leaders in all walks of life—for citizens of all political backgrounds and persuasions—to come to the aid of the republic."

Brett Wilkins ·


Ahead of Historic House Hearing, Fresh Big Oil Misinformation Campaign Exposed

"It's always helpful to remember that big fossil fuel companies (besides being overwhelmingly responsible for carbon pollution) are also skeevy disinformation hucksters."

Jessica Corbett ·


'Very Welcome' Progress as Iran Agrees to Restart Talks on Nuclear Deal Sabotaged by Trump

One peace advocate urged all sides to reconvene negotiations "as soon as possible and with renewed urgency" to avert "disastrous" consequences for Iran and the world.

Brett Wilkins ·


House Progressives: 'When We Said These Two Bills Go Together, We Meant It'

"Moving the infrastructure bill forward without the popular Build Back Better Act risks leaving behind working people, families, and our communities."

Andrea Germanos ·

Support our work.

We are independent, non-profit, advertising-free and 100% reader supported.

Subscribe to our newsletter.

Quality journalism. Progressive values.
Direct to your inbox.

Subscribe to our Newsletter.


Common Dreams, Inc. Founded 1997. Registered 501(c3) Non-Profit | Privacy Policy
Common Dreams Logo