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Guest Post: Someone Is Always Making Money Somewhere

Tyler Durden's picture




 

Submitted by Energy Burrito via OilPrice.com,

Regardless of whether a market is moving up or down, there is always someone making money somewhere. There are various examples every day – be it a billionaire selling a stock short (i.e., Herbalife) or a company selling a meal short on ingredients (i.e., horsemeat economics). Some methods are legitimate, and some are not. But one thing is for sure…energy markets are by no means immune to such collusion.

The natural gas market is coming under increased scrutiny, as price movement ahead of the main event of the week – the weekly storage report – appears to be being manipulated by high-frequency trading (HFT). The below illustration from last weekend’s Wall Street Journal highlights how this is done, causing regulators now to conduct ‘more than just the routine oversight and surveillance’.

 

Natural Gas Future Price

High-frequency trading is nothing new to financial markets, but it is new to the natural gas market. It has also spawned some wonderfully inventive names to describe the pre-storage report shenanigans. The best term by far has to be ‘banging the beehive’, which is where a flood of orders is sent to trigger a huge price swing immediately before the data is released.

Other strategies include ‘spoofing’ and the ‘Boston zapper’. Regardless of how comical these names are, however, this creation of ‘synthetic momentum’ is market manipulation and is being investigated accordingly.

Next up, we take a look at gasoline prices, which have now risen for a wallet-whooping 34 consecutive days, according to the AAA. There are a number of reasons to explain why gasoline prices are now at a record for the time of year, with the omission of the one which makes most logical sense…higher demand.

US Liquid Fuels Consumption

The rise is due to an amalgam of reasons, including elevated oil prices, refinery repairs, seasonal maintenance, and the impending switch to the more expensive summer blend. There is further bad news ahead, as prices will likely continue to show seasonal strength to peak in the coming months, ahead of higher demand from the impending arrival of driving season in May:

Related article: This Week in Energy - Billionaires Secretly Funding Climate Denial Think Tanks

AAA Retail Gasoline Price

So who is making money here?  The breakdown for the price of gasoline is something like this: 10% for refining costs, 14% in federal and state taxes, 8% for distribution and marketing, with the rest made up by the price of crude oil (68%). Gas stations earn less than $0.05 per gallon.

Meanwhile, higher energy costs continue to increasingly impact consumer spending. Gasoline last year equated to a record $2,900 of spending per US household, or just under 4% of income before taxes. Rising global demand for oil may be the ultimate culprit for higher gasoline prices, and given that the US is the largest global consumer, leaves the US consumer as the ultimate victim.

 

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Thu, 02/21/2013 - 20:33 | 3265403 ricky2
ricky2's picture

Gas prices going up!?!?! Well.....time to start another war. I hear Iran's nice this time of year

Thu, 02/21/2013 - 20:38 | 3265410 bank guy in Brussels
bank guy in Brussels's picture

Sounds like what Americans were saying 10 years ago ... 'Kick their ass and take their gas' ...

The US regime then spent at least 2 trillion on the wars while killing at least 1 million people ...

And cheap petrol did not come back

The satanic oligarchs still laugh about that one

Thu, 02/21/2013 - 20:58 | 3265458 DJ Happy Ending
DJ Happy Ending's picture

Yeah but according to Krugman the destruction adds to GDP so it's all good, right?

Thu, 02/21/2013 - 21:28 | 3265469 espirit
espirit's picture

The real truth is everybody lies on behalf of their own book, expecting to be challenged with actionable proof against them.  So where does that leave us if no action is taken (enforcement) when obvious laws are broken?

It's a suckers game unless you're an insider with immunity.

Edit: Or choose the blue pill.

Fri, 02/22/2013 - 00:25 | 3266021 AldousHuxley
AldousHuxley's picture

wealth is absolute

money is zero sum.

 

Only difference between 100 years ago and today is technology.

 

 

Fri, 02/22/2013 - 10:01 | 3266562 Bicycle Repairman
Bicycle Repairman's picture

"Related article: This Week in Energy - Billionaires Secretly Funding Climate Denial Think Tanks"

Another related article: This Week in Energy - Other Billionaires Secretly Funding Climate Change Think Tanks

Thu, 02/21/2013 - 23:05 | 3265773 W74
W74's picture

More goyim blood to be sacrificed at the zionist's blood alter. I'll bet the slimey fuckers in New York and Washington would enjoy watching another war on their monitors and flat screens....at least for the first week or so before they get bored with it.

At least it won't be my blood (dumb enough to take two trips west of the Zagros) although I do feel sorry for all the poor Southern and Midwestern kids just trying to make a couple bucks and some college money in an economy that doesn't even offer opportunity anymore.

Thu, 02/21/2013 - 20:51 | 3265439 chump666
chump666's picture

If a war, and it will, breaks out on the South China Sea with India having a gut-full with Pakistan's madness + Vietnam/Philippines join the Japan/India against China/Pakistan.  Nat Gas prices will go through the roof.

 

Thu, 02/21/2013 - 20:49 | 3265442 2bit Hoarder
2bit Hoarder's picture

WHAT THE FUCK?!  My financial advisor (Corzine) told me that when you lose money it goes to money heaven!

Thu, 02/21/2013 - 21:06 | 3265473 espirit
espirit's picture

Corzine told me that "you have to lose money, to make money".

Thu, 02/21/2013 - 20:56 | 3265453 blindman
blindman's picture

the basis is bogus, oh shit !
ji cheeki ki, kaw a wu
mole,
.
the mother land is pregnant with a two headed love child.
she may die giving birth if we don't do a "see" section.
.
Thursday February 21 12:00pm
http://archive.wbai.org/#ankor3
.
fine point, minute 28:33 or so ... denial is born of the inability to
fight or flight, the place where fear and love have no name
worthy of consideration ... the realm of denial.
where people are cut off from their fear and are
in congregation, or urban environments.
. garrison on jung ...
fascinating.
.
into the space of denial steps.....
guess?
evil
.
"..evil is the rock upon which all systems ship wreck."" as per dr. jim
garrison
.
Moment of Clarity No. 208 . . . and No. 1 (check out this No. 1 episode *****)
Posted on February 20, 2013 by maxkeiser
http://maxkeiser.com/2013/02/20/moment-of-clarity-no-208/
.
Exchange Stabilization Fund (Parts 1 to 4) • Eric deCarbonnel
http://www.dailymotion.com/video/xn4a62_exchange-stabilization-fund-part...
.

Fearfully, the US Treasury's Secret, 75-Year-Old Fund and Its Dark History Has Been
Exposed? ...
By Staff Report
http://www.thedailybell.com/3343/Fearfully-the-US-Treasurys-Secret-100-Y...
.
The Beatles - Eleanor Rigby
http://www.youtube.com/watch?v=-LOgMWbDGPA
.
sane fear cale, j.
John Cale - Fear Is A Man's Best Friend
http://www.youtube.com/watch?v=8iAAe_7_HOw
"..we're already dead but not yet in the ground." j.c.
.
Television - See No Evil
http://www.youtube.com/watch?v=a7L0IYPXKj8
" i want to fly. fly a fountain.."
i understand no destructive urges
it seems so perfect
isee , i see no. i see no evil !!!...
....
get i?. .... "
t.v..

.
KEEP GOING by Joseph Marshall III
http://www.youtube.com/watch?v=RjudO5Xfibc
.
p
ps.. i guess that is it for now

Thu, 02/21/2013 - 21:04 | 3265465 AssFire
AssFire's picture

I was naked, doing some bathsalts and enjoying some horsemeat adrift on the SS Feces when this shoe shine guy gave me a stock tip on Herbalife.

I replied: "Stock market?? Do I look like I'm crazy?"

Thu, 02/21/2013 - 21:34 | 3265536 chump666
chump666's picture

haha f*ck yes

Thu, 02/21/2013 - 21:04 | 3265468 tom a taxpayer
tom a taxpayer's picture

In order to understand the rise in gasoline prices, it would have helped if the article had supplied not just the average breakdown %s in the price of gasoline, but compared it with breakdown %s comprising (or responsible for) the 34 day price rise of gasoline. For example, while refining costs are typically 10% of the price, were refining costs 30% or 50% or ?% of the 34 day price rise.

Thu, 02/21/2013 - 21:12 | 3265485 scatterbrains
scatterbrains's picture

oh..  well good thing all the printing and diluting of fiat going on around the world has nothing to do with the price... for a minute there I thought niggas would refuse to give up their natural resources for free printed money.

Thu, 02/21/2013 - 21:17 | 3265498 blindman
blindman's picture

making money, there a loaded phrase; the universe then does unfold.

Thu, 02/21/2013 - 21:46 | 3265562 GoinFawr
GoinFawr's picture

"Other strategies include ‘spoofing’ and the ‘Boston zapper’. Regardless of how comical these names are, however, this creation of ‘synthetic momentum’ is market manipulation and is being investigated accordingly."

Hahaha! Oh yeah, they're like so scared of the 'investigators' they carry around in their pockets.

Rattle the dreaded 'Tobin Tax' Aegis at 'em again! Threaten the HFT'ers with having to leave their bids/asks up for a full second!

Empty threats like that will make headlines and smarten them up... for about one  tenth of a nanosecond; just about the same amount of time it will take to  pass in through one ear and out the other of the general public.

 

 

 

Thu, 02/21/2013 - 22:40 | 3265710 logicalman
logicalman's picture

What's really worrying is that some Market might creep into the Manipulation.

\sarc

Thu, 02/21/2013 - 22:40 | 3265711 Ident 7777 economy
Ident 7777 economy's picture

 

 

Starting the production of LOWER volatilty gasoline now (for summer)?

 

I call "BULLSHIT" friend ... there is still a need for higher volatility WINTER blends ... 

 

IOW, let me get this straight: LOWER volatility blends are being produced NOW to be STORED until about JUNE?

 

B S

 

 

Thu, 02/21/2013 - 22:52 | 3265744 Downtoolong
Downtoolong's picture

Mandatory jail time for anyone quoting or trading primarily for the purpose of moving a market or price index. The cases would be difficult to prove. However, the mere existence of the law would be a huge game changer for the way traders behave.

Fri, 02/22/2013 - 03:44 | 3266276 thisandthat
thisandthat's picture

 

This Week in Energy - Billionaires Secretly Funding Climate Denial Think Tanks

No one said they couldn't do anything good - what kind of socialists are you?

Fri, 02/22/2013 - 07:17 | 3266368 Downtoolong
Downtoolong's picture

the weekly storage report

I just want to know if Clarence Beeks is on the payroll.

Fri, 02/22/2013 - 10:21 | 3266609 Bicycle Repairman
Bicycle Repairman's picture

The "someone" making money has insider information, HFT and government connections.

Another "someone" is also losing money somewhere.  That "someone" has none of the above.

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