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WALL STREET PETROLEUM FUTURES TRADERS AND THE PRICE OF GAS

July 17, 2013

WALL STREET PETROLEUM FUTURES TRADERS AND THE PRICE OF GAS

If OPEC did not exist, Wall Street petroleum futures traders would invent it. With the spikes in gas prices for no apparent reason, or one that is spurious, angry American consumers are looking for someone to blame for such rip-offs. Everyone involved in the price of gas (from producers in Arab deserts through transporters through refineries through retailing gas stations) is desperate to point the finger at the culprit(s) causing such spikes in prices. Such finger-pointers in the chain of production always point to someone else along the chain of production; never does one point at the guy(s) in the mirror – to do so would be a PR catastrophe of the first order. So who are the bad guys?

OPEC is a handy stop for finger pointing, but it has been pointed at so often that American consumers aren’t buying this old blame-worthy organization as the bad guy anymore, and in this, the consumers are on the mark. OPEC is only marginally involved in any such spikes; they are into long-term contracts with American and other oil companies and consequently have little if any to do with instant spikes in retail gas prices, and though American oil companies profit greatly from such spikes, they (for a change) are not the bad guys. So who are the bad guys?

As I blogged months ago (and nothing has changed), the bad guys are Wall Street petroleum futures traders, people involved in the exchange of futures petroleum contracts. You and I are paying a future price for oil cracked into gas that was drawn from Arab deserts weeks or months ago. We are required to pay not for the costs of turning oil into gasoline at the price such oil was extracted and refined weeks or months ago; we are paying for yesterday’s gasoline at a price set by Wall Street petroleum traders for a market of tomorrow, one, they say, which must go up because of the civil commotion in Egypt and the uncertainties that poses to the delivery of oil from the region.

That is an interesting rationale for rip-off in the marketplace, not only because of the timing of the spike, but also because we don’t get oil from Egypt. Does anyone reading this think that Saudi Arabia’s ability to suck oil out of the ground and send it to Houston for refining is or could be in the least affected by protests in Cairo? I don’t. We have fleets of ships and planes in the area to assure such a result. If the futures traders cannot sell consumers on that score, then what’s next – some sheik of one of the Emirates has a bad cold? Our Wall Street profiteers are running out of targets to finger.

The whole business rationale for the rip-off as expanded fails. As a for instance, let’s say you went to K-Mart and the clerk told you at checkout that the price you saw on the items you want to purchase is not the real price – that you must pay more because there is a threatened strike in the Chinese factory that produces the items you want to buy. With the goods in hand, it is plain that the potential for future labor strife in China has nothing to do with the tangible goods already manufactured and ready for sale. You would rightly ask the clerk what such a future possibility had to do with goods already produced and on the market, and how any future situation can be the subject of retrospective pricing today.

We consumers should ask our politicians (unless they are silenced by campaign contributions from Big Oil and Wall Street) to investigate this ridiculous display of illogic and find out why we have to pay tomorrow’s prices and assume the traders’ risks (if any) for yesterday’s production. (?) Let’s leave future costs to future pricing, and involve our government in the process. We are being had.  GERALD  E

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