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Prices & supplies - June 1

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CFTC to Examine Oil Traders' Intent, Ex-Officials Say

Bob Van Voris, Bloomberg
An investigation of oil trading by the U.S. Commodity Futures Trading Commission will likely target evidence that traders intended to manipulate markets rather than just schemed to make money, former officials of the agency said.

The CFTC, which announced May 29 it's investigating oil trading, will be looking for e-mails, voicemails, memoranda and other direct proof that traders were trying to illegally skew the markets with their trades.

``The key to this is: what is the intent of the trading?'' said Geoffrey Aronow, a former head of enforcement for the CFTC. ``Is the sole intent to try to move the price of the commodity - - in this case, crude oil? Or does the trading have a reasonable commercial justification?''

Record-high oil costs have prompted lawmakers to press for scrutiny of whether speculative trading is artificially pushing up prices.
(31 May 2008)


Russian oil output down 0.3% in Jan-Apr 08

RIA Novosti via Tehran Times
MOSCOW (RIA Novosti) - Production of oil and gas condensate in Russia dropped 0.3% year-on-year in January-April 2008, to 161 million metric tons (1.18 billion bbl), the economics ministry said on Friday.

The decrease was mostly down to the depletion of oil fields and delays in the opening of new deposits, as well as high taxes amid soaring global oil prices.

Oil exports stood at 81.7 million metric tons in the first four months of 2008, down 4.9% against the same period last year
(1 June 2008)


Behind Skyrocketing Oil Prices

Robert Weissman, Common Dreams
Yesterday comes the news that the Commodity Futures Trading Commission (CFTC) is investigating potential manipulation of the oil trading market.

That’s a good thing, though the CFTC is not exactly the most aggressive regulator around. (Says Judy Dugan of Consumer Watchdog: “On its face, the investigation smacks of the fox investigating a hen shortage in the chicken coop.”)

Market manipulation may be contributing to the recent oil price spike - though even in the worst case, it is only part of the story. The most important factor is supply and demand: supply is having trouble keeping up with unabated demand growth.

... Global supply is stretched thin. Some argue this is because the world is at or near “peak oil production,” a tipping point when half the world’s oil has been extracted, and yields begin to decline, with very major price effects.

A different view is uncomfortable with the apocalyptic element of peak oil theory. From this vantage point, more oil - or close substitutes, like tar sands or shale - is available, but it is harder and more expensive to get. This is the preferred view of the oil industry analysts (many of whom note that much oil that is easily attained from a technological standpoint - for example, in Iraq - is hard to reach for political reasons).

Either way, the supply challenges combined with rapidly growing demand means the world is going to see steadily higher prices. Additionally, very tight supplies will inevitably lead to price spikes that appear irrational from a close-up view.

... So, by all means, forward with a robust investigation of market manipulation, and yes to re-regulating oil markets that are now too financialized and removed from the buying and selling of real oil.

But the supply-demand challenges facing the world are much more serious than the speculative and other factors contributing to the present run-up in price.

Robert Weissman is co-director of Essential Action, a corporate accountability group based in Washington, D.C. that focuses especially on international issues and has been very involved in the access to medicines campaign. He is also editor of Multinational Monitor magazine. With Russell Mokhiber, he is editor of a weekly column, Focus on the Corporation, archived at lists.essential.org/pipermail/corp-focus.
(31 May 2008)

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