$2.5 Trillion- The Global Oil Scam: 50 Times Bigger than Madoff

[kpete]

The Global Oil Scam: 50 Times Bigger than Madoff
by: Philip Davis November 11, 2009 | about: BP / DB / GS / ICE / JPM / MS / RDS.A / SCGLY.PK /

$2.5 Trillion - That’s the size of the global oil scam.

It’s a number so large that, to put it in perspective, we will now begin measuring the damage done to the global economy in "Madoff Units" ($50Bn rip-offs). That’s right - $2.5Tn is 50 TIMES the amount of money that Bernie Madoff scammed from investors in his lifetime, yet it is also LESS than the MONTHLY EXCESS price the global population is being manipulated into paying for a barrel of oil.

Where is the outrage? Where are the investigations?

Goldman Sachs (GS), Morgan Stanley (MS), BP (BP), Total (TOT), Shell (RDS.A), Deutsche Bank (DB) and Societe Generale (SCGLY.PK) founded the Intercontinental Exchange (ICE) in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate "dark pool" trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel.

A Congressional investigation into energy trading in 2003 discovered that ICE was being used to facilitate "round-trip" trades. " Round-trip” trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands. But when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company. This is nothing more than a massive fraud, pure and simple.

"Traders of the the ICE core membership (GS, MS, BP, DB, RDS.A, GLE & TOT) wouldn’t really have to put much money at risk by their standards in order to move or support the global market price via the BFOE market. Indeed the evolution of the Brent market has been a response to declining production and the fact that traders could not resist manipulating the market by buying up contracts and “squeezing” those who had sold oil they did not have. The fewer cargoes produced, the easier the underlying market is to manipulate." - Chris Cook, Former Director of the International Petroleum Exchange, which was bought by ICE.

more:
http://seekingalpha.com/article/172797-the-global-oil-scam-50-times-bigger-than-madoff?source=article_sb_popular

[imdjh]

1. One correction. As I understand it, ICE is actually in Atlanta. It pretends to be in London.

Not that it should be safe in London, but part of London's economy is being sort of a Switzerland for unregulated trading.

[snagglepuss]

2. This is mind boggling. nt

[nc4bo]

3. Players rule. The cheaters win. The world is their playground.

Then assholes like the CEO of GS says he's doing God's fucking work.

:grr:

[Orwellian_Ghost]

4. K&R

[Festivito]

5. Big. Yet, only 1/2% of the Credit Default Swap/Currency ponzi scheme.

Over 500T$ so far.

[DemReadingDU]

7. I have read the derivatives could be over $1000 trillion

that's a quadrillion. wow


From reading elsewhere, the CDS is smaller, appx $80 trillion, the derivatives is the bubble of all bubbles, perhaps over $1.5 quadrillion.

:wow:


edit. just found this on Google which explains what comprises derivatives
http://www.siliconvalleywatcher.com/mt/archives/2008/10/the_size_of_der.php

[Festivito]

10. I was pulling from another website.

Don't know how much to believe anything seen or heard anymore. I like that article you posted. At least it breaks things down.

I wonder how much money there is in retirement accounts in the US and what percentage within those are CDO/CDS.

People think SS won't be there for them. Wait until they start realizing their retirement accounts won't be there either, only by then they won't be able to do a thing about it, being too old.

589T and dropping.
http://www.usdebtclock.org/

[truedelphi]

12. Frontline interviewed Brooksley Borne and she said

500 Trillion, but then she would probably want to speak conservatively. So it probably could be the larger number.

[Zynx]

31. Those numbers get bandied about, but they don't mean quite what they appear

http://en.wikipedia.org/wiki/Notional_amount

The notional value is different than what the instrument is actually worth. For example, if I own 100 January call options for P&G at $70 a share, the notional value is $7,000, but I may have only paid $5 per option or $500. If I actually bought 100 shares of P&G at $70, that is truly worth $7,000.

It's still a problem, but it isn't as though ten times global output is on the line.

[unkachuck]

6. why....

....are the crooked machinations of the wall street thieves good for the economy but providing universal healthcare for the American people bad?

[cutlassmama]

8. Because they all have "Cadillac" health care and money and "the people" don't

:sarcasm:

[iceman66]

25. This is the opposite of "good for the economy"

If the wall street thieves hadn't DOUBLED the price of oil in the last several months using the TARP money, the recovery would be a lot further along!

[Kansas Wyatt]

9. Where the fuck are they putting all this money?

Supposedly, the banks lost their asses and needed bailed out, so the U.S. Government gave them whatever they wanted. A $1 Trillion or whatever.

We found out last year the banks were speculating in skyrocketing oil prices, which just so happened to be, right before they allegedly needed bailed out. Now this says that they have been running a $2.5 Trillion Scam.

Where the Hell is all the money going, and why can't the Government stop it and seize it?

Oh, that's right, they are too big to fail.

[Greyhound]

11. Trust me, you don't want to know.

Over the last decade or so, the parasites have moved inconceivable amounts of money into a variety of these "dark pools" of extra-governmental funds. So much in fact, that these super funds can and have bought entire markets and can thereby dictate any price they wish according to their strategy of the moment.

The further down the rabbit hole you go, the darker it gets.

[leveymg]

14. It's not money - this is the value of futures options with notional value used to cover hedges.

The commodities and derivatives markets have spawned a secondary market that trades in futures options. ICE is an exchange for options in oil futures, a form of trading that doesn't really involve goods with any fixed value, but trading them makes money for big banks and hedge funds that own shares in commodities. It's an additional way to make money off of trading rather than just sitting on a commodity waiting for its value to rise or fall.

The thing that makes this secondary markets work are swaps. The swaps (you've probably heard of the notorious Credit Default Swaps) have no real value as currency. They're like side-bets between big banks and institutional traders to cover potential losses in trades of highly-leveraged (borrowed) assets (such as commodities) that have real value. If their value were cancelled on both sides of the bets, supposedly nobody would lose anything, but without them the sort of high-risk speculation that goes on couldn't be justified.

Swaps are like the coolant in your car that allows the engine to get extremely hot without exploding. Sometimes, as in September '08, the engine melts down, anyway. Back to the drawing board, or just throw the thing back together again and start racing again. Too bad they bet the house on the outcome, and the wife and kids are sliding around in the back seat.

[mopinko]

19. i think people just get boggled.

the options market is a complicated beast. when you explain it to most people, it sounds like bullshit. that don't make it bullshit, tho.

[glitch]

24. It only becomes real money when taxpayers "bail" them out. nt

[jwirr]

17. What money might be the real question. Once again we have a paper

market that resembles a bubble. How many times do they sell the oil before they forget who owns it or where it is?

[truedelphi]

13. thanks, kpete, for posting this latet acknowledgement of the troubl ewe are in

"Democratic President" or not, there is a lot of suffering that will be had when the games that these scamsters are playing are finally exposed.

[jwirr]

15. That sounds like the good old game of price fixing. That I think is

illegal.

[Mari333]

16. knr yes indeed, where is the regulation.

[bergie321]

18. K&R

:bounce:

[sellitman]

20. ICE is almost as scary as Acorn!!!!

:sarcasm:

[Vinnie From Indy]

21. Another huge elephant in the room

The opaque oil specualtion markets are doing exactly as described and exactly as designed.

One regulation that has been proposed is that buyer of large parcels of options HAVE to take delivery of the oil.

One thing is certain, the tiny group of people that benefit from this massive scam will not go quitely or willingly. Sadly, they have the juice to protect themselves.

[malaise]

22. Excellent article

Thanks

[earth mom]

23. K & R! nt

[Overseas]

26. K&R. I've always wondered about that. //nt

[dotymed]

27. There is no doubt that

oil speculation is one of the most destructive forces in our
market. That is why there has been such a delay in renewable
energy in America. Solar, wind, hydrogen and more. These
wealthy/elite people only care about profit. That is why our
unregulated capitalistic market  has ruined America. The
politicians are owned, as we all know, by these greed
machines. We have to demonstrate and not be afraid of the harm
that will befall us. The labor and civil rights movements knew
this. Now there is even more at stake. Our survival.We must
enforce the laws already won by these former movements. The
SCOTUS actually ruled that corporations do not have the rights
of person hood. It is a lie among a "country of
laws." Another SCOTUS ruling: no taxes on personal labor.
If we are going to survive, we must be willing to sacrifice.
Our own police and military will attack and harm us. We will
win only through the international community. Currently we are
serfs for corporations who legally must file a charter that
proves they will exist for the betterment of society. The
repeal of THE FAIRNESS DOCTRINE by Reagan's bosses has allowed
a revisionist history to be accepted as the truth. If we will
not sacrifice we will not win.

[Overseas]

28. We did protest. Millions of us worldwide to stop the War on Iraq.

We were out there before it started, by the millions worldwide, and were brushed aside by oil barons' Shock & Awe. But you are right that oil trading of all kinds-- current and futures-- has dominated our country for decades, ruining our national security, corrupting our politics, and polluting our planet's atmosphere to the point of disrupting our global climate. So called "cheap" energy, which was only cheap because its costs were removed from the calculations.

The SCOTUS did not rule in favor of corporate personhood but the corporations got a footnote written into the decision that they've been riding on ever since. http://www.reclaimdemocracy.org/personhood/santa_clara_vs_southern_pacific.html

I was glad to hear Justice Ginsberg asking questions during the recent related case on how we could treat corporations as people with the rights of US citizens when nowadays so many of them are owned in full or in part by foreign nationals. My cynical self thought that perhaps, since common sense and economic justice are unimportant to our right wing, xenophobia could be used as a wedge against corporate personhood. I'd like us to revisit the issue and strongly repudiate corporate personhood but the Bush Gang's takeover got John Roberts in as Chief Justice, so I don't know if we'll get that chance.

It is a real pity that we allowed Reagan to take over, slash taxes, bust unions and keep spending on "covert" wars, pretending it was "Morning in America" because the country didn't want to engage in the challenges Carter suggested, or because the oil giants didn't want to risk allowing decentralized alternative energy sources to gain ground.

But you've got to hand it to the right wing. They have really succeeded in pushing our country far far to the right. I remember talking about sustainable development when I was in college in the late 70's. Then we all got shoved aside in favor of the Let's Pretend Times of Grandpa Reagan. And the right wing got busier on their campaign to drive the national dialogue to the right. They have worked on many fronts and have succeeded much more than I thought they would.

[dotymed]

33. Thanks for the link, Overseas.

Just because unscrupulous lawyers used a false reporting of a
case to build precedence on, it doesn't change the law. It
just means that the courts have to do their job and retry
these cases with the actual ruling as precedent. That would
change America and free us from corporo/fascism. Please ACLU
get busy.And thanks for your participation so far in
demonstrations. All concerned Americans need to sacrifice to
shake off our bondage. The corporate owned commander in chief
(I worked to elect him) and our local police will harm or kill
us to keep their fake authority. Since Reagan's handlers
disposed of THE FAIRNESS DOCTRINE most of our service people
are not educated enough about the struggles of the people and
will follow orders even though, by the Geneva Convention, it
is illegal to follow an illegal command. It is also immoral to
hurt or kill your neighbor, especially when he/she is trying
to free you also.

[truedelphi]

30. Cleaning out a box of old magazines in the basement, I was startled

To see several ads for cars in the early eighties that had 38 to 41 mpg ratings. Now we are still having cars touted as being "energy saving" and their mpg is 34!

[Overseas]

35. I remember people gauging hipness by how close to 40 mpg they got.

That was during college in the late 70's. We gauged hipness by your getting more MPG. 40+ was really cool.

So you can imagine how confused I felt years later when mild increases to MPG were proposed for legislation and we were told it would be too much of a hardship for the automakers.

And how sad it was to see Hummer purchases subsidized during the Bush administration.

[defendandprotect]

29. k i c k

[bhikkhu]

32. Its arguable that $40/b is oil's "natural" price

If you take oil down to a sustained $40 a barrel, a whole lot of production shuts down and a whole lots of planning shuts down. There is a large amount of cheap oil still ( http://www.reuters.com/article/rbssEnergyNews/idUSLS12407420090728 ) but a big slice of current production costs more than $40 a barrel, and all the new deep water finds that are supposed to save our hides for the next decade or so are not worth bothering with at that price point.

...and then the natural result of production shut down is deeper global recession and probably higher oil prices in a smaller and more desperate market. Not that there's no truth to the manipulation and all that crap we don't regularly hear about, but sometimes things are the way they are by collective necessity, regardless of the crooks involved. Even if all you want is a smooth transition to alternative energies, the infrastructure that will be needed will necessarily be built with oil energy, and that oil energy will necessarily be of the "excess capacity" type, which is the $60-80/barrel oil.

[dotymed]

34. Bhikkhu

I am not convinced you are right.I do believe that the
"harder to get oil" is not as profitable at $40 a
barrel. We are talking about an industry that has been
"reporting" record breaking profits for about ten
years (40 quarters). They don't have as much incentive if
their profit margins return to a more realistic and
sustainable margin of their actual work, but then the American
people have a NEGATIVE real income growth for over three
decades. We need legislation enforced that will change these
things and force the oil companies, all companies and CEO's,
to reflect the plight of the majority of Americans. We can no
longer be their profit fodder just like we can't be cannon
fodder for a "war" that is only meant to increase
corporate profit and individual power. I mean, we pay the same
Taliban that we fight in Afghanistan, so we can safely
transport our war supplies to our soldiers. We pay them to
fight us.  We have to seize the reigns, nonviolently, and
expect a lot of casualties. If we attempted an armed struggle
for control of our government we would be slaughtered.
Besides, in a country with double digit unemployment, the
military is the only game in town.Since the repeal of THE
FAIRNESS DOCTRINE, by Reagan,this generation does not know
about the Geneva Convention or that following illegal orders
is a crime. We have reinforced this by our use of torture and
its glamorization by the media.At this point in time,
Venezuela is much closer to what our founding fathers had in
mind, than we have been for at least 30 years.

[bhikkhu]

36. One solution is to nationalize the oil industry

Its worked quite well in many places, and sweeps away a whole vast layer of corruption and obscene profit.