NYMEX Traders Drive Oil Prices Into Outer Space

by John M. Curtis
(310) 204-8700

Copyright January 3, 2011
All Rights Reserved.                                

          Driving oil prices through the roof, traders on the New York Mercantile Exchange continue their unregulated bidding war, pushing oil prices beyond the value due to supply-and-demand.  Closing Dec. 31 at 91.38 a barrel, the price of oil is expected to rise unabated despite Russia’s increased production and Brazil mammoth offshore Tupi oil field.  Expectations about abundant supplies are supposed to take oil prices down, regardless of increased demand in the developing world.  With Brazil leading the way with sugarcane-based ethanol and other industrialized powers experimenting with bio-fuel, electric and natural gas vehicles, world gasoline demand is expected to drop over the next twenty years.  Expecting less use of fossil fuels, the world anticipates lower prices, not the whopping increases seen during the last two months.  Oil industry and NYMEX traders assure continued price spikes.

            President Barack Obama must take a hard look at what happened the last time oil and pump prices spiked in 2008.  Runaway oil and gas prices helped push the country into the worst recession since the Great Depression.  Wall Street and the oil industry only concern themselves with obscene profits, not whether they tank the U.S. economy.  Today’s fragile recovery can’t take another oil shock where runaway oil and gas prices rob consumers of the cash needed to spur the consumer economy, accounting for over two-thirds of U.S. Gross Domestic Product.  With U.S. fourth quarter GDP running under 3%, the economy can’t afford a sudden spike in oil and gas prices.  Based purely on supply-and-demand, oil and gas prices should be dropping precipitously given Russia’s increased production and bountiful new finds off the coast of Brazil and elsewhere on the planet.

            Brazil plans to name its massive Tupi oil field off the coast of Rio de Janeiro “Lula,” after its outgoing popular President Luiz Ignacio da Silva.  Under the last eight years of da Silva, Brazil became the world’s leader in sugarcane ethanol production, with 90% of all commercial and private vehicles running on the popular bio-fuel.  Given the massive new “Lula” subsalt oil fields, estimated by Brazil’s “Petrobras” national oil company at 50 billion barrels, the price of NYMEX oil should be plummeting back to the OPEC-recommended $60 a barrel level.  All of Wall Street’s hype about growing demand from the end of the global recession or China and India can’t possibly account for the recent spike in today’s oil and gas prices.  Unlike Brazil, and practically every other industrialized country, the oil industry is controlled by the state for economic stability and prosperity.

            Only in the U.S. does its stock exchange conspire with the oil industry to maximize profits at the expense of consumers and the economy.  Obama can’t afford to allow a repeat during the Bush years, when the oil industry ran amok contributing to the nation’s worst recession since the great depression.  Stable energy prices are an essential part of a growing economy.  Free market traders argue that the markets will take care of themselves.  Market forces, namely, supply-and-demand, have nothing to do with the current oil and gas price spike, caused by oil industry and NYMEX collusion to maximize profits.  There’s nothing “natural” about today’s runaway prices, simply attributable to greed on the part of oil industry and NYMEX.  Todays’ fragile economic recovery simply can’t afford a repeat of 2008 when the NYMEX and oil industry drove the nation into recession.

            Congress must look carefully this time around at what can be done to avoid a repeat of 2008.  There’s too much at stake now, especially the nation’s stubborn 9.8% unemployment rate that contributes to today’s harmful budget deficits.  For the deficits to drop and the economy to improve, Wall Street must keep growing with healthy publicly traded companies.  Nothing hurts the bottom line more than runaway fuel prices, robbing most businesses, except the oil industry, of profits to keep quarterly earnings strong.  Obama and Congress can’t afford to let the oil industry get the better of the economy this time around.  While Wall Street cheers unbridled greed, it can’t be at the expense of the overall economy.  If more businesses fail and quarterly earning plummet, its eventually leads to a bear market, hurting the economy.  NYMEX traders must be kept from taking down the economy.

            New announcements by Russia and Brazil about stepped up oil production should have a sobering effect on world oil prices.  Because NYMEX continues to bid oil and gas prices into the stratosphere, some intervention is necessary to prevent a repeat of 2008, when runaway oil and gas prices boosted oil industry profits while hurting the overall economy.   Free market advocates in the U.S. must realize that manipulation by the oil industry and NYMEX can’t be allowed to sabotage supply-and-demand forces that should have oil and gas futures trading around 50% of its current value.  With the U.S. economy finally showing a pulse, the oil industry can’t undermine economic recovery.  Too many jobs ride on the profits from cheap oil and gas prices.  Before it’s too late, Barack must show the leadership needed to prevent the NYMEX and oil industry from tanking the economy.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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