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That US oil prices have been nearly 20% lower than the Global oil prices is not merely a coincidence. The fact that Texas crude has been priced a fifth lower than Brent Oil for most of last year has been due to continuous pro-active action by the Obama Administration. Using price inversions to tame the volatile commodity markets by using its considerable strategic storage capacity has helped make the WTI cheaper than the Brent Oil. Now President Obama has taken a global initiative to convince other IEA members and big Asian consumers to join his cause and Japan and South Korea have agreed to join the strategy. The core idea is to temporarily curb volatility and demand thus reducing spot buying at peak prices by using strategic stocks of crude. The latest initiative is to meet the shortage due to disruption of Libyan supplies, a stopgap measure, till Saudi Arabia can sufficiently increase its production.
The volatility in the commodity markets are more due to speculation, than the demand supply gap.
A recent flash crash in the natural gas markets in Asia attributed to 'High Frequency Trading' HFT had prices dropping by over 8% in a few seconds and smart hedge fund managers across the globe instantly hitting their desktops with buy orders to cash in on the volatility as per Reuters . The glitch was a small repeat of the huge flash crash in the equity markets of the summer of 2010, when the shares of blue chips like P&G and Accenture plummeted in seconds as sell orders were accumulated over a period of time and released en bloc at a pre-determined hour by crafty cartels of traders and their sophisticated programmers. As expected nothing happened in the inquiry, as the system is too opaque, the regulators too pliant to look at the obvious.and the traders are too innovative with their operations and trading tools code named the 'Hammer', the 'Spool' or even 'Oppenheimer' suggesting the atomic bomb effect.
The introduction of High Frequency Trading in commodity markets has been at the heart the volatility in the financial markets and the consequent rise of prices since the Enron days. Several important law makers in the US have been campaigning for transparency but the U.K. backed by European powers have always done enough to keep the markets players and their operations in the commodity and metal exchanges shrouded in secrecy, primarily to keep the traders more happy at the London and European exchanges. Deregulated markets was the Enron dream and London has provided the perfect setting for the adventurous. This has reluctance of London and Paris to join the Americans has thrown up strange bedfellows and President Obama has now convinced Asian nations like Japan and South Korea to use its considerable strategic reserves to quench the rising oil prices, as US has already done its bit by committing to release 30 billion barrels of oil.
China already working independently actively uses its strategic reserves to temper prices,but surprisingly the Indian Minister of Petroleum thought little of joining this US policy initiative. As a result, India one of the largest importers of crude oil will keep paying a heavy price. Indian consumers who are up in arms over the recent rising prices and Govt. inaction have little to cheer at their Governments unwillingness to join the effort. True,unlike the IEA nations, India has little built up strategic reserves today, but that can be easily augmented quickly like China has done by renting floating capacity of chartered oil tankers which are still available at $1 per barrel per month, a fraction of the prices India usually pays for imports.
The volatility in the commodity markets are more due to speculation, than the demand supply gap.
A recent flash crash in the natural gas markets in Asia attributed to 'High Frequency Trading' HFT had prices dropping by over 8% in a few seconds and smart hedge fund managers across the globe instantly hitting their desktops with buy orders to cash in on the volatility as per Reuters . The glitch was a small repeat of the huge flash crash in the equity markets of the summer of 2010, when the shares of blue chips like P&G and Accenture plummeted in seconds as sell orders were accumulated over a period of time and released en bloc at a pre-determined hour by crafty cartels of traders and their sophisticated programmers. As expected nothing happened in the inquiry, as the system is too opaque, the regulators too pliant to look at the obvious.and the traders are too innovative with their operations and trading tools code named the 'Hammer', the 'Spool' or even 'Oppenheimer' suggesting the atomic bomb effect.
The introduction of High Frequency Trading in commodity markets has been at the heart the volatility in the financial markets and the consequent rise of prices since the Enron days. Several important law makers in the US have been campaigning for transparency but the U.K. backed by European powers have always done enough to keep the markets players and their operations in the commodity and metal exchanges shrouded in secrecy, primarily to keep the traders more happy at the London and European exchanges. Deregulated markets was the Enron dream and London has provided the perfect setting for the adventurous. This has reluctance of London and Paris to join the Americans has thrown up strange bedfellows and President Obama has now convinced Asian nations like Japan and South Korea to use its considerable strategic reserves to quench the rising oil prices, as US has already done its bit by committing to release 30 billion barrels of oil.
China already working independently actively uses its strategic reserves to temper prices,but surprisingly the Indian Minister of Petroleum thought little of joining this US policy initiative. As a result, India one of the largest importers of crude oil will keep paying a heavy price. Indian consumers who are up in arms over the recent rising prices and Govt. inaction have little to cheer at their Governments unwillingness to join the effort. True,unlike the IEA nations, India has little built up strategic reserves today, but that can be easily augmented quickly like China has done by renting floating capacity of chartered oil tankers which are still available at $1 per barrel per month, a fraction of the prices India usually pays for imports.
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