Quote from a great piece in this month’s Vanity Fair, penned by the illustrious Mr. S…
“Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest. When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth.”
– Joseph E. Stiglitz, economist and Nobel laureate
Surprised by Gas Price of $4 a Gallon? Try $8.35 in Germany
By SUSANNA KIM
April 12, 2011
While American drivers are spooked by $4-per-gallon gasoline prices in the U.S., they may be shell-shocked on other continents like Europe. In London, gas was $8.17 per gallon in March, and in Istanbul, Turkey the price was $9.63, according to DailyFinance.
Leah McGrath Goodman, author of “The Asylum: The Renegades Who Hijacked the World’s Oil Market,” said at least two factors contribute to the variance in global gas prices. First, countries that produce their own oil often have lower prices. Second, different governments choose to subsidize or tax citizens for purchasing gas.
“Every country is different, obviously,” Goodman said. “Some countries have amazing subsidies. In Libya, even with its conflict, its low price has a lot to do with the fact that the government can choose to charge people a lot less.”
Here are five national averages around the globe… Continue reading 5 Shocking Gas Prices Around The Globe
Another year of high oil prices, another endless conversation about the role of speculators. Call up anyone on Wall Street or in Washington to find out what’s really going on. Chances are, the answers you get will go a little something like an Abbott and Costello routine.
Abbott: Well, let’s see, we have almost $4 gas and $110 oil. Who’s trading it? What’s the reason it’s so high? I Don’t Know…
Costello: That’s what I want to find out.
Abbott: I say, Who’s trading it; What’s the reason it’s so high; I Don’t Know.
Costello: Are you the portfolio manager?
Costello: You gonna’ be the regulator too?
Costello: And you don’t know the fellows’ names?
Abbott: Well I should.
Costello: Well then who’s trading it?
Costello: I mean the fellow’s name.
Costello: The guy trading it.
Costello: The first one to trade it at $110.
Costello: The guy trading…
Abbott: Who is the first!
Costello: I’m asking YOU who’s the first.
Abbott: That’s the man’s name. Continue reading Same Oil, Same Palaver…
By Tim O’Shei
HOUSTON BUSINESS JOURNAL | Friday, Apr 8th 2011
Who controls the global oil prices?
Powerful banks? Massive hedge funds? Big Oil? OPEC?
There’s never been a straight answer to that question – until now.
Leah McGrath Goodman, a former special writer and editor for The Wall Street Journal and 1998 graduate of St. Bonaventure University, spent the last seven years writing a book that reveals where oil prices have been set for decades: the New York Mercantile Exchange. Or, as the title of Goodman’s book calls it, “The Asylum.”
Published this year by William Morrow/HarperCollins, “The Asylum” takes readers into the boardroom and onto the trading floor of Nymex. Goodman paints a warts-and-all portrait of the often rough-edged traders, for whom she claims making or losing millions in a day was as commonplace as fistfights, drugs and pornography.
By executing both their own deals for oil contracts and orders from big banks and hedge funds, the Nymex traders set the benchmark for global oil pricing. They still do, though Nymex is now part of a group that includes its former competitor, the Chicago Mercantile Exchange, and most of the trading action happens online rather than on the floor.
Business First Managing Editor Tim O’Shei, a classmate of Goodman’s at St. Bonaventure, recently talked to her about the book and about the oil market. Following is a truncated version of that conversation: Continue reading New Book Reveals Who Controls Global Oil Prices
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 fortune.cnn.com on Mar. 9, 2011
In this excerpt from The Asylum: The Renegades Who Hijacked the World’s Oil Market, Leah McGrath Goodman witnesses a NYMEX energy trader hazing ritual and watches Bill O’Reilly uncover how those traders set the price of a barrel of oil.
It was dawn when I received my first of many after-hours phone calls from Mark Bradley Fisher, otherwise known as the Fish. A self-made millionaire with a Napoleonic sense of his own destiny, Fisher prided himself on his work ethic, his intellectual prowess, and his ability to rise early in the morning and toil late into the night. As a result, he had a habit of calling me almost exclusively at inconvenient times.
It was February 2005, the year Wall Street began to realize something was wrong with the oil market. Fisher, however, was not particularly disturbed. After all, he was one of the wealthiest and most powerful energy traders in the world.
Fumbling in the darkness, I nearly fell out of bed trying to find my cell phone. As I flipped it open, Fisher sounded none too pleased at the five-ring wait. Continue reading The Secret Group Setting the Price of Oil: Us
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