In Case You Missed This... 'How Koch Became An Oil Speculation Powerhouse'

[WillyT]

How Koch Became An Oil Speculation Powerhouse
From Inventing Oil Derivatives To Deregulating The Market
By Lee Fang - ThinkProgress
Jun 6, 2011 at 2:42 pm

<snip>

In April, ThinkProgress caused a stir when we uncovered a series of Koch Industries corporate documents revealing the company’s role as an oil speculator. Like many oil companies, Koch uses legitimate hedging products to create price stability. However, the documents reveal that Koch is also participating in the unregulated derivatives markets as a financial player, buying and selling speculative products that are increasingly contributing to the skyrocketing price of oil. Excessive energy speculation today is at its highest levels ever, and even Goldman Sachs now admits that at least $27 of the price of crude oil is a result from reckless speculation rather than market fundamentals of supply and demand. Many experts interviewed by ThinkProgress argue that the figure is far higher, and out of control speculation has doubled the current price of crude oil.

Reached for information about its trading division, Koch Industries — America’s second largest private company — declined our request for comment.

Writing on his political blog, an attorney working for Koch’s law firm angrily replied to our initial investigation by claiming that Koch is solely a bonafide hedger, meaning that it only participates in speculative markets to reduce risk for the oil the company refines (he also bizarrely argued that speculation has no relation to the price of oil). The spin obscures reality: much of Koch’s oil trading business is actually akin to a hedge fund, buying and selling financial products based on oil with little interest in the actual delivery of the product. In fact, Koch pioneered the risky speculation industry that dominates the world’s oil markets today, first by inventing oil derivatives back in the ’80s, then by working to kill off regulations. ThinkProgress has delved into the history of Koch’s oil speculation business and the following timeline spells out Koch’s leading role:

– October 6, 1986: First oil derivative is introduced to Wall Street by traders at Koch. Koch Industries executive Lawrence Kitchen devised the “first ever oil-indexed price swap between Koch Industries and Chase Manhattan Bank.” At the time, such derivatives had been limited to currency markets, and the shift of creating a synthetic financial instrument based on the value of crude oil was revolutionary. For an agreed-upon period, an oil swap is a contract where one party makes payments based on a fixed oil price, and the other party makes payments back based on the changing spot price of oil. In July of 2009, EnergyRisk magazine, a publication for commodity traders, posted a piece exploring the very first oil derivatives and Koch’s role in developing them.

<snip>

Much More: http://thinkprogress.org/report/koch-oil-speculation/

:kick:

[renate]

1. just when you think they couldn't get more evil.... n/t

[WillyT]

2. It's A Win/Win For Them...

Become even more fabulously wealthy on oil speculation, and use some of that money to put forth a national PR campaign blaming Obama for high gas prices, and thereby putting his re-election at greater risk.

I hope everybody has their eyes wide open.

:shrug:

:hi:

[Rex]

3. Eyes wide open still won't stop the Evil Twins.

This nations allowance of corporatocracy is stunning. At this rate we will either all be dead or paid slaves by the end of the century.

[nichomachus]

4. Well, they started out working with Joe Stalin

That's how they made their first bundle.

[WillyT]

5. I'd Love To Have A Link For That...

Thanks in advance.

:hi:

[nichomachus]

6. You do know how to google don't you?

http://exiledonline.com/a-peoples-history-of-koch-industries-how-stalin-funded-the-tea-party-movement/

[WillyT]

7. Yes... And I Also Know How Not To Be A Complete DICK...

But in your case, I'll make an exception.

:evilgrin:

:hi:

[nichomachus]

8. In thw time it took you to be a total dick

You could have googled it yourself instead of aski someone else to it for you.

[WillyT]

9. Yes... Because If I Aski Youi Directly, It's Faster...

Didn't know I was placing such an awesome task on your shoulders. I will burden you no longer.

:shrug:

[hfojvt]

10. think this should get more attention

but its hard to notice what with all the pictures of hot dogs being tweeted.