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World faces choice between higher energy, food cos

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  Quote Spartakus Quote  Post ReplyReply Direct Link To This Post Topic: World faces choice between higher energy, food cos
    Posted: 18-May-2008 at 10:06

World faces choice between higher energy, food costs: experts

Is it really a choice between food or fuel, or are closed US, European and Asian markets the real cause of the global food crisis.
by Staff Writers
Singapore (AFP) May 15, 2008
The world must choose between higher energy prices or rising food costs, experts said Thursday, arguing that the use of farm land to make biofuels was likely to continue amid strong energy demand.

Biofuels are among the factors blamed for escalating global prices of foodstuffs including corn, rice and wheat. The rising cost of such staples has sparked protests in many countries, including in Asia.

Biofuels account for a substantial portion of the fuel produced in non-OPEC countries, so governments, businesses and individuals must decide if they want higher energy prices or more expensive food, the experts said at a Singapore conference.

Oil prices would be 15 percent higher if biofuel production was taken out, said Francisco Blanch, global commodity strategist at Merrill Lynch, Pierce, Fenner and Smith Ltd.

Biofuels such as ethanol can be derived from foodstuffs including corn, soybeans and sugarcane.

Last year, one-third of oil production by countries outside of the Organisation of the Petroleum Exporting Countries (OPEC) cartel came from biofuels and this is projected to increase to two-thirds this year, he said at the conference.

"So if you think that in the next five years we can live without biofuels because governments decide that they are pushing up agricultural commodity prices, it's going to boil down to a decision between eating or moving around," he said.

Diverting farm products to produce biofuels, which power cars, has come under heavy criticism by environmental activists and some government officials, who said it is one of the major reasons for rising global food prices.

Biofuels were initially viewed as an environmentally-friendly alternative compared with dirty fossil fuels, but they are now under attack as some unintended consequences emerge.

Speakers at the conference said making a choice is not easy, especially in a market where crude oil supply is struggling to meet demand, and with oil and gas production costs soaring.

Michael Coleman, founder of the hedge fund Aisling Analytics, said that the issue of the choice between high food prices and higher fuel costs "has a moral dimension that everybody needs to wrestle with."

Paul Willows of LD Commodities Asia Pte Ltd added that "biofuels is here to stay if we think oil prices are going to remain over 100 dollars a barrel."

Oil prices broke through the 100 US dollar per barrel level at the start of the year and are now trading above 120 dollars.


http://www.energy-daily.com/reports/World_faces_choice_between_higher_energy_food_costs_experts_999.html
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  Quote Omar al Hashim Quote  Post ReplyReply Direct Link To This Post Posted: 18-May-2008 at 12:24
I'm not convinced biofuels are making any impact on food prices. Six months ago I was sure we had a food surplus, now suddenly a deficit? Huh?
For all of the foods that I buy the price hasn't gone up. Flour (atta) is the same, rice (banaspati) is the same, meat is only subject to local issues (weaker drought, price goes up slightly), where are these higher food costs?

I think that most of the higher food costs are in transportation. It costs more to transport the food, therefore the price is higher.


Edited by Omar al Hashim - 18-May-2008 at 12:24
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  Quote Styrbiorn Quote  Post ReplyReply Direct Link To This Post Posted: 18-May-2008 at 12:28
Originally posted by Omar al Hashim



I think that most of the higher food costs are in transportation. It costs more to transport the food, therefore the price is higher.

Well, everything has gone up ridiculously here, including locally produced food. For example,  since 10 months, wheat flour is up 35%, dairy products(which all are locally produced!) 20%, meat 10% etc.
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  Quote Maharbbal Quote  Post ReplyReply Direct Link To This Post Posted: 18-May-2008 at 21:14
Actually, the issue is slightly more complicated:

1. There is no clear relationship between rising food prices and the increased use of biofuel. More precisely, this relationship seems very weak. A wealth of other factors are at play (natural disasters in the  big producers such as Burma, the US and Australia, rampant diseases and parasites are also taking their toll on the production of Ethiopia, Iran and Kazakstan, rise in demand, rise in the price of transport, land, seeds and fertilizer, institutional disincentives in Argentina, China, North Korea, Egypt, speculation for profit or to guaranty food supplies) and by any mean decreasing the share of biofuel in the next harvest will do very little to help.

2. Agriculture is badly hit by the cost of oil. Machines, transports and fertilizer use energy and/or oil. Decreasing the biofuel supply would merely increase the price of these three things and thus the price of food.

3. The prices of biofuel-producing crops (mainly corn and sugarcane) are amongst those that have increased the least over the last few month. There is next to no relationship between the amount of rice produced in Asia and the one amount of corn produced in the US.

To prevent such food prices hick in the future some key policies are important:

1. Cutting red tape in many regions where agricultural production is limited artificially by the price of corruption, the weight of the administration, etc. For instance, Ukraine and specially Russia and Khazakstan could easily double the amount of land cultivated if they let farmers and financiers do their stuff freely.

2. Some state keep their farmers' productivity artificially low. In Egypt, India, Ukraine and Argentina, farmers are prevented from exporting their production. As a result, while world prices are rising, the farmers from these countries do not benefit from this windfall, so they have no incentive to produce more, so their country still has to rely on the world food markets. This situation is even worst in China, Burma and North Korea, there the lack of freedom, the inability to benefit from one's labour and other factors have slashed productivity to the point that North Korea is not even able to avoid starvation and that rice production in Burma is a mere 10% of what it was 50 years ago.

3. Investment in infrastructures is also essential. In Africa in particular, but in other places too, roads, ports, dams and levies are essential for producing more and being able to bring that production to the consumers.

Unfortunately, the recent crisis seems to have fueled a form of hysteria highly prejudicial to almost every body. The US and the EU do not seem to want to diminish their policies designed to artificially keep the price of their agricultural produces low. But a new element is starting to appear: the food-poor but cash-rich nations such as Lybia and Saudi Arabia are starting to buy huge quantities of land abroad to make sure that their food supply will not only depend on the international market. But ultimately this may seem a bit petty considering that despite their financial might these nations are quite small in term if demography and thus won't create too much problem.

The situation is much more frightening when China joins the ranks of the countries buying land abroad. Feeding 1.4bn Chinese is a huge issue, and their eagerness to eat more meat and dairy will soon make them the biggest consumer in the world. The Chinese government is planning to buy through public companies or private ones financed through public banks huge amounts of land mostly in Africa and South America. So far so good, but it quickly appeared that this had more to do with neo-imperialism than anything else. Most of the farmers will be Chinese, they will draw on resources such as water and compete with local peasants, they will certainly keep the best land, and re-distribute very little to the host country. It will create a system very close from the one observable nowadays in the oil field in Africa where foreign engineers trust the best jobs and the locals benefit mostly from pollution.

Overall, certainly, the best thing to do is to make the agriculture more sustainable. Using less fertilizer would decrease significantly the price of production. It is mostly up to us to support bio-agriculture… I have a dream…
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  Quote Omar al Hashim Quote  Post ReplyReply Direct Link To This Post Posted: 19-May-2008 at 02:39
Thanks Marhabbal! That was the kind of analysis I was after
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  Quote vulkan02 Quote  Post ReplyReply Direct Link To This Post Posted: 19-May-2008 at 05:48
I never heard that Saudi Arabia and Lybia are buying land abroad. You meant land from other nations in the Middle East or in the West as well?

I think you could also add the actions of speculators to the mix that  helps drive food prices higher. Maybe it isn't the primary cause but them making billions by betting on food stocks is of course going to have its effect on raising that price even more.
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  Quote Maharbbal Quote  Post ReplyReply Direct Link To This Post Posted: 19-May-2008 at 20:16
Vulkan what would be the point for Lybia to buy Syrian desert? No, Khadafi's governement is in discussion for some massive buy out in Ukraine.

The action of speculators is difficult to assess as it is the case in the oil sector. Ultimately the speculators on the international future market (i.e. the price of the next harvest or the one after that) that have the most impact are governments such as Philippines and Egypt that prefer paying a significant premium now rather than seeing their people on the brink of starvation later, this is the main engine of the inflation.

Of course in the middle of that some big companies and some traders make handsome profits. But the food market was not ready to face such crisis so most of the benefits from the price hike are lost for instance through higher transport costs (resulting from the lack of ships) and higher stocking prices (less ships available when needed means more time in the warehouses). Proof that speculators are not the main reason for the inflation (nor indeed even a significant one) can be found in the fact that (1) stocks are at a 30 years lowest for most crops (2) governments are the main buyers.

Where there is indeed speculation it is on the factors of production. Agricultural land in particular is becoming a refuge value a bit as gold is. It is thought that it can't go down and actually will very likely rise. Over the last few month some major banks and other financial bodies have heavily invested in agricultural land over the world. Between October and March if I recall correctly the price of land in Ukraine and Western Russia has increased by 50% and is still way below the price of similar land in Western Europe. I don't have the figures, but I wouldn't be surprised if a similar trend was to be observed in Ethiopia, Vietnam, etc.

This type of speculation is (relatively) good news for the people on the ground that are producing the food we eat and that have been suffering badly over the last 25 years of a price of food extremely low. Basically, a Russian farmer that had a few fields worth nothing 2 years ago, is now at the head of a significant capital. He can sell a bit and with that money buy machines and other stuff that will increase considerably his output. The problem is that in many places, farmers only partly own their land and their rent the rest, in this case, most of the benefit of the inflation will go to the landowner and not the farmer and the production may well not rise.

Frankly, the #1 reason for the increase in price is the fact that mediocre investment in agriculture in most of the world have not allowed the primary sector's production to follow the recent demographic growth. That is why the countries the most badly hit by the crisis are those with the highest rate of population growth (Egypt, Philippines, West Africa).
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  Quote vulkan02 Quote  Post ReplyReply Direct Link To This Post Posted: 21-May-2008 at 05:48
So basically its a combination of booming population vs. stagnant agricultural methods, transportation has gone way up since oil is skyrocketing and finally the speculators (middleman) in international stocks also help somewhat to drive up of the prices.
And you are saying that food is less expensive today than 30 years ago?

A crazy world we live in these days, just 50 years ago governments were trying to wipe each other out now they are buying each other out ...
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  Quote pikeshot1600 Quote  Post ReplyReply Direct Link To This Post Posted: 21-May-2008 at 23:23
Originally posted by vulkan02

So basically its a combination of booming population vs. stagnant agricultural methods, transportation has gone way up since oil is skyrocketing and finally the speculators (middleman) in international stocks also help somewhat to drive up of the prices.
And you are saying that food is less expensive today than 30 years ago?

A crazy world we live in these days, just 50 years ago governments were trying to wipe each other out now they are buying each other out ...
 
Give them a chance to starve their adversaries, or deny them water resources, to get what they want.  We haven't seen anything yet. 
 
 
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  Quote Omar al Hashim Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 05:58
Originally posted by vulkan


A crazy world we live in these days, just 50 years ago governments were trying to wipe each other out now they are buying each other out ...

They buying each other out 50 years ago and they are trying to wipe each other out today too.
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  Quote Leonidas Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 07:24
there is also some 'froth' in the recent prices, some of these commodities are being traded by hedge funds and others in a specalutive way. Though for sure, the structural issues of supply and demand are certainly there. Expect agr-inflation to remain as a part of the 'super cycle' reality hitting resources in general.
 
Bio fuels should only effect some of the supply, that is corn and sugar. The weather will have a bigger impact, for example Burma, with rice already the key driver for our problems at this point in time. Land usage, urbanisation as well as desertification (sp?) of over used land will also hurt more than bio fuels.


Edited by Leonidas - 22-May-2008 at 07:25
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  Quote Guests Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 07:54
Hey, its not funny. Gone from an all time surplus to a shortage in two years. After a bumper crop. Since most of it was sold abroad.
 
 
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  Quote Leonidas Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 13:08
wasn't their rice issues in pakistan? 
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  Quote Guests Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 13:31
Wheat. We had a record crop this year. But the thing is since there is a liberal export/import policy, producers (80% of whom are private) have the ability to sell wherever they want. As a result they sold it in the mid east, and Afghanistan (where the UN was buying) since they got better prices. In other words priced out for our own wheat.
 
Rice, a bumper crop as usual, but rice is considered a poor mans food here.
 
The thing is, that unlike most third world countries, we always had surplus electricity and food production. It is because of that we managed to have a consistant if unspectacular economic growth, and increasing industrialisation. In the space of 3 years, we are deficient in both. 8 hour power cuts! Cuts were unheard of here (except in Karachi where the problem was distribution rather than generation).
 
 
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  Quote Leonidas Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 13:43
thanks for the information, i just heard that there was rice issues (maybe amongst the poor?), but it could of been wheat all along. exporting to the highest bidder can be a problem

what it sounds like is that pakistan has grown too quick for its infrastructure set up and has big bottle necks >  poor planning (we have a similar problem but not in that way)
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  Quote Guests Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 13:59
Musharraf era has seen unprecedented growth in all areas, except the two I mentioned. Middle Class in now something like 50 million plus, up from 7 million. And the standards for what is middle class is now much higher.
Yes planning could have been better, political problems have also caused it. For example, a dam on the Indus cannot be built since Sindh* is dead against it, even though the fears are irrational, it is so politicised that no gov can order it constructed, without declaring martial law in Sindh.
 
 
*Parts of Punjab and Frontier are also against, but other parts, esp those on the Indus are pro.
 
 
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  Quote Maharbbal Quote  Post ReplyReply Direct Link To This Post Posted: 22-May-2008 at 20:07
About the export problem, you should consider the Argentinian case. Huge producer of wheat as you know, the country has faced a few problems last year. This has motivated the government to ban export. As a result, the farmers' income dropped while the price of production went on rising (oil, fertilizer, seeds world prices have risen and farmers receive no subsidies in this case). As a result the next harvest is expected to be 15% lower than the previous one. Free market remains the best incentive for productivity.

On electricity, the Russians were speaking about building ships with nuclear plants on them that could be quickly deployed next to the shores of the regions that need it. When I hear about what you say about Pak (but of course the case in other countries such as South Africa) I really think it would be a brilliant idea.
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  Quote Guests Quote  Post ReplyReply Direct Link To This Post Posted: 23-May-2008 at 07:37

The govenments reponse here as far as the wheat is concerned is to set up a grain reserve ala wartime. I don't think they will reduce exports by much, though that might occur yet.

 
As for electricity, they are busy authorising new power stations right, left, center. Also something like 8 new nuclear power stations will come online in the next 25 years. That will solve the porblem hopefully, and encouragingly they are modernising the distribution infrastructure. As for using ships, well there are a couple of old barges and oil tankers who are being used for that ourside Karachi
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  Quote vulkan02 Quote  Post ReplyReply Direct Link To This Post Posted: 25-May-2008 at 07:44
Another commentary relevant to this thread, regarding especially how speculators drive up prices...



Oil price mocks fuel realities
By F William Engdahl

As business and consumers consider the implications for them of crude oil selling at US$130-plus per barrel, they should bear in mind that, at a conservative calculation, at least 60% of that price comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York Nymex futures exchanges and uncontrolled inter-bank or over-the-counter trading to avoid scrutiny (see Speculators knock OPEC off oil-price perch, Asia Times Online, May 6, 2008).
US margin rules of the government's Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex by paying only 6% of the value of the contract. At the present price of around $130 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120.

This extreme "leverage" of 16 to one helps drive prices to wildly unrealistic levels and offset bank losses in subprime and other disasters at the expense of the overall population.

The hoax of "peak oil" - namely the argument that oil production has hit the point where more than half all reserves have been used and the world is on the downslope of oil at cheap price and abundant quantity - has enabled this costly fraud to continue since the invasion of Iraq in 2003, with the help of key banks, oil traders and big oil majors.

Washington is trying to shift blame, as always, to Arab oil producers and the Organization of Petroleum Exporting Countries (OPEC). The problem is not a lack of crude oil supply. In fact, the world is in over-supply now. Yet the price climbs relentlessly higher. Why? The answer lies in what are clearly deliberate US government policies that permit the unbridled oil price manipulations.

World oil demand flat, prices boom
The chief market strategist for one of the world's leading oil industry banks, David Kelly, of JP Morgan Funds, recently admitted something telling to the Washington Post: "One of the things I think is very important to realize is that the growth in the world oil consumption is not that strong."

One of the stories used to support the oil futures speculators is the allegation that China's demand for imported oil is exploding out of control, driving shortages in the supply-demand equilibrium. Yet the facts do not support the China demand thesis.

The US government's Energy Information Administration (EIA) concluded in its most recent monthly Short Term Energy Outlook report that US oil demand is expected to decline by 190,000 barrels per day (b/d) this year. That is mainly owing to the deepening economic recession.

Chinese consumption, the EIA says, far from exploding, is expected to increase this year by only 400,000 barrels a day. That is hardly the "surging oil demand" blamed on China in the media. Last year, China imported 3.2 million barrels per day, and its estimated usage was around 7 million b/d total. The US, by contrast, consumes around 20.7 million b/d.

That means the key oil-consuming nation, the US, is experiencing a significant drop in demand. China, which consumes only a third of the oil the US does, will see a minor rise in import demand compared with the total daily world oil output of some 84 million barrels, less than half of one percent of total demand.

OPEC has its 2008 global oil demand growth forecast unchanged at 1.2 million barrels per day (mm bpd), as slowing economic growth in the industrialized world is offset by slightly growing consumption in developing nations. OPEC predicts that global oil demand in 2008 will average 87 million bpd, largely unchanged from its previous estimate. Demand from China, the Middle East, India and Latin America is forecast to be stronger, but the European Union and North American demand will be lower.

So the world's largest oil consumer faces a sharp decline in consumption, a decline that will worsen as the housing and related economic effects of the US securitization crisis in finance de-leverages. The price in normal open or transparent markets should presumably be falling not rising. No supply crisis justifies the way the world's oil is being priced today.

Big new oil fields coming online
Not only is there no supply crisis to justify such a price bubble. There are several giant new oil fields due to begin production over the course of 2008 to further add to supply.

The world's single-largest oil producer, Saudi Arabia, is finalizing plans to boost drilling activity by a third and increase investments by 40%. Saudi Aramco's plan, which runs from 2009 to 2013, is expected to be approved by the company's board and the Oil Ministry this month. The kingdom is in the midst of a $50 billion oil production expansion plan to meet growing demand in Asia and other emerging markets and is expected to boost its pumping capacity to a total of 12.5 mm bpd by next year, about 11% up from the present capacity of 11.3 mm bpd.

In April this year, Saudi Arabia's Khursaniyah oilfield began pumping and will soon add another 500,000 bpd to world oil supply of high grade Arabian light crude. In addition, the country's Khurais oilfield development, the largest of Saudi Aramco's projects, will boost the production capacity of Saudi oilfields from 11.3 million bpd to 12.5 million bpd by 2009. Khurais is planned to add another 1.2 million bpd of high-quality Arabian light crude to Saudi Arabia's export capacity.

Brazil's Petrobras is in the early phase of exploiting newly confirmed oil reserves offshore in its Tupi field that could be as great or greater than the North Sea. Petrobras says the new ultra-deep Tupi field could hold as much as 8 billion barrels of recoverable light crude. When online in a few years it is expected to put Brazil among the world's "top 10" oil producers, between Nigeria and those of Venezuela.

In the US, aside from rumors that the big oil companies have been deliberately sitting on vast new reserves in Alaska for fear that the prices of recent years would plunge on over-supply, the US Geological Survey (USGS)recently issued a report that confirmed major new oil reserves in an area called the Bakken, which stretches across North Dakota, Montana and south-eastern Saskatchewan. The USGS estimates up to 3.65 billion barrels of oil in the Bakken.

These are just several confirmations of large new oil reserves to be exploited. Iraq, where the Anglo-American Big Four oil majors are salivating to get their hands on unexplored fields, is believed to hold oil reserves second only to Saudi Arabia while much of the world has yet to be explored for oil. At prices above $60 a barrel huge new potentials become economic. The major problem faced by Big Oil is not finding replacement oil but keeping the lid on world oil finds in order to maintain present exorbitant prices. Here they have some help from Wall Street banks and the two major oil trade exchanges - Nymex and London-Atlanta's ICE and ICE Futures.

Then why do prices still rise?
There is growing evidence that the recent speculative bubble in oil, which has gone asymptotic since January, is about to pop. Late last month, in Dallas, Texas, the American Association of Petroleum Geologists held its annual conference, with major oil executives and geologists present. According to one participant, knowledgeable oil industry chief executives reached the consensus that "oil prices will likely soon drop dramatically and the long-term price increases will be in natural gas".

Just a few days earlier, Lehman Brothers, a Wall Street investment bank, had said that the current oil price bubble was coming to an end. Michael Waldron, the bank's chief oil strategist, was quoted in Britain's Daily Telegraph on April 24 saying, "Oil supply is outpacing demand growth. Inventories have been building since the beginning of the year."

In the US, stockpiles of oil climbed by almost 12 million barrels in

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April according to the May 7 EIA monthly report on inventory, up by nearly 33 million barrels since January. At the same time, MasterCard's May 7 US gasoline report showed that gas demand has fallen by 5.8%. And refiners are reducing their refining rates dramatically to adjust to the falling gasoline demand. They are now running at 85% of capacity, down from 89% a year ago, in a season when production is normally 95%. The refiners today are clearly trying to draw down gasoline inventories to bid gasoline prices up. "It's the economy, stupid," to paraphrase Bill Clinton's infamous 1992 election quip to daddy Bush. It's called economic recession.

The May 8 report from Oil Movements, a British company that tracks oil shipments worldwide, shows that oil in transit on the high seas is also quite strong. Almost every category of shipment is running higher than it was a year ago. The report notes that, "In the West, a big share of any oil stock building done this year has happened offshore, out of sight." Some industry insiders say the global oil industry from the activities and stocks of the Big Four to the true state of tanker and storage and liftings, is the most secretive industry in the world with the possible exception of the narcotics trade.

Goldman Sachs again in the middle
The oil price today, unlike 20 years ago, is determined behind closed doors in the trading rooms of giant financial institutions like Goldman Sachs, Morgan Stanley, JP Morgan Chase, Citigroup, Deutsche Bank or UBS. The key exchange in the game is the London ICE Futures Exchange (formerly the International Petroleum Exchange). ICE Futures is a wholly owned subsidiary of the Atlanta Georgia International Commodities Exchange. ICE in Atlanta was founded in part by Goldman Sachs, which also happens to run the world's most widely used commodity price index, the GSCI, which is over-weighted to oil prices.

As I noted in my earlier article, ICE was the focus of a recent congressional investigation. It was named both in the Senate's Permanent Sub-committee on Investigations' June 27, 2006, Staff Report and in the House Committee on Energy and Commerce's hearing in December 2007, which looked into unregulated trading in energy futures.

Both studies concluded that the energy price climb to $128 and beyond is driven by billions of dollars' worth of oil and natural gas futures contracts being placed on the ICE. Through a convenient regulation exception granted by the George W Bush administration in January 2006, the ICE Futures trading of US energy futures is not regulated by the Commodities Futures Trading Commission (CFTC), even though the ICE Futures US oil contracts are traded in ICE affiliates in the US. And at Enron's request, the CFTC exempted the over-the-counter oil futures trades in 2000.

So it is no surprise to see in a May 6 report from Reuters that Goldman Sachs announces oil could in fact be on the verge of another "super spike", possibly taking oil as high as $200 a barrel within the next six to 24 months. That headline, "$200 a barrel!" became the major news story on oil for the next two days. How many gullible lemmings followed behind with their money bets?

Arjun Murti, Goldman Sachs' energy strategist, blamed what he called "blistering" (sic) demand from China and the Middle East, combined with his assertion that the Middle East is nearing its maximum ability to produce more oil. "Peak oil" mythology again helps Wall Street. The degree of unfounded hype reminds one of the self-serving Wall Street hype in 1999-2000 around dot.com stocks or Enron.

In 2001, just before the dot.com crash in the NASDAQ, some Wall Street firms were pushing the sale to the gullible public of stocks that their companies were quietly dumping. Or they were pushing dubious stocks for companies where their affiliated banks had a financial interest. In short, as later came out in Congressional investigations, companies with a vested interest in a certain financial outcome used the media to line their pockets and that of their companies, leaving the public investor holding the bag.

It would be interesting for Congress to subpoena the records of the futures positions of Goldman Sachs and a handful of other major energy futures players to see if they are invested to gain from a further rise in oil to $200, not forgetting that 16 to one leverage with which a hedge fund or bank can buy oil futures.

We are hit with an endless series of plausible arguments for the high price of oil: a "terrorism risk premium", a "blistering" rise in demand of China and India; unrest in the Nigerian oil region; oil pipelines' blown up in Iraq; possible war with Iran ... And above all the hype about peak oil. Oil speculator T Boone Pickens has reportedly raked in a huge profit on oil futures and argues, conveniently, that the world is on the cusp of "peak oil". So does the Houston investment banker and friend of Vice President Dick Cheney, Matt Simmons.


As noted in the June 2006 US Senate report, The Role of Market Speculation in Rising Oil and Gas Prices, "There's a few hedge fund managers out there who are masters at knowing how to exploit the peak oil theories and hot buttons of supply and demand, and by making bold predictions of shocking price advancements to come they only add more fuel to the bullish fire in a sort of self-fulfilling prophecy."

Will a Democratic Congress act to change the carefully crafted opaque oil futures markets in an election year and risk bursting the bubble? On May 12, the House Energy and Commerce Committee stated it will look at this issue in June.

F William Engdahl is author of A Century of War: Anglo-American Oil Politics and the New World Order (PlutoPress), and Seeds of Destruction: The Hidden Agenda of Genetic Manipulation (Global Research, available at www.globalresearch.ca). He may be reached at info@engdahl.oilgeopolitics.net.

(Copyright 2008 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)




Edited by vulkan02 - 25-May-2008 at 07:44
The beginning of a revolution is in reality the end of a belief - Le Bon
Destroy first and construction will look after itself - Mao
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  Quote Guests Quote  Post ReplyReply Direct Link To This Post Posted: 25-May-2008 at 14:19
Population growth, particularly in Asia and specially Africa is what is keeping food prizes up.
Massive bio-fuel production hasn't even started as yet-
 
If population growth in the above uncontrolled regions continue to go, it is almost inevitable hunger will strike the world once again. People just forget that hunger was stopped just a few decades again, and that without massive food donations many peoples would today be starving.
Well, earth resources are finite, and there is an environmental crisis ahead if the predictions of global warming are correct. All that added means few food production.
I am afraid there will be throuble ahead if nobody worries now for what the future brings.
 
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