Didn't wheat have position limits and CFTC regulation? The action in Minnie wheat made the recent oil move look like a mild blip.
The California legislature imposed price caps on energy companies, preventing them charging the market price to consumers. In addition, they had imposed environmental and other regulation making it very difficult to increase supply by building more power plants. The combined result was a massive supply shortage (artificially low prices cause artificially low supply), and the destruction of the balance sheets of the energy companies. When supply is extremely low, price becomes inelastic to demand and so even a small amount of increased demand can cause prices to skyrocket. Thus, the situation is germane for any budding manipulator to push the price up to extremes by adding a little extra speculative demand, which cannot be met in the normal fashion by producers, because i) the legislature/public discouraged production & supply for years, so they did not have the capacity, and ii) the producers were going broke so didn't have the financial means to meet margin calls and/or hedge forward their future production. That's how supply and demand acted during the energy crisis in California. What did you think happened - Enron just waved their magic wand and spirited prices up by psychokinesis? P.S. your friend Jimmy Rogers seems to have been bang on the money with oil, wouldn't you say?
DJN: =DJ Morgan Stanley Analyst Sees Oil Driven To $150 By July 4 (Dow Jones 06/06 09:32:54) By Ed Welsch Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Strong demand from Asia will cause a short-term spike in oil prices to $150 a barrel by July 4, a Morgan Stanley analyst said Friday. Oil prices took a big step in that direction Friday, with benchmark futures rising 5% and topping $134 a barrel in morning trading. A spike to $150 would significantly raise the risk of severe damage to oil-sensitive sectors. Aviation executives have said even $125 oil wrecks the industry's business model, and chemical companies like Dow Chemical (DOW) have sharply raised prices to accommodate the soaring cost of petroleum feedstocks. Retailers and others who rely on consumers with budgets pinched by high gasoline prices are also under stress. Airline shares plunged Friday, cutting short a midweek rally spurred by deep capacity cuts at UAL Corp.'s (UAUA) United Airlines and Continental Airlines (CAL). UAL, Continental, US Airways Group (LCC) and American Airlines parent AMR Corp. (AMR) were all down more than 7% in late morning trading. Delta Air Lines (DAL) and Northwest Airlines (NWA) were down more than 6%. Morgan Stanley analyst Ole Slorer said Asian countries are taking "an unprecendented share" of the world's oil. The strong demand from Asia, coupled with stagnant oil supply growth, "appears to be pricing out Atlantic basin consumers while at the same time driving Atlantic inventories to critically low levels," he told clients in a research note released early Friday. The argument echoes that made by Goldman Sachs analyst Argun Murti, who has said it is increasingly likely oil prices could spike as high as $200 before enough demand is knocked out to rebalance the market. U.S. lawmakers and regulators, unconvinced supply and demand fundamentals fully explain the oil price spike, are looking into oil markets for signs of manipulation and undue influence from speculators. Inventories of U.S. crude oil are down by 35 million barrels since March, Slorer said, which is helping to drive the price of oil higher. Slorer said he didn't see a "quick fix" to the problem of higher prices, because he didn't see oil imports slowing by a surprising amount any time soon. He also blamed the effect of oil subsidies in oil exporting countries, and didn't see them being abandoned by their governments despite international pressure. Subsidies mean consumers in high-growth countries aren't fully feeling the effect of rising prices, easing pressure that otherwise would force them to use less fuel. Slorer said that the decisions of India and Malaysia to trim their fuel subsidies fueled a mistaken impression that other governments will follow suit. Few governments that subsidize gasoline for their citizens will trim those subsidies and may even increase them, Slorer said, because most countries with gasoline prices lower than the U.S.'s about $4 a barrel are oil exporting economies. The revenue they get from shipping crude at inflated prices more than offsets the cost of subsidizing gasoline use by their citizens, he said. Plus, those governments feel an obligation to give some of the profits from higher prices back to their people, and one way they are able to do that is through subsidized prices. "We reckon that higher price of crude will only lead to higher subsidies in oil exporting countries," he said. The only subsidizing emerging economy that could potentially cut subsidies and have an effect is China, Slorer said, calling it the "wild card" in the situation.
MS needs oil to be 150 by July 4 and I am sure it will get there maybe before that. Who would doubt that.
this would be a good time for Bush-II to show his leadership.... since it seems anyone complaining about the economic impact and destruction of life as most Americans know it, due to the unfettered rise in the price of oil, and how it is causing people on the ground to rethink everything about their ways of life, whether being a soccer mom and taking a trip to the grocery all the way to whether or not the police / fire trucks will roll on emergencies.... since anyone complaining of pointing out the negetive deliterious effects is being smeared with some socialist, communist name calling by those in support of these conditions, then, a simple solution would be for Geo Bush II to show his commanding, authoritative leadership and get out in front of this "thing" hey, after all, isn't he an Oil Man? hey, after all, isn't this what these last 8 years were all about anyway? hey, after all, with stocks going up, oil going up, with stocks going down, oil going up, hey, after all, isn't this what the Texas Delegation has wanted all along?
Here's what many dimwits fail to comprehend. The public is FORCED to pay the market price. Thus , the 'market' can set any old bullshit price it wants. No one is forced to buy a stock. Or gold. You are forced to buy a CERTAIN amount of oil. That's why the govt should be stepping in here to see whats really going on. I don't like the smell of it.
If we have to buy well well i guess the saudis are looking pretty and can charge whatever price they so desire. All this manipulation is getting old, you fight it at 80, 100,120,150 and then at 200. your problem is that there is no supply at lower prices, and those taking delivery have been willing to buy at any price! Price will keep going until a it finds where demand decreases. Demand has to decrease because they don't have the oil and are hiding this fact for as long as possible.
I can't believe that you would even make such a comparison. Minnie Wheat is like a pin-prick of a marketplace. Thin, thin, thin.
The problem with the presentation of your argument is that the Enron "disruption" and "gaming" of the power grid in California ONLY occurred in Northern California - - - no where else in the State. You conveniently failed to address this. What's wrong? Would mentioning that rather significant FACT poke a rather large HOLE in your argument?