Since publishing “The Asylum: The Renegades Who Hijacked The World’s Oil Market,” I have received a great deal of response (most of it in private correspondence and some in public forums, such as the press and in the courts, where I spent the better part of my summer languishing in sunless quarters).
You would think it would be the very traders about whom I wrote who would have caused the most trouble. This has not been so. On the contrary, most of them have been supportive to an unwarranted degree, including a rare few who have had every reason to be furious about what I wrote, but instead were reasonable.
Many of them also expressed a sincere belief that the global oil market has run off the rails and that prices are no longer set by supply and demand.
Enter the “market fundamentalist” academics, think tanks, lobbyists and politicians. These folks have been some of the worst offenders. What I have had difficulty understanding, mainly, is what they are getting on about and why. They certainly do not get paid well enough by Wall Street to justify the damage they cause by promulgating misinformation. Any money tossed their way is literally kibble, compared with what is being made off their backs. How much does a senator or academic cost? Not very much, I’m afraid.
It seems the issue of not wanting to be labeled a pariah in the well-heeled circles they like to frequent is the primary motivating factor. I myself have been subjected to it. Free caviar is addictive. And why shouldn’t it be?
Those playing umpire in the death match over whether the cost of energy is no longer tied to reality but tied to the capital movements of the big banks, hedge funds and oil traders often get caught in the middle. The Economist, for example, shies away from entertaining the concept that billions of dollars loaded in and out of a relatively compact market (much like “elephants might be loaded in and out of rowboats,” as one veteran oil trader put it) will lead to price swings, despite long-held economic principles that say just that. Why? Because it is too punishing. Recall George Bernard Shaw’s, “Never wrestle with a pig. You get dirty and, besides, the pig likes it.”
All the more reason why Fortune should be applauded for handling the white noise on a topic that’s nothing if not controversial. Last spring, it excerpted a full chapter of ‘The Asylum,’ and this week, it features the book as its Weekly Read, in a section that reviews top picks from Fortune’s editorial staff.
Do you have a link for the John Stossel clip? Thanks,
Good job making it appear easy.
Troy, CBS’s “Money Library” posted a transcript of the show here (scroll about halfway down page to read): http://bit.ly/mSuZsu
The crude markets clearly are affected by monetary policy more than fundamentals of supply demand. Within the past month, there were gunfights in eastern Saudi Arabia between Shiite militants and Sunni military. The area Shiite majority happens to occupy that part of Saudi Arabia that produces the majority of crude and loads it aboard tankers.
After years of price spurts due to Nigerian culprits interrupting a few hundred thousand per day—-with frequency–and corrected within 48 hours, one would expect the attacks in Saudi Arabia with its millions/day to move the market dramatically. It did not.
Rather the prices of crude bounce based on the latest rumors of Greek default—-of running printing presses in the ECB and US—now up to twist plus QEIII. Clearly it is the availability of free money with which to gambel that is moving the oil markets today. For Brent–WTI lags because it is physically constrained by mid continent US supply demand as affected by declining demand and increased supply of NGLs from ND shale gas production.
Thanks a lot – your answer solved all my problems after several days struggling
Ab fab my goodly man.
MS. Goodman’s blog posts are well written and interesting.
Among other sources, the film Inside Job exposes how many academic economic departments have become just another branch of Wall Street and the corporate class. Some of these learned mouthpieces may actually believe the laissez faire nonsense they spout, but receiving buckets of cash also has its pernicious sway. As Upton Sinclair said, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” It’s true that the amounts they get pale in comparison to the amounts extracted and outright stolen, but hey that summer home isn’t going to pay for itself.
Im working with a local OWL group in Ohio and Im thinking a way they can stay relevant and directed overwinter is to help people set up the claims that the FANNIe Freddie regulator is mandating–does anybody know what the staus of the claim program is?
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