Editorial comment ///

The American peso. Since oil prices are up 66% this year (as of Nov. 20th), it’s fitting that I should begin and end the year discussing them. Things haven’t changed much fundamentally: supply is still more than adequate and demand is crummy. So, it’s definitely not fundamentals. There are five reasons for high prices, in no particular order: 1. Changes in US law. The Commodities Futures Modernization Act of 2000 enabled large oil and gas traders to trade US energy commodities on unregulated, Over-The-Counter (OTC) electronic markets without any record or oversight, as was previously the case. NYMEX has complained that “instant” arbitrage across these markets is morphing in unpredictable ways, especially, between NYMEX and the Intercontinental Exchange (ICE), the latter of which is neither self-regulating nor externally overseen. This creates opportunities for manipulation. A market that exists purely to set prices for paper barrels, and does so in the dark, is nothing more than gambling.

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