I loved this story. Some poor bastard over at Chevron accidentally released the company’s crude/distillate trading results for the year. An effort was made by the company to squash the information. Dow-Jones said, "the hell with that" and went public with the info.
Not surprisingly, Chevron is doing just fine in its oil trading business. They show year to date gains of a very tidy 360 million. I find it amusing that they are making such a bundle. The President said a month or so ago that he was going after the speculators who he thinks are driving up the cost of energy. Look no further Mr. President. It’s the oil companies that are driving up prices and making a bundle in the process, not some ‘locals” who trade crude futures in Chicago.
Speaking of making a bundle in oil trading it’s worth taking another look at the SPR oil sales that Obama ordered to “reduce the price at the pump”. This chart looks at LLS (Louisiana Light Sweet) for the past month.
Note that as of Friday’s close of $116.49 we are now above the level for pricing before the SPR sales (June 22). Therefore one would have to conclude that nothing of lasting value was accomplished by the effort to manipulate markets.
The government sold off 30 million barrels to the LLS market at the very favorable price of 107.20. Comparing that to Friday’s close gets a loss to the SPR of $280mm. Keep in mind that it only took a few weeks to get these gains, so the folks who played in the deal made a bundle.
Given that sweet crude is now above where it was on June 22 we have to anticipate that the deep thinkers in D.C. may well try another round of oil sales. If they do, it will have the same results. Big Oil will make a bundle, gas prices will not go down at the pump and the ‘owners’ of the SPR (all Americans) will get ripped off again.
There is the possibility that the bright folks who dream up these silly plans will come to their senses. They might just do the ‘right thing’ and preserve the SPR for what it was supposed to be for in the first place; an emergency. I doubt that will be the case. Gas prices are going to be going up in the next few weeks. Given that the ‘Deciders’ have absolutely no other options (monetary and fiscal policy is now dead in the water) they may well take the step to manipulate energy prices again. It won’t work the next time either.
There is no way to determine how much money was made by the principals who bought the SPR oil. We know what price they paid and we know how much oil each company got. We don’t know when/if they sold it. On the assumption that the inventory profits were all retained, the paper gains would look like this:
What’s $280 million amongst ‘friends’? By they way, they don’t pay taxes on this crap either.
At some point someone in D.C. is going to defend the decision to sell crude reserves from the SPR. I can’t wait. This effort to manipulate the economy produced no meaningful results, other than to make some fat cats fatter.
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I like the post, but crude futures are traded in NY, not Chicago :)
ReplyDeleteCME Bought Nymex a while back
ReplyDeleteSome time ago, Mayan astrologers met around their calculations table, where at the center of the table was displayed dummy planets revolving around a lighted sun, a model of the heavenly skies shown in their meeting room where they did their precise calculations of time and of the future. They were drawing up a prophetic calendar to say when the end of the civilized world would be. The chief seer had his third eye opened and could see strange pictures into the future, and what now came clearly into panoramic view in a vision was Congress the ruling body of the people. It was being led around on a steel leash by fat cats in cash-for-klunkers, and look, what the seer saw then was, a President on a leash by the same pot-bellied oligarchs relishing and laughing their bellies off, in siphoning off emergency gas, turning it into money and it was going directly went into already plentiful bank accounts. The Mayan astrologers, with their long white beards in hand, looked at one another, and unanimously said, ah—2012. Yes, 30,000 years from now—‘tis the date.
ReplyDeleteThey looked over to the scribe and said,"Put it down as the exact date for the end time. Do it now.”
Walter, Thanks for setting that straight. Look at my Bio. It's a very long time since I traded crude futures. When I did it to make a living, they were in Chi town.
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