Against whom? Tens of thousands of future contracts are traded in nanoseconds at the NYMEX, and the price of oil is set. This price affects not only the price which will be paid when these contracts expire and delivery takes place, but also, according to Goodman, the all-important over-the-counter market, where sellers trade more directly with buyers without government oversight.
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Goodman contends that there is little oversight of the NYMEX because the agency charged with the role is the weak and ineffectual Commodities Futures Trading Commission CFTC , where many staff and commissioners are busy burnishing their resumes so they can cash in later as market executives. It is one of those pieces of special-interest protection that owes its existence to legislative immaculate conception.
It was not in the committee version of the bill; it slipped in along the way without parenthood, but is largely believed to be the work of former Sen. In classic theory, a market is where a willing buyer and a willing seller strike a price.
The Renegades Who Hijacked the World's Oil Market
In the world of traders, it is something else: It is where volatility is rewarded and myths hold sway. Today there is no actual shortage of crude oil.
Supply and demand, according to those who monitor these things, is in balance. But fear stalks the trading floors because fear is good for traders; and fear is a critical part of the oil price. Wars and rumors of wars are relished in trading pits. They raise the specter of coming shortage and introduce the instability the traders love. During the electricity shortage in California in , traders, particularly at Enron, sought not only to capitalize on fears of shortage, but also to guarantee shortage by taking generating equipment off line.
Of course, reality must eventually catch up with speculation. The production of oil must meet demand and the price will briefly reach real world equilibrium.click
The Asylum: The Renegades Who Hijacked The Worlds Oil Market
This happened in , when the price collapsed because Saudi Arabia opened its spigots after the volatility of the s. Many traders were wiped out and speculative billions were lost. The nation has about eight months of supply of crude oil saved in salt domes, in what is called the Strategic Petroleum Reserve. There is more oil available in the Naval Petroleum Reserve, a set-aside of oil in the ground.
Obama needs to say that we are going to start using this oil as soon as it can reach the refineries. He has to go the whole hog — to set the machinery of using our special reserves in motion. That will counter-spook the market and humble the traders. However, any new wars in the Middle East, and all bets are off.
The Asylum: The Renegades Who Hijacked the World's Oil Market :HarperCollins Australia
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In other ways, they are nothing you can imagine: many come from working-class families themselves. The progeny of Jewish, Irish, and Italian immigrants who escaped war-torn Europe, they take pride in flagrantly spurning Wall Street. Under the thumb of an all-powerful international oil cartel, the energy market had long eluded the grasp of America's hungry capitalists. Neither the oil royalty of Houston nor the titans of Wall Street had ever succeeded in fully wresting away control. But facing extinction, the rough-and-tumble traders of Nymex - led by the reluctant son of a produce merchant - went after this Goliath and won, creating the world's first free oil market and minting billions in the process.
Their stunning journey from poverty to prosperity belies the brutal and violent history that is their legacy. For the first time, The Asylum unmasks the oil market's self-described "inmates" in all their unscripted and dysfunctional glory: the happily married father from Long Island whose lust for money and power was exceeded only by his taste for cruel pranks; the Italian kung fu-fighting gasoline trader whose ferocity in the trading pits earned him countless millions; the cheerful Nazi hunter who traded quietly by day and ambushed Nazi sympathizers by night; and the Irish-born femme fatale who outsmarted all but one of the exchange's chairmen - the Hungarian emigre who, try as he might, could do nothing to rein in the oil market's unruly inhabitants.