Monday, June 02, 2008


The Bush Administration continues to ignore the realities of world oil prices as spokesperson Treasury Secretary Henry Paulson said on June 1 that oil price increases are due to “supply and demand” issues. Just a couple of days earlier the Commodity Futures Trading Commission, a federal regulatory agency, announced a massive criminal investigation of price manipulation in the oil futures markets.

The CFTC indicated the investigation had been quietly launched six months earlier and the announcement sent shock waves through the financial sector. The Coltons Point Times has written 14 articles about the financial manipulation of the oil futures markets over the past 18 months so we are pleased a federal agency has actually started the process.

However, the CFTC may not have the ability nor the resources to undertake such a massive investigation as their targets would have to be the largest financial organizations in the world. We already disclosed that equity owners of the London oil futures market, ICE, which is a USA company but not subject to federal regulation, include two of the largest investment houses in the world, Goldman Sachs and Morgan Stanley, three of the largest oil companies in the world, Royal Dutch Shell, BP Amoco and Total Fina Elf, and two of Europe’s leading financial institutions, Deutsche Bank and Societe Generale.

The price manipulations under investigation could be the result of actions by these and all the other top financial houses and oil companies in the world and the CFTC says it has just five lead counsels to handle the cases. There are already over forty investigations launched. To give you an idea of the limits of the CFTC a spokesperson testified just ten days ago before a Senate Committee and listed reasons for the record oil price as “the weak U.S. dollar, demand from emerging economies, world unrest, bad weather and supply disruptions.” No mention was made of financial manipulations.

Now Secretary Paulson should have known about the CFTC investigation before he spoke, everyone else in the world knew. Paulson used to head Goldman Sachs, one of the certain targets of the investigation, and he knew Goldman Sachs was one of the owners of the oil futures market. Are the Bush people really that disconnected from reality or is there another reason for the refusal to acknowledge the potential for price manipulation from speculators?

Bush recently traveled to Saudi Arabia and asked OPEC to increase oil production to lower prices and they told him it was speculators driving up the price, the financial institutions, not the producers. Both the president and treasury secretary continue to get the wrong information and that raises a lot of questions about the quality of the staff in the Administration.

The CFTC was set up in 1974 to protect Americans from manipulations in the commodity markets. It was last updated in 2000 even though in 2006 a Senate Permanent Subcommittee on Investigations said there was substantial evidence of price manipulation in the commodity oil futures markets and a gaping loophole in U.S. Regulations that would lead to further speculation and manipulation.

That was the same year the Administration allowed ICE, the new oil futures market owner in London to trade American oil futures in London. Oil prices were $59-60 per barrel then and since the gaping loophole in our regulation prices have more than doubled, meaning the price impact of speculation could be $60 per barrel today.

So Goldman Sachs represents ICE in securities offerings and was an original equity owner of ICE. The current Treasury Secretary was former head of Goldman Sachs. The current head of NYMEX, the New York Mercantile (Futures) Exchange whose contracts can be bought through ICE in London, is James Newsome who also sits on the Dubai Exchange, the third and last oil futures exchange in the world. Interestingly Newsome is a former chairman of the CTFC.

The current CTFC Global Markets Advisory Committee includes Newsome and Jeffrey Sprecher, Chairman and CEO of ICE, along with representatives of J.P. Morgan, Goldman Sachs, Lehman Brothers, Citigroup, UBS and Barclays among others. The CTFC Energy Market Advisory Committee includes Newsome and Sprecher from the futures exchanges along with Goldman Sachs, Shell Oil, Morgan Stanley, Merrill Lynch, Lehman Brothers, J.P. Morgan, and others.

So the two key advisory committees to the CTFC contain many of the very firms that are under investigation by the CTFC and the largest investment houses, banks and oil companies of the world are the target. The five CTFC lawyers could spend decades searching for truth.

Why did Congress and the Administration refuse to act to close the huge CTFC regulatory loophole two years ago when it was identified? Why were no changes made in CTFC regulations to enable it to effectively stop oil price manipulations since Bush took office? Why does the Treasury Secretary ignore what may be massive oil price manipulations by the financial sector speculators? How can the CTFC investigate the largest and richest corporations in the world with five lawyers?

If Congress or the Administration have any sense they will assign all the investigative resources of the federal government to the CTFC investigation including the FBI, SEC, FTC and any intelligence service monitoring the world oil situation. If ever there was a need for a national security investigation this is it as our economy and the world economy are at risk. This could be the last chance for Bush to actually do something for the good of the people before his Administration becomes a target of the investigation.

And don’t forget these same financial and oil companies have already given $1.6 billion to the campaigns of our U.S. Senate, House and presidential candidates in this election year and another $1.6 billion will be given before November. Let’s hope $3 billion cannot buy the influence of Congress. They have also paid over $20 billion in fines for fraud and stock manipulations in recent years so such behavior may not be anything new.

1 comment:

Anonymous said...

If Bush had any balls, he would have immediately dropped the speed limit back to 55 after getting snubbed by OPEC.

Do you really think OPEC is sympathetic to the America that screwed the world with AAA subprime mortgage securities that weren't worth the paper they were printed on?

And don't forget Phil:

Short link:

"But Gramm's most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act."