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>they'll protest the high oil prices and it's far >easier to believe McBush's sound bites than to >research. > >A missing child, a shooting, plane crash or a storm, >boom, easy to understand, no thinking involved. > > > > >>Handful of speculators dominate vast oil market >>by David Cho - Aug. 21, 2008 12:00 AM >> >>Washington Post >> >>WASHINGTON - Regulators had long classified a private >>Swiss energy conglomerate called Vitol as a trader >>that primarily helped industrial firms that needed oil >>to run their businesses. >> >>But when the Commodity Futures Trading Commission >>examined Vitol's books last month, it found that the >>firm was in fact more of a speculator, holding oil >>contracts as a profit-making investment rather than a >>means of lining up the actual delivery of fuel. >> >>Even more surprising to the commodities markets was >>the massive size of Vitol's portfolio - at one point >>in July, the firm held 11 percent of all the oil >>contracts on the regulated New York Mercantile >>Exchange. >>The discovery revealed how an individual financial >>player had gained enormous sway over the oil market >>without the knowledge of regulators. Other CFTC data >>showed that a significant amount of trading activity >>was concentrated in the hands of just a few >>speculators. >> >>The CFTC, which learned about the nature of Vitol's >>activities only after making an unusual request for >>data from the firm, now reports that financial firms >>speculating for their clients or for themselves >>account for about 81 percent of the oil contracts on >>NYMEX, a far bigger share than had previously been >>stated by the agency. >> >>Some lawmakers have blamed these firms for the >>volatility of oil prices, including the tremendous >>run-up that peaked earlier in the summer. >> >>"It is now evident that speculators in the energy >>futures markets play a much larger role than >>previously thought, and it is now even harder to >>accept the agency's laughable assertion that excessive >>speculation has not contributed to rising energy >>prices," said Rep. John Dingell, D-Mich. He added that >>it was "difficult to comprehend how the CFTC would >>allow a trader" to acquire such a large oil inventory >>"and not scrutinize this position any sooner." >> >>The CFTC, which refrains from naming specific traders >>in its reports, did not publicly identify Vitol. >> >>The agency's report showed only the size of the >>holdings of an unnamed trader. Vitol's identity as >>that trader was confirmed by two industry sources with >>direct knowledge of the matter. >> >>CFTC documents show Vitol was one of the most active >>traders of oil on NYMEX as prices reached record >>levels. By June 6, for instance, Vitol had acquired a >>huge holding in oil contracts, betting prices would >>rise. The contracts were equal to 57.7 million barrels >>of oil - about three times the amount the United >>States consumes daily. That day, the price of oil >>spiked $11 to settle at $138.54. Oil prices eventually >>peaked at $147.27 a barrel on July 11 before falling >>back to settle at $114.98 Wednesday. >> >> >>The biggest players on the commodity exchanges often >>operate as "swap dealers" who primarily invest on >>behalf of hedge funds, wealthy individuals and pension >>funds, allowing these investors to enjoy returns >>without having to buy an actual contract for oil or >>other goods. Some dealers also manage commodity >>trading for commercial firms. >> >>To build up the vast holdings this practice entails, >>some swap dealers have maneuvered behind the scenes, >>exploiting their political influence and gaps in >>oversight to gain exemptions from regulatory limits >>and permission to set up new, unregulated markets. >>Many big traders are active not only on NYMEX but also >>on private and overseas markets beyond the CFTC's >>purview. These openings have given the firms nearly >>unfettered access to the trading of vital goods, >>including oil, cotton and corn. >> >>Using swap dealers as middlemen, investment funds have >>poured into the commodity markets, raising their >>holdings to $260 billion this year from $13 billion in >>2003. During that same period, the price of crude oil >>rose unabated every year. >> >>CFTC data show that at the end of July, just four swap >>dealers held one-third of all NYMEX oil contracts that >>bet prices would increase. Dealers make trades that >>forecast prices will either rise or fall. Energy >>analysts say these data are evidence of the >>concentration of power in the markets. >> >>CFTC leaders have argued that speculators are not >>influencing commodities' prices. >> >>Vitol released a statement that stated only that it >>had not been contacted by the CFTC about the >>reclassification of its business and that its trading >>status remained unchanged.

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