10. The real hand behind oil price manipulation (10/14/08)

An article on September 11 revealed the hand behind oil price manipulation.
Quote, "Speculators blamed for wild swings in oil"
By H. Josef Hebert
Associated Press

Washington - Speculation by large investors - and not supply and demand for - were a primary reason for the surge in oil prices during the first half of the year and the more recent price declines, an independent study concluded Wednesday.

The report by Masters Capital Management said investors poured $60 billion into oil futures markets during the first five months of the year as oil prices soared from $95 a barrel in January to $145 a barrel by July.

Since then, these investors have withdrawn $39 billion from those markets as prices have retreated dramatically, the report said. Oil traded at about $102 a barrel Wednesday on the New York Mercantile Exchange.

"We have clear evidence the fund flow pushed prices up and the fund flow pushed prices down,"said Michael Masters of Masters Capital Management, calling the amount of money moving into oil futures markets by large institutional investors in the early part of the year "way off the scale."

Masters said its analysis shows investors "began a massive stampede for the exits" on July 15 and that this caused the price decline. "
(San Jose Mercury, 9/11/2008)

Since the future market needs only 7% down on the future contract, the leverage is 1:14. That means 60 billion fund operated the contract worth of 840 billion. It's more than the 700 billion rescue fund government asked to save the current financial market tsunami.
The conclusion is not a new discovery. Two years ago (in June 2006) when the oil price inflated from $25 per barrel to the then prevailing price of $60 per barrel, the Senate Committee had found this already : "The report points out that large purchase of crude oil futures contracts by speculators has, in effect, created additional demand for oil and in the process driven up the future prices of oil......." (see Oil price #3)

Then why our law makers left this important issue alone and let the oil price to go up like a rocket?
kathaksung Reviewed by kathaksung on . Oil price and Iran war 556. Petro-dollar, the cause of Iran war (7/4/08) People think the nuclear ambition of Iran is the reason for Iran war. That is only right on Israel's part. For US part, it is petro-dollar. US dollar is appointed currency in oil trading. Because the oil trade is a huge business, a large amount of dollar is locked up in that trade. That money is called petro-dollar. Why it is so important to US? Because it acts as a long term none interest loan The prosperous US economy partly was based Rating: 5