Originally published in The Financial Times on April 6th, 2011
Tensions in the Middle East and north Africa, we are told, lie behind the recent increase in global fuel prices, which Wednesday hit a 2 ½-year high. Yet while Brent crude this week stayed above $120 a barrel, in Tripoli petrol hovered at around 54 cents a gallon. And that is not a typo. The popular reason for why those closest to the fighting, in this case, suffer less than those farther afield, is Libya’s hefty subsidies. The less popular reason is that world energy markets have been carefully designed to profit from the slightest supply hiccup, even if there is little evidence of actual shortages.
The energy-trading fraternity has never let the facts get in the way of a good supply scare. True, this historically fragile market is vulnerable to price swings as demand threatens to climb faster than production. But there is more to it than that. Indeed, what President Barack Obama did not mention last week in his energy security speech about the faults of the global energy market could fill a Saudi oilfield. Continue reading The Global Oil Casino Benefits Only Its Players
Originally published on huffingtonpost.com on Mar. 14, 2011
In the mid-1990s, the U.S. Marine Corps sent more than a dozen generals, colonels and other high-ranking officers to the trading floor of the New York Mercantile Exchange, the world’s reigning oil market. Their mission: to see how the traders behaved when forced to make tough decisions under high stress with incomplete information.
What they found taught them a lot about the nature of the oil speculator. Continue reading Killing Your Own: The Truth About Oil Speculators
Originally published on abcnews.go.com on Feb. 24, 2011
Energy Trading Is Rife with Loopholes for Some but Not All
Oil topped $100 a barrel for the first time Wednesday since 2008, the same year that Wall Street and Washington brought the nation to the brink of financial Armageddon.
But that was then. Surely both camps are much more prepared to deal with the fallout now, right?
Not so fast.
All appearances to the contrary, both camps have wasted very little time getting back to business as usual. Only in this case, Americans know for certain one thing they did not know back in 2008: If anything goes wrong, they’ll likely be the ones to foot the bill.
And that changes everything. Here is what you do not know about how the Powers That Be have been handling high energy prices and the ongoing credit crisis, more popularly known in Washington these days as “the recent unpleasantness.” Continue reading When It Comes to $100 Oil, It’s Every Man for Himself
Originally published on CNBC.com on Feb. 15, 2011
“It’s the side of Wall Street Wall Street doesn’t want you to see,” one high-level banker warned me before I ventured down the rabbit hole that would become my seven-year sojourn to the heart of the oil market.
I will be honest: I expected the drugs, the corruption, the fistfights and the territorial death matches over money. It wasn’t surprising that the traders who ruled over the New York Mercantile Exchange, the world’s most powerful oil market, imbibed illegal substances and brought guns, strippers and pornographic material into the trading pits.
As many of the market’s inhabitants had come from nothing, their riches effectively overwhelmed them, leaving them with a feeling of omnipotence, a sense that real-world consequences did not apply to them. Much of the oral history of the men and women who built the global oil market, as related in “The Asylum,” invariably touches on their struggle with these things.
What I could not get over, however, was that most of the bad behavior appeared to be well-known to the nation’s top market regulators, the New York Police Department and some of the highest-ranking officials of the U.S. government. Yet as oil prices streaked to nearly $150 a barrel in 2008, no one did anything about it. To the contrary, there was mass denial and the desertion of many key “regulators” from their posts. Continue reading ‘The Asylum:’ New Book Uncovers the Dark Side of the New York Merc