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Controlling the futures markets from ‘commodities to countries’ has never been as easy for Big Oil and Big Banks as today. With Europe now under debt the off balance sheet debt crisis, the stranglehold of the cartels on the regulators increase.
The stock market crash of September 2008 cleaned out a lot of mid sized operators like Lehman Bros and Bear Stearns leaving half a dozen big Banks in the fray. Now some of these have become bigger, thanks to the timely infusion of the TARP funds to bolster cash flow and the quick rotation of those funds in the spiralling oil futures trade, through high speed computer based round trip swapping. It is estimated that cross swaps at London and New York yielded mega profits of over $ 50 Billion last year , on a turnover of 2500 Billion on oil futures, a commodity whose global stock value has been less than always 100 billion . In short each barrel of oil was swapped 20 to 25 times mostly at the trader friendly London ICE Exchange, and each paper transaction yielded a 1% to 2% margin as prices fluctuated repeatedly.
Though a few dozen players shared the huge booty the big four in the tie up were the Wall Street Bankers Goldman Sachs and Morgan Stanley with European oil majors BP and Shell . Between them they control the global stocks of North Sea Brent Oil and West Texas Intermediate, the most favoured and heavily traded oil stocks in the future market that controls price line in Europe and the US respectively. The big four also control the supply chain around Europe with the help of friendly Governments, lax regulators, and some quick decisive investment in stocking facilities.
Over 80 million barrels of oil is being hoarded in super tankers around the world today, as per Frontline which owns the largest tanker fleet worldwide. They along with Morgan Stanley’s own offshore stocking facilities near New England are used to soak up excess stocks and quickly dump back the same to create a market volatility at Europe’s future markets. “Contango” trades and falling charter prices have ensured the viability of these giant flotillas. With a liberal price gap of $ 8 on March futures and $21 on September rates It is extremely profitable to hire the super tankers at around $1 a barrel and hold low priced spot market oil today at the high seas for 3 to 6 months.
Between BP , Shell and Morgan Stanley, (Their is Total too in the cartel) almost 70% of the pipeline and stocking facilities feeding oil to Europe is cornered.
With Morgan Stanley's substantial storage capacity and hiring of tankers at low rates thanks to demand supply manipulation on high seas, the tanker industry along with economies like Greece dependant on ocean trade are sinking. As the shipping industry distress increases, the frieghts further falls and the contango trades become more profitable. Commodity prices remain at artificially high rates as the supply lines, now in the control of the cartel can easily be choked or manipulated at will.
Veterans of manipulation of Governments in the West African oil deals, the big four are today debt managing Europe’s excessive leverage through in lieu for looking the other way at the trading exchanges.
The London ICE Exchange, the hub of mainipulation has pliant regulators. that have gone to the extent of penalising a pliant trader due to binge selling after excessive lunch time alcohol, but not touched the company (Morgan Stanley) as the big banks manage the stock exchange and also UK's off the balance sheet borrowings
It is time to levy a transaction tax on future swaps as regulator control is simply not working.
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