Gasoline Price Manipulation? Looks like some proof here

[IChing]

Is Goldman Sachs manipulating the gasoline price?

There has been some speculation that the Saudis have been driving down the price of oil to help Republicans in the upcoming elections. I personally haven't seen any evidence that the Saudis are doing this, but it sure looks as though Goldman Sachs is doing some strange trading in the gasoline futures market. Can the Saudis be far behind?

Check out this timeline:

President George W. Bush nominated Henry M. Paulson, Jr. to be the 74th Secretary of the Treasury on June 19, 2006. The United States Senate unanimously confirmed Paulson to the position on June 28, 2006 and he was sworn into office on July 10, 2006.

Before coming to Treasury, Paulson was Chairman and Chief Executive Officer of Goldman Sachs.

So what does Goldman do just weeks after Paulson is sworn in as Treasury Secretary?

It announces a subtle move that drives down gasoline prices, short-term.

Nice move, coming just months before the election.

This weekend (They always hide the good stuff in the low circulation Saturday edition.), Heather Timmons at the New York Times spilled the beans on the maneuver:

Politics and worries about oil supplies may have caused gasoline prices to go up at the pump earlier this year, but one big investment bank quietly helped their rapid drop in recent weeks, according to some economists, traders and analysts.

Goldman Sachs, which runs the largest commodity index, the G.S.C.I., said in early August that it was reducing the index’s weighting in gasoline futures significantly. The announcement did not make big headlines, but it has reverberated through the markets in the weeks since and some other investors who had been betting that gasoline would rise followed suit on their weightings.
“They started unwinding their positions, and those other longs also rushed to the door at the same time,” said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation.

The August announcement by Goldman Sachs caught some traders by surprise.The firm said in early June that it planned to roll its positions in the harbor contract into another futures contract, the reformulated gasoline blendstock, which is replacing the harbor contract at the end of the year because of changes to laws about gasoline additives.>>>>snip


http://select.nytimes.com/gst/abstract.html?res=F10E15FA3C540C738FDDA00894DE404482

http://www.kellerkomments.com/2006/10/gasoline-price-manipulation.html

[Bluestar]

1. Shout this from the Rooftops - n/t

[IChing]

2. Yes this is some important news

But I'm afraid it is not nuclear enough right now to cause a fission reaction on the board

[C_U_L8R]

3. Gas still costs twice as much

a minute pre-election down-swing only fools idiots and freepers

[Sinistrous]

4. There is some heavy-duty jargon in that article.

I am sure that the phrases:

"reducing the index’s weighting in gasoline futures",
"They started unwinding their positions",
"it planned to roll its positions in the harbor contract into another futures contract", and
"the reformulated gasoline blendstock"

all have meanings and implications of which I am totally ignorant. I would be grateful if someone translates the article into more common language.

Sinistrous

[mrreowwr_kittty]

5. I second that. We need soundbites, please.

This is an important message that needs to get out to the voting public.

[IChing]

6. From another article explaining it a little better.

Gasoline Price Manipulation Before the Elections

by Peter Stojan


Now it may be hard to swallow for some that market manipulations go on, but they do at all levels. Penny stock promoters cook up their schemes, and power players have their schemes. In traders jargon, it’s called painting the tape. Indeed, the Washington Post has revealed that the government has formed something that is casually known as the Plunge Protection Team. PPT is supposed to jump in and buy stocks when things are unruly. Ronald Reagan formed the PPT when he signed Executive Order 12631. It’s just another way of painting the tape (Using your tax money, or newly printed Federal Reserve dollars, of course). Goldman is a member of the secretive PPT.


But some just don't believe these kinds of manipulations go on. I have had some email discussions in recent days with some pretty sophisticated economists who don’t believe Goldman has manipulated the gasoline market. Their argument goes: "I will continue to be an economist and look at the supply and demand issues."

My reply has been, Goldman Sachs understands supply and demand – and they also understand trading. When you sell-off $6 billion in gasoline futures contracts, you are going to have an impact – as the New York Times story correctly pointed out. That is an awful lot of supply. Further, this type of aggressive selling will result in selling by others who will receive margin calls they can’t meet. And by trend followers, who will suddenly dump gasoline and other commodities. This is, indeed, exactly what is happening. Goldman Sachs didn’t get to be Goldman by not understanding this stuff. Supply and demand can explain this manipulation completely.



They ask, "Why would Goldman Sachs trade this way and lose money?" The answer here is that Goldman doesn’t lose money. This is a managed commodity index. Goldman manages the index, but the actual money put up comes from institutions, hedge funds and other unlucky saps that trusted Goldman to manage the commodity index as a hedge against inflation – not to bail out of $6 billion in contracts over a few weeks. The result: Unlucky saps – Major losses. Goldman – Zero losses and their man running the Treasury. Which side of this trade would you want to be on?>>>>>snip

Peter Stojan has traded commodities full time for over twenty years.

[leftchick]

8. damn!

I didn't realize the PPT was the resilt of an executive order!

[IChing]

9. Charts of Gas Prices vs popularity and oil prices

Friday, September 15, 2006
Bush Approval Ratings, Gas Prices, and Iraq: Update


A few months ago, I posted on the correlation between Bush's approval rating, Operation Iraqi Freedom deaths, and the price of gasoline. There seems to be a strong correlation between the price of gasoline and Bush's approval, not so strong a correlation between Iraqi casualties and Bush's approval. Things are starting to heat up for the election run, so I figured I would update the data and take a crack at some further analysis.

Here is an updated graph depicting Pres. Bush's approval rating (measured on the left axis) and the inverse of gasoline price (measured on the right axis). As the red line decreases, this corresponds with an increase in the national average retail price of gasoline:



Here is the relationship between the inverse of the price per barrel of crude oil and Bush's approval ratings.



http://heavylifting.blogspot.com/2006/09/bush-approval-ratings-gas-prices-and.html

[JimDandy]

10. READ Post # 6 FIRST! Easy explanation. Then look at charts above.

WOW! Great job IChing.

[Coexist]

7. knr

[NoAmericanTaliban]

11. Not too long ago any slightly bad news would spike up the oil price

now - no matter what bad things are occuring the oil price is droping or going up just slightly.

we have had

- Nigerian rebels take over oil facilities
- more bad news out of Iraq
- Chavez & the UN speech
- Iran defiant to the UN & US and going ahead with it's nuclear program
- North Korea & atomic bomb test

Anyone of these would have sent the oil prices higher, but not now right before an election. Course, the oil companies are sacrificing some profit here, but they will make up for it in the long run with the tax breaks they get from the GOP.

[Initech]

12. I've been saying this for years

There HAS to be some sort of direct connection between Bush's approval ratings and fluctuating gas prices.

[specimenfred1984]

13. They've been rigging the S&P for a couple of years now

as I've posted numerous times in the "Stock Market Watch" threads in Latest Breaking News on DU.

Goldman buys 20,000 mini-S&P 500 futures contracts in 2 minute time periods, always on days when a Fed spokesperson is speaking -- I call it "Fed speaks, Fed pumps". They also do it on bad economic news days, days when the overall market would not go up.

It's a fascist country now. The head of the SEC was appointed by Bush and has a history of insider trading. Frist, the GOP Senate head is an insider trader. Con's offices had traders trading from the Capitol building based on legislation that was passed and I wouldn't be surprised if they're still doing it.

Finally, a huge natural gas hedge fund named Amaranth collapsed, losing $5 billion a week and it blocked "investors" from pulling out of the fund. Goldman Sachs had "investments" in that fund.

[IChing]

14. Yes always those Faries that magically appear when the market

starts to tank badly

[chill_wind]

28. The Paulsen Pay-Off at the Treasury Dept-- Senate Cared effing less!

(Sirota piece right after his confirmation)

The Paulson Payoff at the Bush Treasury Department


So again, a simple question: With Goldman Sachs handing incoming Treasury Secretary Henry Paulson an $18.7 million bonus for six months of service, what is the company looking for in return? After all, Goldman Sachs has had a lot of business before the government that Paulson's Treasury Department has been involved in and can influence. Here are just a few factoids about the Goldman Sachs-Government connections that raise questions about the Paulson payoff:

- The nonpartisan Project on Government Oversight (POGO) noted in a major 2002 study that Goldman Sachs is one of the largest beneficiaries of government contracts in America. It is also one of the contractors that POGO noted "have been found to have repeatedly broken the law or engaged in misconduct," yet still receives government contracts.

- MSN Money notes that Goldman Sachs main profit-makers is its offering of "investment banking services to corporate and government clients."

- The Associated Press reported in 2004 that "Goldman Sachs is being sued by investors who say the firm cost them money by trading on advance knowledge of the Treasury Department's announcement in October 2001 that the government was ending sales of new 30-year bonds." Goldman Sachs "previously settled government charges that one of its economists used an illegal tip to make millions for the firm in advance of the announcement."


more: http://www.huffingtonpost.com/david-sirota/the-paulson-payoff-at-the_b_24379.html

more at DU thread
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x27195


More corporate criminal cronyism--- Congress cared fucking less.

Confirmed him in a heartbeat. UNANIMOUS VOICE VOTE. Schumer slobbered all over him. "Simply no equal to Hank!"

Senate confirms Paulson as Treasury secretary
By William L. Watts, MarketWatch
Last Update: 5:57 PM ET Jun 28, 2006

(...)

The Senate approved the nomination by voice vote. Bush nominated Paulson, the departing CEO of Goldman Sachs, earlier this month to replace John Snow, who has headed Treasury since 2003.

Confirmation came just hours after the Senate Finance Committee approved Paulson's nomination by unanimous voice vote. Paulson testified before the committee for around three hours in his confirmation hearing on Tuesday.

"Members on both sides of the aisle came away very impressed with Mr. Paulson as ... an intelligent nominee who appreciates the concerns of senators and will try to work with senators to address those concerns," said Senate Finance Committee Chairman Charles Grassley, R-Iowa.

(snip)

"In the world of finance and international markets there's simply no equal to Hank," said Sen. Charles Schumer, D-N.Y., who praised Paulson's experience in international finance and relationships with Chinese business leaders and government officials. "We need someone who is seasoned. We need someone who knows markets," Schumer said.

from
http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=google&guid=%7B5801D6FE-295A-4326-894B-ACB0454619C5%7D&keyword=

[Justice Is Comin]

15. If only we had our own major network

show on two hours a night in prime time.

America would be educated beyond belief.

[jpak]

16. This maneuver and ChimpCo's decision to halt crude purchases for the SRP

are further proof of their political manipulation of the oil and gasoline markets.

If the Dems take the House or the Senate, they really need to investigate this...

[Gabi Hayes]

17. glad this came back again. Woodward, today on Dianne Rehm

talked about this, and, beyond Saudi manipulation, said he, despite his many contacts in this area, can think of NO reason for prices to go down so fast

what a surprise, huh?

[BootinUp]

18. If an index fund holds a large enough share

it makes sense they will be able to have that effect. The question is why other funds don't also play this market, minimizing the effect. Also whether there should be limits on how much of a market one fund can control.

[madmusic]

19. Just paid $2.21/gallon.

So happy, only twice as much as when BushCo took office. Better than the 3 times as much as it was a few weeks ago.

BushCo is God, and I'm voting for him. :sarcasm:

[SammyWinstonJack]

20. K & R

[WCGreen]

21. One other reason Gas prices have declined is a huge build up

in the US Gasoline inventory...

That is one of the reasons G&S dumped their long position...

Now Gas prices are gonna start creeping back up these next few weeks...

Already here in the Cleveland Area the price has bounced off a bottom of about 1.90 and is climbing back toward 2.15 - 2.20....

[Ignacio Upton]

23. Nigeria, Venezuela, and OPEC are also cutting production

Although I'm not sure how much the production cuts will matter. However, forecasters are saying that oil prices will go back up in the next months or so (winter) that will happen regardless of who wins next month. Personally, I would rather see oil prices climb a bit to prevent Bush from gaining in his job approval, but I don't want them to go back to their summer peak of $78 per gallon, because that number is too high. Having oil at $60-$65 would be my ideal range. It's low enough that it is not an overwhelming burden for many, but at the same time it's not too high that it will help Bush.

[ooglymoogly]

22. anybody who believes this is just a coincidence of market

forces should look into those brooklyn bridge shares. if you think the oil co's would not kill to keep those 40 bullion a year and would not manipulate the market are just plain fools.

[Ignacio Upton]

25. I think the price drop is part market maniupulation, part actual market

The price of oil would still drop even if there is no market manipulation (ie., lack of hurricane season, end of summer travel, etc.) However, I'm suspicious, because of the EXTENT in which gas prices are falling.

[ooglymoogly]

30. i think the spin is oversupply

oh gee we have too much gold lets dump it cheap just before the election.

[sofa king]

24. Who did it in 2000?

Remember in the fall of 2000 when gasoline prices began to inexplicably rise, and then just as inexplicably the Big Dawg threatened to tap into the Strategic Petroleum Reserve to counter the rise in prices?

It looks to me as if that was one of the first economic wars prosecuted by supporters of the Republican Party against the American people--at it looks like President Clinton knew about it, and was reacting to it. But I am a financial dimwit and there is no way I can follow up this story myself.

Anyone else working on this who is capable of putting it in fourth-grade English for me?

[Imagevision]

26. So enjoy the lowering gas prices while you can, regardless of which

party wins power control come November...

[dragonlady]

27. Price went up a dime here, and possible reason for that

When dragongentleman saw that the price of gas went up a dime here in Wisconsin, he said it was because whoever is in charge of manipulating it has given up on the Republicans' chances in the election and figured they might as well not miss out on any of that lovely profit.

[TheBaldyMan]

29. Al Jazeera, Oct 5th, "OPEC to cut production"

The story says OPEC are planning to cut production by 1 billion barrels per day now that oil has sunk below $60 per barrel.
from the website:http://english.aljazeera.net/NR/exeres/20C62388-D629-416F-9E33-F2C901D5C2F9.htm">OPEC to cut production

The Organisation of Petroleum Exporting Countries will make the cut after prices dropped 23 per cent in less than three months, a senior delegate said.

World markets are oversupplied with crude and fuel stocks in the US are at a 7-year high which has caused prices to fall from a peak of $78,40 in mid-July.

The exact date for the move is still to be decided, the delegate added.

The US expressed dismay at the decision. Sam Bodman, the energy secretary, said he would tell Opec ministers that the world still needed all the oil they could pump as they head into winter. He pointed that at $60 a barrel oil was still near record highs.

"We still need oil for sure. We still need all the oil we can get," Bodman told Reuters news agency.

The prices may be falling temporalily because of US stockpiles but expect the price of oil to be maintained at high levels all through 2007.