Is Oil Market Beginning to Burst

Like the housing industry is the oil market bubble beginning to burst? With the daily drop in prices and news of the market manipulation investigation it makes you wonder what's ahead for investors. News leaking out that U S imports of foreign oil are down and production of gasoline and diesel at U S refineries are running well below capacity leaves serious questions for investigators. Add to the news that ships are being delayed from offloading could lead to an oil glut in the market have some investors selling off their futures.

Who will be hurt in a mass sell off? Small investors and the banks that are loaning the large portion of funds to investors. Wealthy investors that only pay 6% of the cost per barrel and bower the rest from the investment banks can simply default, leaving the banks to pass on the loss to other customers. Is it time for small investors to divest their funds into other markets before it's too late, maybe.

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Oil and The 7 Deadly Sins

What does oil have to do with the 7 Deadly Sins ? Pride for which the other 6 are derived from and Greed are a prime reason for commodities and hedge fund trading. The rich that can invest in others failures which is hedge funds (betting on housing and banking failures resulting in home foreclosures), is Greed. The rich that don't need more money are doing it for Pride being able to say "I'm richer Than You." The ones speculating on commodities are hoping for bad times so the price will increase and they will make more money. Seeing people around the world facing hard times and suffering is the worst type of Greed. Not all people investing in the markets do it out of Greed. Most small investors do it for income no different than working. Gaming the oil market to become rich out of Pride or Greed is using oil to indulge in 2 of the most Deadly Sins.

In "Proverbs" 6:16–19, it is stated that "These six things doth the Lord hate: yea, seven are an abomination unto him:"

• A proud look,
• a lying tongue,
• and hands that shed innocent blood,
• A heart that deviseth wicked imaginations,
• feet that be swift in running to mischief,
• A false witness that speaketh lies,
• and he that soweth discord among brethren.

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Oil Inventory Up Imports Down Refineries Down

For the past 5 weeks oil inventories have been up and it is expected to rise again this week. At the same time reports are coming out that U S imports of foreign oil are down and production of gasoline and diesel at U S refineries are running at only 86% capacity. Unloading ships delivering oil are deliberately being delayed causing a slowdown in the delivery of crude oil to American refineries. This has forced some oil producing countries to stock pile oil on ships off their coasts, waiting in line for a delivery date. The same report says fuel consumption has steadily decreased due to high gas prices.

In the normal scheme of things when inventories are high, production is at or higher than 90%, crude oil deliveries are waiting offshore and demand has fallen an oil glut is the result. Prices fall at the both the pumps and on the open market. Something strange is happening, supply and demand is not working. There is no natural reason for refineries to be operating at only 86% of capacity. There is no excuse for ports to delay offloading ships with crude oil. This sounds more like price fixing than the normal supply and demand of a Capitalist market.

America is reaching a crisis level with the continued daily price increase at the pumps. Auto industries are falling back to the 1980's strategy of cutting the production of trucks, SUV s and next will be 4 wheel drives and mid-size autos. People are losing their jobs and foreclosures continue.

Other actions around the country are beginning to hit the news:

-Airlines are charging for every bag, raising prices and cutting services

-Airlines are considering charging passengers according to weight

-Local governments are increasing license fees for vehicles, wheel tax

-Local governments are charging school and surge charge taxes, to cover fuel price increases

-(Some) Local governments are considering extra license plate fees for older less fuel efficient vehicles

-(Some) Local governments are trying to pass obesity tax on fast food restaurants

-Restaurants are trying to charge extra for people they consider overweight

-Green taxes are being considered, the more energy (electricity, natural gas, etc.) a customer consumes the higher the tax

-Cheap dangerous imports from China are up (consumers cannot afford American made/produced products)

-The number of Americans selling their blood for gas and food are increasing daily.

We cannot wait for the promised change in '09 with a new president. This Congress had better do something, instead of spending on pork barrel projects and playing politics, or it will be too late for the next president. Like Nero's Rome, America is slowly burning.

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GM Follows Ford: Been Here Before

GM announced they will follow Ford down the same road we have traveled before. With sales down and heat up, from the politicians and environmentalist to raise the CAFE standards, both have announced they will suspend manufacturing of SUVs and cut productions of PU trucks. This is nothing new, we went through the same scenario in the 1980's after the second oil crisis. The first crisis was the 1973-1974 embargo and the second was the 1979 Iranian revolution. After the government in Iran lost control and our Embassy was taken over in Tehran, oil production from OPEC was down and became unreliable.

The auto industry shifted from large automobiles to smaller more compact cars and trucks. This was done to satisfy the new 27.5 mpg CAFE that was passed by Congress. The American auto industry also had to compete with imports to America. Companies that had built smaller vehicles that worked well in their own countries began to be very popular in America. Honda, Toyota, Nissan, Subaru, Mazda and Yugo found a new market in the U S. The big three countered with their own versions of small fuel efficient vehicles. Unfortunately the CAFE standards were never met and the small engines that worked well in the smaller countries would not stand up to the daily transportation needs of Americans.

Along with some American brands most of the models offered eventually failed. The Mazda rotary engine, Yugo and most 4 cylinder engines fell out of favor with most Americans that lived outside of our major cities. American cars like : Pinto, Vega, Escort, Omni, Aspen, Skylark and others that were equipped with 4 cylinder engines also fell out of favor.

The oil crisis in '73 and '79 not only effected the auto industry it effected everything with the rise in fuel prices at the pumps. The government reacted with conservation, rationing of gas, tax breaks for using alternative energy sources like Solar and Wind, new home construction responded with totally electric homes, and industry was given tax breaks for research into alternative fuels. Universities around the country were given government grants to research alternative fuels, renewable sources of energy, and an alternative to the combustion engine. The Federal Government also restricted the speed limit on interstates to 55 mph.

Not much has changed today than in the 1980-1989 period. CAFE standards have really not been met. Most vehicles on the road today don't meet the 27.5 mpg required in the 1980's. We increased the size of our engines to V-6 and V-8 to satisfy the needs of American motorist and added electronic gadgets and emissions controls to satisfy the environmentalist. What did change is we started buying oil from countries other than OPEC. While we are still dependent on them countries like Mexico, Canada, Venezuela, and others started increasing production and brought the price down.

Traveling down the same road we traveled before will not help us today. It will only bring about more Pintos, Vegas, and Yugos. Congress will hold hearings, raise the CAFE standards, preach conservation, spend, spend, spend tax payer money but never allow drilling off shore for are own oil.

How Obama Can Beat McCain

Here is a perfect way Sen Obama can beat Sen McCain in the fall election before the Denver Convention even starts.

According to a recent Gallop Poll survey " Americans Favor Meeting With U. S. Enemies"
"Six in 10 think it's a good idea to meet with President of Iran"

Over the week of July 4th Sen Obama should meet with not only Ahmadinejad, but also include Venezuela President Hugo Chavez, Syrian President Bashar al-Assad, Hamas Leader Khaled Mashaal, and Hezbollah Leader Sayyed Hassan Nasrallah. Meet them in a neutral country visited by many members of Congress like Speaker Pelosi, say Syria. Sen Obama can work out a deal with Mashaal and Nasrallah to recognize a 1 year cease fire with Israel, no more rockets or suicide bombings and return all Israeli soldiers. In return he will convince Israel to release all Palestinians Israel is holding prisoner.

With Ahmadinejad and Chavez, all Obama needs to do is get them to agree to produce more oil for the American market and have Ahmadinejad promise his nuclear plants are for peaceful purposes only. In return all Obama has to do is promise a closer more understanding relationship with the U. S. and guarantee we will pull all of our forces in Iraq out and will never return.

On his trip home he can meet with Fidel and Raul Castro. He could get an agreement with Raul to consider opening travel restrictions in return for Sen Obama promising to lift American sanctions on Cuba. A simple letter of agreement to hold meaningful negotiations in the future would satisfy most Americans.

If Sen Obama starts his preparations now, he can have these meetings the 1st week of July and have the Presidential election sowed up before Aug. These are all knowledgeable men willing to negotiate in good faith with the next President. With Sen Obama's power of persuasion he should have no problem negotiating with these leaders.

Obama Democracy Alliance and Oil

In an earlier post State_of _America: Using Oil To Sway Elections I question if some of our billionaires could really be manipulating the market in an effort to sway the elections in Sen Obama's favor. Now we hear the Federal Trade Commission is investigating the market for possible manipulation of oil prices. In another post, FTC: Oil Market Manipulation, I raised doubts that the government would be capable of finding a smoking gun. Should the government take a hard look at the Democracy Alliance group's donor-members, some of whom are?:

-George Soros, and possible members or donors (the list is mostly private): Jim Rogers, Victor Niederhoffer and Stanley Druckenmiller

-Board Directors:

-Rob McKay
-Anna Burger
-Drummond Pike
-William Budinger
-Robert Dugger
-Al Dwoskin
-Gail Furman
-Robert Johnson
-Steven Phillips
-Charles Rodgers
-Deborah Sagner
-Michael Vachon
-Rob Stein

Other public known donor-members are:

Peter B. Lewis
Herb and Marion Sandler
Tim Gill
Rachel Pritzker Hunter
Gara LaMarche
Guy Saperstein
Rob Reiner
Herb Miller
David A. Friedman
Ann S. Bowers
Albert C. Yates
Davidi Gilo
Mark Buell

Like Soros some of these people are the richest people in America, invest in commodities and hedge funds, and are Obama supporters. It is no secret that George Soros will do anything to see a Democrat win the White House. The question is, would he go so far as to destroy America economically so he could see her rebuilt in accordance with his Open Society beliefs?

None of the people I mention in this post may be doing anything illegal, they may only be guilty of following the ideals and advice of people like George Soros and Robert Dugger, of the Tudor Foundation a global funds management company participating in major debt, equity, currency, and commodity markets worldwide.

With prices going up on everything because the price of fuel is steadily increasing, the poor get poorer and the rich get richer. Manipulating and gaming the market to effect the overall economy is nothing new. To do it in an effort to sway an election is nothing short of treason against your country. If Americans care about America now would be the time to sell your oil futures and re-invest in America.

Lou Dobbs Protecting Our Borders

Night after night we hear CNN's Lou Dobbs rail against our government for not Protecting Our Borders. To some extent he is right but he is also wrong in some ways. The most looming misunderstanding he has of the situation is his constant proposal to place our military along the borders to enforce criminal or civil law. The president as Commander-In-Chief must walk a fine line using the active or Reserve Army or Marines to enforce criminal or civil laws within our own borders. Over the past 30 years the Congress has watered down the Posse Comitatus Act and being a statutory law, they have given the President more latitude when using our military. This being said there are still legal hurdles and barriers the President must consider when contemplating the use of our military for law enforcement.

Working with the Border Patrol, Marines have been used in the past. In a well publicized incident in May 1997 that brought an outcry from people across America (Amnesty International), High School student Esequiel (Zeke) Hernandez from Redford, Texas was shot and killed by a Marine conducting surveillance in an area heavily used by drug smugglers crossing the Rio Grande. President Clinton and Congress decided to use the Marines in conjunction with the Border Patrol to fight the War On Drugs. The shooting was ruled justified since young Hernandez fired 2 shots in the direction of the Marines. The Marines, assuming they were being fired upon, requested and got orders to lock, load and return fire. For 2 years there was public outrage for the shooting and for the use of our military along the border.

In 1999 the Clinton Administration settled the wrongful death lawsuit brought by the Hernandez family for $1.9 million. Due to past court decisions the Administration didn't want to argue it in court. In decisions of using the military to complement law enforcement the courts have looked at whether the military was being used in a "passive" or "active" roll. Being used for patrol and surveillance purpose only, might be considered "passive". Taking action by returning fire might have been considered "active."

Courts have always held making arrests while working with civilian law enforcement would be considered active and is a violation of the "Act". They have also held providing training, equipment, logistics and administrative assistance, and certain types of intelligence information is permitted. In this case President Clinton did not want the courts involved.

Since this incident the government has made limited use of the military along the border. When President Bush sent the National Guard to the border areas he was well versed on the Hernandez incident. It was well understood that the National Guard would be in strict compliance with the statutory act of Posse Comitatus. Performing administrative duties and building fences keeps them well within the 'Act'. In any other capacity, such as patrolling, would place our soldiers and the Commander-In-Chief in extremely difficult positions. Congress would have to pass a law allowing immunity for our troops acting in a law enforcement capacity and give them full law enforcement authority.

Congress would further have to authorize the President the authority to use the military in an active roll along the border. With all the outrage from the Hernandez incident, I can only imagine what would happen if President Bush took the same action as President Clinton.

Governor Richardson along with other governors have been calling for more troops along the border. I wonder if they have ever heard of Esequiel (Zeke) Hernandez or The Posse Comitatus Act, if so what would they do if they were the President?

News From Trinity Church Chicago

In his speech not covered by CNN or MSNBC Sen Obama announced his decision to leave Trinity Church in Chicago. After the Pfleger rantings at the alter and listening to the cheers from the congregation for these racist remarks, Obama had no choice. The same as when he joined the church Obama is now leaving the church for purely political reasons. More of Chicago Style Politics 101.

CBS News From The Road Blog by Dean Reynold, still carrying water for the Obama Campaign, writes:
"It had to have been a painful decision, as Obama just cut the line to his religious anchor, but the church had become a weapon for his political enemies. The Trinity Church was the place Obama called his religious home. A place where he was married. Where his children were baptized. Where he was friends with the congregation and its minister, Jeremiah Wright."

The only pain will be if the black community feels betrayed turns against. Everyone at Trinity loved Obama and thought he was one of their own. They never expected him to be just another politician that would say or do whatever it takes to win. They forgot he learned how to be a politician in the Chicago School of Politics Class of 1996. He tried to make it sound like it was the best thing he could do for the church, with all of the media constantly covering the Sunday meetings and bothering congregation, trying to dig up a story. Sounds very noble but it would have made more sense if he had done this before he started to lose in the primaries.

The longer the election carries on the more we learn about Sen Obama. Today he is looking more and more like just another elitist politician that will do or say anything to win the election. With the Democratic Party so splintered to have Sen Obama carry their banner in the fall election will be political suicide. The best thing Sen McCain and the Republicans can do is sit back and watch as the carnage continues.

Voters Lose Obama Wins

After watching the DNC Rules Committee proceedings I have come to the conclusion that Sen Obama will win in Florida and Michigan but the voters will lose. On behalf of the Obama Campaign, Florida Congressman Robert Wexler told the committee Obama's Campaign was prepared to seat half of the delegation. When asked if the Obama Campaign was willing to seat the full delegation like a lot of Floridian voters demand, Sen Wexler was evasive and told the committee this was all their fault and now they must follow the rules and allow only half. After receiving a negative reaction from the audience Congressman Wexler tried to spin his answer but never did directly answer the question. The Committee inferred by his non answer that the Obama Campaign would reject the seating of the full delegation, thereby letting every vote count.

There is nothing illegal with Obama's position. He is simply using the rules to his benefit. He learned that playing strictly by the rules can be to your benefit, Chicago Politics 101. If you are not familiar with Chicago Style Politics CNN ran a story detailing how an Incumbent running for re-election and other candidates can actually be removed from the ballot, leaving one candidate running unopposed.

"In his first race for office, seeking a state Senate seat on Chicago's gritty South Side in 1996, Obama effectively used election rules to eliminate his Democratic competition.

As a community organizer, he had helped register thousands of voters. But when it came time to run for office, he employed Chicago rules to invalidate the voting petition signatures of three of his challengers.

The move denied each of them, including incumbent Alice Palmer, a longtime Chicago activist, a place on the ballot. It cleared the way for Obama to run unopposed on the Democratic ticket in a heavily Democrat district.

"That was Chicago politics," said John Kass, a veteran Chicago Tribune columnist. "Knock out your opposition, challenge their petitions, destroy your enemy, right? It is how Barack Obama destroyed his enemies back in 1996 that conflicts with his message today. He may have gotten his start registering thousands of voters. But in that first race, he made sure voters had just one choice."

Obama's challenge was perfectly legal, said Jay Stewart of the Chicago's Better Government Association. Although records of the challenges are no longer on file for review with the election board, Stewart said Obama is not the only politician to resort to petition challenges to eliminate the competition.

"He came from Chicago politics," Stewart said. "Politics ain't beanbag, as they say in Chicago. You play with your elbows up, and you're pretty tough and ruthless when you have to be. Sen. Obama felt that's what was necessary at the time, that's what he did. Does it fit in with the rhetoric now? Perhaps not." CNN May 30, 2008

Fours before campaign lawyers swarmed into Florida in the 2000 election, a very similar scene took place in Chicago. Using his army of lawyers Obama successfully wiped out the competition by using registration technicalities. Like counting the hanging shads in Florida, Obama was very successful and gave the Chicago voters only one person to vote for, Barrack Obama.

Knowing this the DNC Rules Committee must question how far is Obama willing to go to get his way in Florida and Michigan. Will he fracture the party forever? While he brags about a new kind of politics and uniting the country it is clear the change in politics he is pandering is a change to Chicago Politics Nationwide.

FTC: Oil Market Manipulation

On May 2, 2008 the Federal Trade Commission announced its plan for investigating and regulating possible market manipulation by oil companies, traders and others. After Katrina the FTC investigated the industry as to whether gasoline prices nationwide were “artificially manipulated by reducing refinery capacity or by any other form of market manipulation or price gouging practices”. Among other things in their report issued on May 22, 2006 the FTC found;

-No situations that might allow one firm – or a small collusive group – to manipulate gasoline futures prices by using storage assets to restrict gasoline movements into New York Harbor, the key delivery point for gasoline futures contracts.

Will this investigation return the same results, probably.

As I stated in a previous post, Using Oil To Sway Elections, could it be a few billionaires are secretly buying up the futures in oil to increase the price and sway the fall elections. With an army of corporate lawyers and accountants I find it hard to believe the FTC has the ability to honestly answer the question in a 6 month investigation. Like the Enron fiasco it takes years to unravel well hidden schemes and real market manipulation especially in an unregulated market like Hedge Funds and Commodities.

In a recent article in WorldTribune.com by Cliff Kincaid he points out;

"It is estimated that assets under management by hedge funds are approaching $2 trillion. But nobody knows for sure. The Securities and Exchange Commission currently oversees and regulates mutual funds and many investment advisers, but it does not regulate hedge funds."

Mr Kincaid also points out that George Soros visited John Paulson;

"The Wall Street Journal has reported that hedge fund operator John Paulson got a visit from Soros after Paulson had made about $4 billion betting on a housing market collapse. Soros wanted to know how he had done it. But Soros wouldn’t talk to the Journal about his meeting with Paulson."

We really believe a billionaire like Soros needs to ask a billionaire like Paulson how he made his money. It is more likely Soros invited Paulson to become a member in one of his private billionaire clubs like Democracy Alliance or into a plan to help sway voters into voting for Obama in the fall elections.

According to an article in the New York News & Features the top ten earners in the Hedge Fund Market are:

1. John Paulson, Paulson & Co. ($3.7 billion)
2. George Soros, Soros Fund Management ($2.9 billion)
3. James Simons, Renaissance Technologies Corp. ($2.8 billion)
4. Philip Falcone , Harbinger Capital Partners ($1.7 billion)
5. Kenneth Griffin, Citadel Investment Group ($1.5 billion)
6. Steven Cohen , SAC Capital Advisors ($900 million)
7. Timothy Barakett, Atticus Capital ($750 million)
8. Stephen Mandel Jr., Lone Pine Capital ($ 710 million)
9. John Griffin, Blue Ridge Capital ($625 million)
10. O. Andreas Halvorsen, Viking Global Investors ($520 million)

Two people in the same market making close to the same amount and Soros asks Paulson, How did you dot it, come on Wall Street do you really think Soros has to ask Paulson about investments. The FTC should be asking Soros how many other people on this list have you met with "for investment advice" and how many of these billionaires are buying futures in oil.

Like the guy on the street playing the "hide the pea under the cup game", manipulating oil on the open market can be done in a similar fashion. Look at Iran holding oil in ships off their coast. Saudi Arabia has said there is plenty of oil being produced to meet the demand, are they right and if so where is it going!