Reply #38: Trading would revert to those who have a direct interest in the product.

[ozymandius]

That is to say: trading in hydrocarbons, once the investment banks are removed from the equation, would involve refineries and nations like Britain, China, India and the U.S.

How the investment banks got involved was on the futures end of oil trading. Either they can purchase oil that is currently flowing or they can purchase futures in terms of oil that will be delivered to market on a certain date in the future. The big investment banks have been heavy-handed in their purchase of oil promised for future delivery. Literally, they have been sitting on millions of barrels of oil with only certificates to show for it. They never really touch the stuff. Then they re-sell the goods to refineries at a handsome profit.

This is how Goldman-Sachs, et al., have been able to realize such tremendous profits over the past year.

The big players are actually the refineries and strategic reserves of respective nations. Where the investment banks have such sway is in their massive capitalization that allows them to leverage hydrocarbon markets upward with a promise of a hefty return on their investment.

And yes, G-S rigged the trade. There is either a long-term or short-term, depending on the bank's internal position, incentive to maintain the status-quo: a Republican majority with little incentive either to exercise subpoena power or to place oil execs under oath about what is "really" driving up gasoline prices.