The Kochs Give a Big Enron Fuck You to America
Last week, I wrote that Kochs Industries’ recent fight against financial regulation and aggressive defense of unregulated derivatives via the “Enron Loophole” was a clear sign that the company was using its position as a large-scale marketer of oil and other energy commodities to manipulate prices.
Well, thanks to recent reporting by Lee Fang, we now know this for a fact. Traders working for Koch Industries not only gave PowerPoint presentations outlining their plans to drive up the price of oil, but openly boasted about gaming the market in the business press.
Come “contango” with the Kochs. It only costs $1 more per gallon…
Their methods weren’t that different from the ones used by Enron to boost the price of electricity: instead of shutting down power plants, Koch Industries siphons millions of gallons of oil into storage tanks. ThinkProgress’ Lee Fang writes:
In 2008, Koch called attention to itself for “contango” oil market manipulation. A commodity market is said to be in contango when future prices are expected to rise, that is, when demand is expected to outstrip supply. Big banks and companies like Koch employ a contango strategy by buying up oil and storing it in massive containers both on land and offshore to lock in the oil for sale later at a set price. In December of 2008, Koch leased “four supertankers to hold oil in the U.S. Gulf Coast to take advantage of rising prices in the months ahead.” Writing about Koch’s contango efforts to artificially drive down supply, Fortune magazine writer Jon Birger noted they could be raising “gasoline prices by anywhere from 20 to 40 cents a gallon” at the time. Speaking with the Business Times, Koch executive David Chang even boasted that falling crude prices in 2008 provided an opportunity remove oil from the market for future delivery:
CHANG: The drop in crude oil prices from more than US$145 per barrel in July 2008 to less than US$35 per barrel in December 2008 has presented opportunities for companies such as ours. In the physical business, purchases of crude oil from producers and storing offshore in tankers allow us to benefit from the contango market where crude prices are higher for future delivery than for prompt delivery.
Yep, I guess all the speculatory fraud apologists at Cato are totally right. There’s nothing evil or sinister about billionaires who physically hoard oil supplies to drive up prices. No sir, nothing wrong with it. It’s all a necessary part of the new market economy, where speculators, billionaires, small farmers, young professionals and nice old pensioners all come together in harmony to find prosperity and happiness. Sure, commodities might come with a built-in billionaire tax. But so what? We can’t expect a free capitalistic society to be free. It costs an extra buck or two per gallon.
Here’s one more bit from Fang’s piece:
In recent weeks, gas prices around the country have surged to levels unseen since the 2008 oil spike. However, market fundamentals are not driving the nearly $4.00/gallon gas prices. In fact, under the Obama administration, oil production is at record highs and there is adequate global supply of crude. As Commodity Futures Trading Commission (CFTC) commissioner Bart Chilton has explained, rampant oil speculation, which is at its highest level on record right now, is to blame for current prices.
To put it another way: Forget what you learned about supply and demand. Everyone agrees the oil market is more rigged than a truckstop slot machine.
“What? Is the price of oil going up because of scarcity? Ah…Yeah, sure thing. That, and because of green shoots economic recovery! Haaaaaaaaahaa!”
This is why I’ve always been skeptical of the peak oil crowd. Their constant hysteria and focus on dwindling oil supplies—which they say will be tapped out very soon, plunging us into a post-apocalyptic world filled with roving bands of cannibals, dirty midgets, a gold-based economy, dehydrated veggies and Thunderdome entertainment—works only to the benefit of market manipulators like the Kochs. It helps reinforce in the popular mind the idea that today’s astronomical oil prices are somehow linked to scarcity and dwindling world oil reserves–which of course they are not.
Try searching the Internet for information on the oil market. Peak oil theories will be on 7 out of 10 pages you’ll hit.