The Kochs Give a Big Enron Fuck You to America

[sasha031]

Last week, I wrote that Kochs Industries’ recent fight against financial regulation and aggressive defense of unregulated derivatives via the “Enron Loophole” was a clear sign that the company was using its position as a large-scale marketer of oil and other energy commodities to manipulate prices.

Well, thanks to recent reporting by Lee Fang, we now know this for a fact. Traders working for Koch Industries not only gave PowerPoint presentations outlining their plans to drive up the price of oil, but openly boasted about gaming the market in the business press.

Their methods weren’t that different from the ones used by Enron to boost the price of electricity: instead of shutting down power plants, Koch Industries siphons millions of gallons of oil into storage tanks. ThinkProgress’ Lee Fang writes:
In 2008, Koch called attention to itself for “contango” oil market manipulation. A commodity market is said to be in contango when future prices are expected to rise, that is, when demand is expected to outstrip supply. Big banks and companies like Koch employ a contango strategy by buying up oil and storing it in massive containers both on land and offshore to lock in the oil for sale later at a set price. In December of 2008, Koch leased “four supertankers to hold oil in the U.S. Gulf Coast to take advantage of rising prices in the months ahead.” Writing about Koch’s contango efforts to artificially drive down supply, Fortune magazine writer Jon Birger noted they could be raising “gasoline prices by anywhere from 20 to 40 cents a gallon” at the time. Speaking with the Business Times, Koch executive David Chang even boasted that falling crude prices in 2008 provided an opportunity remove oil from the market for future delivery:

CHANG: The drop in crude oil prices from more than US$145 per barrel in July 2008 to less than US$35 per barrel in December 2008 has presented opportunities for companies such as ours. In the physical business, purchases of crude oil from producers and storing offshore in tankers allow us to benefit from the contango market where crude prices are higher for future delivery than for prompt delivery.
http://exiledonline.com/koch-industries-lackeys-admit-to-manipulating-oil-prices-and-gloat-about-it-too/

[Angry Dragon]

1. Just more money to buy more elected offocoals

and buy more teabbaggers
Too bad the teabaggers are paying more at the pump
because of their masters

When is the government going to step in and break up these people or throw them in jail??

[defendandprotect]

2. kr

[robinlynne]

3. so they admit it. And there are still doubts?

[Cali_Democrat]

4. Thank you so much for posting this

Very informative article.

[sasha031]

5. there is a person over twitter, well there are many

but the research this particular person does is amazing. If you like I'll froward his stash, he wants that.

[w8liftinglady]

6. Thanks for sharing all this! you've taught me a lot!

[Canuckistanian]

7. Goldman Sachs and the Koch bros.

A marriage made in Hell. I really don't understand why these 2 companies aren't prosecuted for fraud and/or price fixing.

[Skink]

8. seems like contango might be illegal.

the government should seize the vesels and sell the oil.

[Frustratedlady]

9. Can someone explain to me how the Koch bros. are that much

different from bin Laden? He said he would bankrupt us. He tried to manipulate our elections. He recruited people to do his dirty work for him.

The Kochs are scary, as they are free to walk among us, to plant their seeds of hate and power within those they recruit and to manipulate state governments by buying pawns to do their bidding.

If they aren't bin Laden-like, then are they sovereign-like...only with more class?

[indepat]

10. Americans might just wake up one day and realize how much the Koch brothers are

fucking them over and commence some rat-fucking on their own. :patriot:

[hfojvt]

11. can you really put that much in four supertankers?

Enough to affect the market? Doesn't the US consume something like a million barrels a day?

No, it is 21 million barrels per day according to wiki http://en.wikipedia.org/wiki/Energy_in_the_United_States#Oil_consumption

Also, according to wiki, the largest supertanker built has a capacity of 564,763 dead weight tonnage. Okay, then I started to calculate how many barrels that would be, but then decided to read a little more and they mention 4 supertankers with a capacity of 3.166 million barrels. http://en.wikipedia.org/wiki/Oil_tanker#The_supertanker_era

So if you filled up four such super-tankers, you would have approximately 60% of ONE day's worth of US consumption.

So my answer is - no, you cannot really affect the price much by storing 4 super-tankers worth of crude. However, a smart business person would reduce their storage when the price is high and replenish their storage when the price is low.

If they really can make the price of gasoline jump by 20 to 40 cents a gallon or by 7-15% they must have a lot more storage capacity than just four supertankers.