Re: [Marxism] how are (oil) prices set?

["Ambrose Andrews" <ambrose-bulk@xxxxxxxx>]

Hullo Les,

I'm no econohead, but this Engdahl source cited below in
a Direct Action article on food prices might be useful to you.

  -AA.


http://directaction.org.au/?q=node/71

Global food crisis made in USA

By Doug Lorimer

[excerpt re Oil prices]

"""
Under corporate capitalism, the price of oil, is not determined by the
demand-and-supply "laws" of the "free market". It is controlled by the
four major Anglo-American oil companies (ExxonMobil, Royal Dutch Shell,
Chevron and BP) that dominate the sale of refined oil in the biggest
markets — the developed capitalist countries of North America and
Western Europe, and by an elaborate financial system dominated by huge
 Western trading banks and hedge funds.


The international oil exchanges in New York — the Nymex — and in London
 — ICE Futures — set the global benchmark oil prices via oil futures
contracts on two grades of crude oil — West Texas Intermediate (WTI) and
North Sea Brent. But as William Engdahl, author of A Century of War:
Anglo-American Oil Politics and the New World Order, noted in a May 2
article on the Global Research website, "All this is well and official. But how
today's oil prices are really determined is done by a process so opaque
only a handful of major oil trading banks such as Goldman Sachs or
Morgan Stanley have any idea who is buying and who selling oil futures or
derivative contracts that set physical oil prices in this strange new world of
 `paper oil'. With the development of unregulated international derivatives
 trading in oil futures over the past decade or more, the way has opened
for the present speculative bubble in oil prices... A June 2006 US Senate
permanent subcommittee on investigations report on `The Role of Market
 Speculation in rising oil and gas prices', noted, "there is substantial
evidence supporting the conclusion that the large amount of speculation
in the current market has significantly increased prices'...


"In the most recent sustained run-up in energy prices, large financial
institutions, hedge funds, pension funds, and other investors have been
pouring billions of dollars into the energy commodities markets to try to
take advantage of price changes or hedge against them. Most of this
additional investment has not come from producers or consumers of
these commodities, but from speculators seeking to take advantage of
these price changes...


"The large purchases of crude oil futures contracts by speculators have, in
 effect, created an additional demand for oil, driving up the price of oil for
future delivery in the same manner that additional demand for contracts
for the delivery of a physical barrel today drives up the price for oil on the
spot market. As far as the market is concerned, the demand for a barrel
of oil that results from the purchase of a futures contract by a speculator
is just as real as the demand for a barrel that results from the purchase of
 a futures contract by a refiner or other user of petroleum.


"Goldman Sachs and Morgan Stanley today are the two leading energy
trading firms in the United States. Citigroup and JP Morgan Chase are
major players and fund numerous hedge funds as well who speculate." In
June 2006, oil traded in futures markets at some US$60 a barrel and the
Senate investigation estimated that almost half of this price was due to
pure financial speculation.


In his May 2 article, Engdahl observed that for the "huge US or EU pension
 funds or banks desperate to get profits following the collapse in earnings
since August 2007 and the US real estate crisis, oil is one of the best ways
 to get huge speculative gains. The backdrop that supports the current oil
 price bubble is continued unrest in the Middle East, in Sudan, in
Venezuela and Pakistan and firm oil demand in China and most of the
world outside the US. Speculators trade on rumor, not fact. In turn, once
major oil companies and refiners in North America and EU countries begin
 to hoard oil, supplies appear even tighter lending background support to
present prices."

"""

-- 
Ambrose Andrews
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