Do you know what it is to treat someone like a mushroom? Keep them in the dark and feed them bullshit. This is the best way to grow a mushroom and it’s an Australian colloquialism used when we want to keep the truth from someone, and, in fact, feed them disinformation. We’re told that the demand for oil is high, that the Iranian sanctions and the threat of war with Iran are real, and that these factors are keeping the oil price high. However, what if the truth were different, and the world’s awash with oil, and, in fact, the collusion of oil producers and investment banks is keeping oil prices high? Would this constitute being “mushroomed?”
What we’re seeing now, through transactions taking place opaquely between producers and investment banks with funds to sell, is a two-tier oil market. There are those who know where the icebergs are, i.e. a couple of producers and investment banks… and those who are on the Titanic, the investors. The two major centres for trading in oil market contracts are in London and New York, and they’re the ICE (Inter-Continental Exchange) and the Chicago Mercantile Exchange’s NYMEX (New York Mercantile Exchange) division. However, participants on neither of these financial markets can actually buy and sell physical crude oil and set the price. One may best describe these exchanges as betting shops or casinos; moreover, they’re casinos where the roulette wheel has about 10 zeroes favouring the house. In the context of mushrooming, ICE and NYMEX provide a cloud of disinformation about the true state of the oil market that’s taking place out of sight amongst consenting adults.
At present, the world’s awash with oil. For example, Iran has so much spare crude oil above ground they literally can’t give it away, despite their best efforts. The obvious reason would be because of the sanctions on Iranian oil; however, the sanctions are yet to affect the current contracts in place. This doesn’t explain why Iran’s using nearly one in three of its oil tankers for above ground storage now. This is almost unprecedented. Iran is offering, unofficially, of course, heavily-discounted oil to buyers, in an effort to move some of this excess stock.
Then, there’s the curious case of an oil tanker returning recently to Valdez AK, with more than 300,000 barrels of crude oil still in its holds. Two weeks earlier, the ship had set sail with 1.2 million barrels of oil on board for a refinery on the west coast of America, only to find that the storage tanks at the refinery were so full, they couldn’t take the full shipment, so, they duly shipped 300,000 barrels home again. Valdez still supplies a large portion of the West Coast of America’s oil. For the last two years, stocks for crude oil in the USA have been at all-time highs, whilst more recently West Coast refineries are decreasing their production as demand shrinks. Yet, oil prices remain high?
Probably, the greatest responsibility for the “mushrooming” of oil prices rests with Saudi Arabia, which will shortly, for the second time this year, charter a fleet of over a dozen VLCC tankers to ship more than 20 million extra barrels of oil to the USA. Saudi Arabia’s above-ground storage facilities are already overflowing, as are the USA’s private facilities. The only logical place for an extra 40 million barrels of Saudi oil to go would be into the USA’s huge underground Strategic Reserve facilities, where they would neatly fill the gap left by last year’s release of oil in response to the Libyan crisis. The purpose of these strategic reserves is as a response to an emergency, for example, if there was a supply disruption to the USA, then, the government could use some of the strategic reserve to fill the gap. Alternatively, they use it to reduce the price of energy for Americans in times of high oil prices by releasing more stock onto the market. Maybe, President Barack Obama is thinking of doing this ahead of the presidential elections later this year?
It’s generally believed that oil companies trade oil more than 22 times between extracting it from the ground and selling it to the end user, but in fact, that’s just paper oil changing hands, and has no effect on the price. What’s affecting the price has been the ability of producers to literally sell ownership of oil in the ground or in storage to investors and thereby support the price with money borrowed from what Goldman Sachs calls “Muppet” investors. Therefore, the average man on the street is in a state of constant threat, they think that the supply of oil’s incredibly tight and the threat of war’s so real, that they’re prepared to pay excessive prices for energy. Energy is a finite resource, but what we’re seeing is the intentional mispricing of energy on a cosmic scale by one or two oil producers… facilitated by investment banks… and at the expense of general consumers and investors.
Oil should have a visible price at the point at which economic interest changes rather than at the time of the delivery of the cargo. This would effectively create real-time pricing of oil rather than the current petro-dollar system of price-rigging of oil at the time of the actual delivery of the cargo. If you control the cargoes, which the producers do, then, you control the price of oil, and that means that, on the casino markets of ICE and NYMEX, the house always wins. So, are we being “mushroomed” with the price of oil? Absolutely, and that’s no bull!
8 May 2012
The Republican Party constantly screams about the “invisible hand of the Market”. They tell us that it’s the only fair mechanism in an imperfect world, and that government regulation’s futile. I seem to observe that both Willard Romney and George W Bush are gazillionaires with a good part of their boodle-bag stashed in foreign parts, and that such regulation would affect them, in a very personal way. In fact, it would remove their hands from about the necks of ordinary people. That’s what the “invisible hand” of the market’s all about… the affluent effluent believe that they have a right to steal a living off the backs of the rest of us. That ain’t right… and we don’t have to accept it.
In an imperfect world, vote for President Obama… otherwise, the “hand” of the Market will squeeze us even harder. Follow France and Greece and vote all the Neoliberal “conservative” bastards out… make sure that the Republican Party becomes a minority bloc of religious nutters and crackbrained libertarians. We don’t need the first “saving our souls” and we don’t need the second securing “economic freedom” so that the rich can rape us ever more thoroughly. After, it IS your choice… you can mark your ballot in November… do so…