
I just finished reading the latest feature article from
RollingStone Magazine and I am very intrigued. The article titled, The Great American Bubble Machine, written by
Matt Taibbi makes many assertions, including one that fits neatly into the theme of this website, Big Oil.
Taibbi takes on the giants of Wall Street in his latest feature article, accusing mainly Goldman Sachs of manipulating the markets, including commodities in order to make massive profits. He claims, with much research to back his assertions, that the Oil bubble that saw prices here in the U.S. spike at over $4.50 a gallon and $150.00 a barrell, was manufactured by the Wall Street cretons at Goldman Sachs. I must say, his story is compelling.
Some of his assertions claim that at the height of the oil bubble, a single barrell of oil from the Middle East was traded over 27 different times before ever reaching the pump. He claims that while the price was spiking in the U.S., and the other major consuming countries as a result, the actual demand was not more than the supply available. In fact, the opposite was true.
"And what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical-commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed."
So, did OPEC and the Middle Eastern suppliers turn a blind eye to the speculative dealings of Goldman Sachs? Was there any collusion? Did they get a bad rap? Is the Supply & Demand argument still viable?
Samuelson falls short of defending the oil companies, but makes a very good case for them and for defending Goldman Sachs assertions . Although Samuelson does admit that the futures (speculative) markets could have been partially to blame for the spike in the prices. I for one am inclined to take a position that adheres to the old adage that you listen to one side, then to the other, and the truth most likely lies somewhere in the middle. In my opinion, both Taibbi and Samuelson are correct.
Taibbi is correct in the fact that Goldman Sachs played their part in the speculative markets and are partially to blame for some of the increase in oil prices. And Yes, they are greeedy punks who created a terrible enviornment in speculative markets. Yet they are not the sole cause, nor are they the only ones to blame. Samuelson has hit on some very good and true facts. The oil industry has a part in the game and true supply and demand are to blame for some of the prices. Yes, his point that we here in the U.S. still pay far less than most other countries for a gallon of gas is also true.
Yet, I am still left wondering about the greed factor. And perhaps the issue that OPEC may had stayed by the wayside during all the speculation. Could someone have sounded the alarm? Should the suppliers have screamed foul? You tell me. Well, sound off in the comments section Casbahites.
Cock-A-Doodle-Doo!