Bail Out Big Oil?

I just love to read all these wonderful stories about captalism involving the crooks in the oil business.  Have you yet to see the connection to the government and why the price is propped up?  Enjoy!

Steve

01/10/09 “Forbes” — – 09.23.08, 11:35 AM ET — While everyone knows the U.S. government is looking to bail Wall Street banks, few people realize that it’s also bailing out speculative oil and commodities traders in the process, fueling a sharp rise in energy prices. Lehman Brothers (nyse: LEH – news – people ) and AIG (nyse: AIG – news – people ) held enormous trading positions in commodities markets. If those positions had been liquidated suddenly, the price of everything from wheat to oil would have collapsed. The Commodity Futures Trading Commission, the main regulator of U.S. commodity markets, allowed Wall Street’s investment banks and trading companies to take control of massive positions in commodities markets called swaps held by Lehman Brothers and AIG.

The result: Oil prices spiked by a whopping $16 per barrel on Monday, the largest single-day rise in oil prices ever.

“If speculators were forced to liquidate their positions, oil would easily be $65 to $75 per barrel by the time the liquidation was complete,” said Michael Masters, the founder of Atlanta-based hedge fund Masters Capital Management. Tuesday, oil was trading at $108.74 in midday trading in New York.

For all the talk of OPEC, the biggest threat to high oil prices in the short term might be the implosion of Morgan Stanley (nyse: MS – news – people ) or Goldman Sachs (nyse: GS – news – people ), which would trigger a massive number of low-priced oil-futures contracts to flood the market all at once in search of buyers to liquidate those contracts.

“If either of these entities were to collapse, we believe the downside for commodities would be tremendous as these companies unwind positions,” Valerie Wood, president and owner of Energy Solutions, told Platts on Monday. “In particular, we know Goldman Sachs has large investments in crude oil and natural gas commodities because its own Goldman Sachs Commodity Index fund [comprises] about 39% crude oil commodities and about 6% natural gas commodities. A liquidation of GSCI shares would directly result in the selling of these commodities, and selling pushes prices lower.”

Ironically, the biggest losers turned out to be the traders who bet that at least one of the victims from this month’s financial chaos would be forced to liquidate a major long position in oil prices. When they avoided that fate, the race to unwind those bets that oil prices would fall before the end of the trading month caused a massive rally in oil prices.

The market meltdown has revealed the full extent of Wall Street’s influence on commodities prices and, especially, their role in energy markets. More than $40 billion in cash has poured into commodity markets since the start of 2008, according to a report by Standard & Poor’s. The total amount of investments in commodity indexes is estimated at between $150 billion and $270 billion. In other words, new investments in the market have climbed by 15% to 25% in less than a year.

In 2006, the U.S. Senate’s Subcommittee for Permanent Investigations had already reported “there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.” The trouble is that so much of the trading happens in so-called “dark markets,” unregulated over-the-counter electronic exchanges where trading companies buy and sell energy derivatives, that this role is hard to document.

Investment banks make money off commodities speculation, but are just conduits for hedge funds and institutional investors that have taken large positions in commodities markets as a long-term investment.

“The market dynamics induced more and more financial players to move into commodities markets,” said Fadel Gheit, a senior oil analyst at Oppenheimer & Co. “It was a perfect storm. The Federal Reserve was cutting interest rates and people were running away from the dollar as it lost value. Hedge funds, pension funds and mutual funds started pumping money into commodities because they were the safest place and the safest of them all was crude oil. There were too many dollars chasing too few physical assets. That’s the bottom line.”http://www.informationclearinghouse.info/article20910.htm

Oh, I remember it well….

OK, all you tree huggers are safe, our congress again seems intent on not drilling, but they keep telling us that we’re running out of oil, that the US citizenry are grease gluttons, and we’re causing global warming, ( which by the way is now pc to say climate change, because this year may be one of the coolest on record, more snowfall, and the polar cap is gonna be just fine, etc, etc, etc) and the folks in New York have a new excuse to say the sky is falling.  The genius minds of Wall Street have no demand from the US to blame, those darned hurricanes keep missing, but yet, where is the price of gas?  From Bloomberg:

Continuing Chinese demand and the ability of Saudi Arabia to control output will be instrumental in keeping the price of oil resilient, despite the uncertainty caused by U.S. congressional wrangling over the financial rescue package, the Wall Street Journal reported, citing analysts.

Although some analysts had been predicting that the credit market turmoil and recession fears would precipitate a fall in prices because of a drop in demand, prices have hovered around the $100 mark; key to this is Chinese demand and Saudi control, the Journal reported.

Continuing Chinese demand and the ability of Saudi Arabia to control output will be instrumental in keeping the price of oil resilient, despite the uncertainty caused by U.S. congressional wrangling over the financial rescue package, the Wall Street Journal reported, citing analysts.

Although some analysts had been predicting that the credit market turmoil and recession fears would precipitate a fall in prices because of a drop in demand, prices have hovered around the $100 mark; key to this is Chinese demand and Saudi control, the Journal reported.

Well, those foreigners are going to twist their arms in New York to raise the price again.  HELLO, THIS IS AMERICA, THE PRICE YOU’RE SETTING IS AFFECTING AMERICANS!  You intellectual bunch of monkees need to check the price of a gallon in China…your price ain’t affecting them…but you’ve sure helped make a mess over here, or am I the only one who can figure this out?

Steve

Is it a lie, or is it a mistatement? (is that a word?)

Another “Gee, I got caught moment’?  Or is this just another attempt to blow smoke up our butts?  Here’s how they get people to believe the sky is falling, (kinda like we’re out of oil, but yet we won’t drill) and then attempt to pass it off on us.  Be afraid, Harry Reid, be very afraid, not all of us out here are stupid.

Steve
*

Oct. 1, 2008—

 

The Senate is poised to pass a revised Wall Street bailout bill tonight, but amendments to the controversial measure may raise the anger of some House Democrats and imperil its chances of approval in the House for the second time this week.

Senate Majority Leader Harry Reid, D-Nev., pressed for passage, with the alarming news that one of the country’s premier insurance companies was about to go bankrupt if the crisis was not quickly resolved.

“We don’t have a lot of leeway on time,” Reid told reporters in the Capitol. “One of the individuals in the caucus today talked about a major insurance company — a major insurance company — one with a name that everyone knows that’s on the verge of going bankrupt. That’s what this is all about.”

He did not identify the insurance company, and later in the day Reid spokesman Jim Manley said the senator was speaking broadly and not referring to anything specific.

“Senator Reid is not personally aware of any particular company being on the verge of bankruptcy,” Manley wrote in an e-mail to ABCNews.com. “Rather, his comments were meant to refer to the conditions in the financial sector generally. He regrets any confusion his comments may have caused.”

The new Senate version of the bailout bill has been sweetened by additions that would allow the Federal Deposit Insurance Corp. to raise the amount of bank deposits it insures from $100,000 to $250,000, a move expected to help small businesses.

The Senate bill also includes tax breaks for businesses and the middle class, something the Senate has been trying to pass for the past several years and which the House has rejected in the past because the Senate does not include corresponding cuts to make up the difference in the budget.

House Majority Leader Steny Hoyer, D-Md., told NBC’s “Today” show this morning that he feared the tax breaks could make it harder to win Democratic support in the House.

“There’s no doubt the tax package is very controversial,” Hoyer said. “There’s no doubt in my mind that the Senate added this because they thought that’s the only way they could get it passed.”

Hoyer feared the tax issues would arouse the ire of the “Blue Dogs,” a caucus of 49 conservative House Democrats who have blocked the tax breaks in the past, arguing that tax breaks without spending cuts would increase the nation’s deficit.

The Blue Dogs split almost evenly when the House shocked the Bush administration and defeated the bailout earlier this week.

The original bailout bill was defeated 228 to 205, meaning another 12 votes are needed to win passage. Congressional head counters are uncertain whether the tax breaks could cost the Bush administration more than a dozen Blue Dog votes.

A Hilarious Story

I wanted to take a break from some of the serious stuff and share this story my wife got in email.  I still laugh just thinking about it.  This is from Pulitzer Prize winning author Dave Barry.  Enjoy this!

Steve

*

… I called my friend Andy Sable, a gastroenterologist, to make an appointment
for a colonoscopy. A few days later, in his office, Andy showed me a color
diagram of the colon, a lengthy organ that appears to go all over the place,
at one point passing briefly through Minneapolis .

Then Andy explained the colonoscopy procedure to me in a thorough,
reassuring and patient manner. I nodded thoughtfully, but I didn’t really hear
anything he said, because my brain was shrieking, quote, ‘HE’S GOING TO  

STICK A TUBE 17,000 FEET UP YOUR BEHIND!’

I left Andy’s office with some written instructions, and a prescription for
a product called ‘MoviPrep,’ which comes in a box large enough to hold a
microwave oven. I will discuss MoviPrep in detail later; for now suffice it
to say that we must never allow it to fall into the hands of America ’s
enemies.

I spent the next several days productively sitting around being nervous.
Then, on the day before my colonoscopy, I began my preparation. In accordance
with my instructions, I didn’t eat any solid food that day; all I had was chicken
broth, which is basically water, only with less flavor.

Then, in the evening, I took the MoviPrep. You mix two packets of powder
together in a one-liter plastic jug, then you fill it with lukewarm water.
(For those unfamiliar with the metric system, a liter is about 32 gallons.)
Then you have to drink the whole jug. This takes about an hour, because
MoviPrep tastes – and here I am being kind – like a mixture of goat spit and
urinal cleanser, with just a hint of lemon.

The instructions for MoviPrep, clearly written by somebody with a great
sense of humor, state that after you drink it, ‘a loose watery bowel movement may
result.’

This is kind of like saying that after you jump off your roof, you may
experience contact with the ground. MoviPrep is a nuclear laxative. I
don’t want to be too graphic, here, but: Have you ever seen a space-shuttle
launch? This is pretty much the MoviPrep experience, with you as the shuttle.
There are times when you wish the commode had a seat belt. You spend several
hours pretty much confined to the bathroom, spurting violently. You eliminate
everything. And then, when you figure you must be totally empty, you have
to drink another liter of MoviPrep, at which point, as far as I can tell, your
bowels travel into the future and start eliminating food that you have not
even eaten yet.

 After an action-packed evening, I finally got to sleep.

The next morning my wife drove me to the clinic. I was very nervous. Not
only was I worried about the procedure, but I had been experiencing occasional
return bouts of MoviPrep spurtage. I was thinking, ‘What if I spurt on
Andy?’ How do you apologize to a friend for something like that? Flowers would not
be enough.

At the clinic I had to sign many forms acknowledging that I understood and
totally agreed with whatever the heck the forms said. Then they led me to a
room full of other colonoscopy people, where I went inside a little
curtained space and took off my clothes and put on one of those hospital garments
designed by sadist perverts, the kind that, when you put it on, makes you
feel even more naked than when you are actually naked.

Then a nurse named Eddie put a little needle in a vein in my left hand.
Ordinarily I would have fainted, but Eddie was very good, and I was already
lying down. Eddie also told me that some people put vodka in their
MoviPrep.
At first I was ticked off that I hadn’t thought of this, but then I pondered
what would happen if you got yourself too tipsy to make it to the bathroom,
so you were staggering around in full Fire Hose Mode. You would have no
choice but to burn your house.
 
When everything was ready, Eddie wheeled me into the procedure room, where
Andy was waiting with a nurse and an anesthesiologist. I did not see the
17,000-foot tube, but I knew Andy had it hidden around there somewhere. I
was seriously nervous at this point. Andy had me roll over on my left side, and
the anesthesiologist began hooking something up to the needle in my hand.
There was music playing in the room, and I realized that the song was
‘Dancing Queen’ by Abba. I remarked to Andy that, of all the songs that could be
playing during this particular procedure, ‘Dancing Queen’ has to be the
least appropriate. ‘You want me to turn it up?’ said Andy, from somewhere behind
me. ‘Ha ha,’ I said. And then it was time, the moment I had been dreading for
more than decade.

If you are squeamish, prepare yourself, because I am going to tell you, in
explicit detail, exactly what it was like. I have no idea. Really. I
slept through it. One moment, Abba was shrieking ‘Dancing Queen! Feel the beat
from the tambourine …..’. and the next moment, I was back in the other room,
waking up in a very mellow mood.

Andy was looking down at me and asking me how I felt. I felt excellent. I
felt even more excellent when Andy told me that it was all over, and that my
colon had passed with flying colors. I have never been prouder of an
internal organ.