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Gasoline & Oil Markets Rigged Far Worse Than Libor

EconMatters's picture




 

By EconMatters 

 

UBS paid $1.5 Billion for manipulating Libor, and Barclay`s already paid the piper for manipulating the Libor rate. Well, it is about time the CFTC get its act together, and start going after the culprits who rig the oil and gasoline markets costing consumers and businesses a mafia tax by paying prices much higher than the markets should be priced based upon supply and demand fundamentals in the consumption marketplace.

 

 

Gasoline Market


Today we had another build in Gasoline supplies, up 2.2 million barrels in the week for a fourth straight weekly build. We have had builds of 3.9 million barrels, 7.9 million barrels, 5.0 million barrels, and 2.2 million barrels totaling 19 million barrels build in gasoline inventories in a month.

 

Well, you say there must be strong demand numbers for gasoline. Nope, gasoline demand in the wholesale market is soft down 2.9 year-on-year, meaning gasoline sales this month are weak as well!

 

 

 

Now, what is happening to price? On November 28th 2012 RBOB Gasoline prices were 2.66 a gallon, and today after 19 million barrels of build, (i.e. we no longer have short supplies on hand, about average for this time of year, in fact), RBOB gasoline prices are 2.74 a gallon.

 

Ergo, we have 19 million barrels of build, weak demand year-on-year.  However, this month, consumers are set to pay a whopping 8 cents a gallon more for the base commodity, which eventually will work its way to the pump over the next few weeks!

 

 

Consumers may think prices are going down.  Yeah, but they should be continually going down, and down a lot more if the gasoline market wasn`t rigged. If anything gasoline prices should have come down at least another 25 cents based upon the build in inventories.  Instead consumers will be paying 8 cents higher with these 19 million build in gasoline inventories --the fair market pricing system at work!

 

 In other words, there was so much supply on the market that wholesalers had to store it because there wasn`t enough demand to sell it to consumers.  Yet prices still go up for the base commodity. So instead of prices continuing to come down further, consumers will have to pay more for gasoline in the coming months, and they shouldn`t if the market wasn`t rigged by this “mafia tax”!

 

 

Libor Rates


So where is the CFTC, the Commodity Trading Futures Commission, who should monitor these price shenanigans? The same place all the regulatory authorities were when consumers were being robbed by paying higher Libor rates than the market should have dictated for all types of lending from credit cards to other types of loans.

 

UBS got caught and agreed to pay 1.5 billion in fines.  Will consumers ever get any of this money? Heck no!  These fines go straight to government coffers, the same government and regulatory bodies who looked the other way while consumers were being charged this mafia tax by big banks for years.

 

Remember, Timothy Geithner knew about phony Libor rates for years before anybody did anything about it. And they say Geithner is in line to be the next Fed chief.  Guess he makes for a good business as usual candidate since Ben Bernanke knew about inappropriate Libor rates for years as well.

 

These officials don`t give a crap about consumers.  They just saw an opportunity to make some money by going after these firms on Libor, long after consumers have paid far more than 1.5 billion in higher interest payments. Moreover, Consumers don`t get any of the money back, the actual victims in the scam!

 

The regulatory and governmental bodies responsible for monitoring these unscrupulous practices are where they always are, sitting on the sidelines for years of damage to consumers pocketbooks, and then when they finally do something about it, it is years down the line, and these firms only pay a slap on the wrist “shakedown fine”, and governments keep all the proceeds while consumers get screwed again.

 

How about giving the money from fines back to the real victims of these scams like the consumers in the form of tax rebates? The government made a whole lot of money off of AIG, how about giving this money back to taxpayers in the form of tax rebates? It will never happen because governments and these regulatory bodies are just as corrupt as the firms doing what I call these “mafia taxes” in the gasoline and oil markets.

 

They only care about how they can make some money off these firms by conducting these pseudo shake down cases just so they can get some money for their own little fiefdoms!

 

It would sure be nice if Obama could actually care about consumers and get somebody in the CFTC to represent consumer’s interests for a change, instead of these cozy relationships that currently exist in the CFTC for the last 10 years as the gasoline and oil markets have been rigged for decades! 

 

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Thu, 12/20/2012 - 07:29 | 3082000 campag
Thu, 12/20/2012 - 07:14 | 3081993 campag
campag's picture

A poor article. Yes the markets are rigged . The rigging usually takes place for a very short time frame . Traders from banks and oil companies push or pull prices at key times during the day usually when huge cash settlements are happening. If you look at Brent this happens at 9.30am/4.30pm and 7.30pm (London Time). This manipulation is encouraged by the exchange -ICE who provide minute markers and settlement trades .Traders for example sell the market heavily between 4.00 and 4.30 pm while having bought the 4.30 minutes. At 4.31 they hope there earlier sales are higher than the 4.30 price and make money. This is done in huge volumes - loved by the exchange and explains why intra day moves in oil are a joke .

From what I can see Libor was the same you take a large position before settlement and then either print a high or low Libor Rate to suit your book . If you are aggresive enough you win 9 out of 10 . The market usually can sniff out when settlement prices are being pushed(piggy back the ride) and go along with it so few complain at the abuse.

Yes its wrong  - but where do we think quartlery Bank profits come from ?

How do banks show only one or two trading loss days a quarter.WAKE UP !

Thu, 12/20/2012 - 05:00 | 3081875 MiniCooper
MiniCooper's picture

The margunal price of gasoline in the USA is determined by the Brent price - not WTI.

That is why there is a disconnect. Even if demand for gasoline in the USA were falling dramatically the marginal price woudl still reflect the price in the rest of the World.

There is a global market for oil. The USA does not exists as an island. Try living in the UK where gasoline costs multiples of what it costs per gallon than USA. If the USA learned to use less then it would not need to spend as much on its military to protect its energy supples. More to the point, if it used less then it could be truely self sufficient and then US gasoline prices really would fall.

Thu, 12/20/2012 - 05:16 | 3081889 Market Analyst
Market Analyst's picture

The US exports gasoline, and we are having builds b/c there is no world demand for these excess products, thus they go into storage, this is world demand, not just US demand - try to keep up.

 

Europe taxes all their social programs via gasoline.

 

The us is self sufficient, in fact we have become a net exporter of gasoline products.

 

Try to follow along with the argument, the author is making a logical point in "relational prices" it makes no sense for prices to be lower with lower supplies of products on hand, and higher with larger supply of products on hand, unless there is a dramatic change in demand - which the author points out isn`t the case.

 

Reading comprehension is a major issue with  zero hedge board members.

Thu, 12/20/2012 - 03:48 | 3081827 SmittyinLA
SmittyinLA's picture

Of course the gasoline market is rigged, the feds mandated regional monopolies and dictates mixes including methanol content and carcinogenic additives like mbte (whatever the fuck that is), duh.

Without regional monopolies locals can't ream you much it just too easy to roll in a train or truck or  shipload of fuel, with regional monopolies they can do whatever the fuck they want.

Gasoline is like the "spice" in the movie Dune.

 

Thu, 12/20/2012 - 03:04 | 3081798 Bansters-in-my-...
Bansters-in-my- feces's picture

Sure glad they don't manipulate the precious metals market.

 

Thu, 12/20/2012 - 03:52 | 3081829 strannick
strannick's picture

Yes. That would be wrong. Oh wait, CFTC Chairperson Wendy Gramm told her judges to let them manipulate commodities markets. CFTC Commisioners Chilton, Sommers and OMalia seem to have embraced this corporate culture

Thu, 12/20/2012 - 02:37 | 3081778 steveo77
steveo77's picture

This worked well last year....bought a wicked good telescope, hope people will check out some of the pictures and klik some adz.

See the end of the world, close up, LOL

http://oahutrading.blogspot.com/2011/12/perspective-via-telescope.html

Thu, 12/20/2012 - 01:54 | 3081739 Money Squid
Money Squid's picture

One way wall street banks can raise a bunch-o-cash is to spike the oil price, regardless of demand, the OPEC profits are then immediately deposited into the banks. Poof -  a chunk of money directly from the public's purses.

Thu, 12/20/2012 - 00:28 | 3081616 ableman28
ableman28's picture

There is a very simple way to demonstrate how accurate the central point of this article is.  When oil hovers around $90-100 its easy to understand why gasoline costs $3.00-4.00 a gallon (depending on where you are geographically). But, why, when oil was $10.00 a barrel in 1998 did a gallon of gasoline cost $1.00.  These are facts, easily confirmed.

The proportional relationship between oil prices and gasoline prices is heavily distorted by many factors.  The main one is simply market/price manipulation.  

There are so few really large vendors of the key commodities that functionally every market is controlled to the disadvantage of "consumers" including the market for money (eg. libor rigging).

 

Thu, 12/20/2012 - 02:40 | 3081782 Flakmeister
Flakmeister's picture

Recheck your numbers

http://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm

http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_m.htm

And I suggest you use Brent as your benchmark...

Thu, 12/20/2012 - 03:14 | 3081812 Market Analyst
Market Analyst's picture

You do know that "US Crude Stocks" include Brent inventories right?

 

Thu, 12/20/2012 - 14:16 | 3083423 Flakmeister
Flakmeister's picture

I was refering to using the Brent price as it is far more relevant now than WTI for most gasoline sold in the US...

Thu, 12/20/2012 - 00:20 | 3081605 Capt. Ray
Capt. Ray's picture

All major gas stations around me sell the same product for the same price...

...always been that way, right, ...must be normal, I guess.

Are you telling me now that for all these years those priceses were rigged?!

...neigghhh, c'omon, tell me it ain't so!

Thu, 12/20/2012 - 01:16 | 3081697 Market Analyst
Market Analyst's picture

The funny thing is that everybody along the supply chain is manipulating or adding their tax along the supply chain from E&Ps, traders, refiners, transporters.

 

It is almost as bad as a new car that is taxed for full value, and then retaxed, and taxed, again, and again for each new owner...talk about quadruple taxation.

 

But subpeana some I-banks, Oil companies, and hedge funds trading records and just look at all the fake orders of large blocks, and other price manipulation schemes of the big players, sure makes Technical analysis much easier if your the one writing TA pricing via large order manipulation so that a channel holds etc.

Thu, 12/20/2012 - 00:13 | 3081592 Yes_Questions
Yes_Questions's picture

 

 

Surprise Surprise Surpise!

Something manipulated into human dependence has somehow caught the attention of greedy people.

 

Barclay's et al pays no piper. I care not the amount in dollars, pounds or pence of any fine.

 

Wed, 12/19/2012 - 23:59 | 3081551 bebopgun
bebopgun's picture

"Prices are manipulated" has become such an overused and tired cliche at this point. Since when is storing inventory price manipulation? You don't want to pay the current price for gasoline? Don't buy it. There are many factors that go into a price and unfortunately you didn't touch on any of them. Perhaps EIA data doesn't mean what you think it should. 

Thu, 12/20/2012 - 00:13 | 3081577 Market Analyst
Market Analyst's picture

completely clueless.

 

No one is saying they cannot store it, but when gasoline is priced high because there " are low inventories" kept artificially low nowadays by refiners to keep prices high, when inventories rise meaning no more low supplies, then prices should fall, not rise...its not like we are in the summer driving season moron.

Wed, 12/19/2012 - 23:58 | 3081546 Some Bloke
Some Bloke's picture

In the olden days, I suppose employees got a little thrill when they made some money on a share, or a bond or what have you.  How could they now, with the game so rigged?

My point is why go through the pretense anymore?  Just lend money on a dodgy mortgage, book your fee, and when the mortgage goes south, sell to the Fed to make yourself whole.  Or steady your LIBOR rate.  Or front-run every other investor.  Or trade insider knowledge. 

Capital markets today are like cheating at Solitaire and patting yourself on the back for wnning another hand. 

Wed, 12/19/2012 - 21:24 | 3081137 Market Analyst
Market Analyst's picture

Yeah Goldman Sachs we have such a tight oil market right now, too funny.....absolute scumbag manipulators

Thu, 12/20/2012 - 00:12 | 3081591 Bicycle Repairman
Bicycle Repairman's picture

Suppose the oil market is completely manipulated and all the signals from it are false.  Specifically oil is much, much cheaper than we've been led to believe.  That cheap oil is super cheap oil and expensive oil is merely cheap oil.  Heh, heh.

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