London-based "ICE" Group Controls the Price of Oil
"People can actually corner the market and drive up the price," said Sen. Maria Cantwell, D-Wash. "When there is no policeman on the beat, you know that crime can go up."
More and more fingers are pointing at one of the least-known but most powerful foreign exchanges - the InterContinental Exchange, or ICE.
By the end of 2007, the all-electronic exchange accounted for nearly a 50 percent market share of all global oil futures contracts, a total of 138.5 million contracts - up 49 percent from 2006.
Today it boasts more than 2,100 individual traders representing virtually all of the major players in oil - banks, hedge funds, energy companies, investment giants.
And according to a securities filing, two of those giants, Goldman Sachs and Morgan Stanley, were founding partners of ICE.
"The fact that they started this shows the intent of where they wanted to go," Greenberger said. "Which was to trade crude oil and energy products without any police in the United States supervising it."
That's because it's considered a foreign exchange. Taking advantage of a loophole created by the CFTC, the company says its "energy futures business" is conducted in London, it is not subject to U.S. laws. Over strong criticism, the CFTC agreed.
All this despite the fact ICE headquarters are on the fifth floor of a building in Atlanta, it's primary data center in Chicago, and nearly all its trades settled in U.S. dollars.
"It is a charade, and ... it defies explanation," Greenberger said.
(snip)
Now Congress and others are asking just how much of the crude oil futures market is being manipulated by either excessive buying designed to drive up the price, or phony transactions that imply a supply problem that does not exist.
posted by spooked at 2:43 PM
2 Comments:
Congress could pass legislation requiring a substantially higher margin requirement for traders and even require that traders must take
possession of x amount of any futures contracts they enter into.
There is no shortage of oil and this
particular bubble will burst and prices will drop back to close what they were before they began accelerating north.
Prediction: retail gasoline prices will return to $3.00 a gallon before the end of October, 2008.
Yeah, 7:14 PM, I totally agree.
Paul Krugman, who I generally have enjoyed reading, made a ridiculous argument in his last column that the idea that oil prices are being raised by speculators is a silly conspiracy theory. At which point I lost respect for Mr. Krugman.
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