With the catapulting price of crude oil, shadowy oil speculators became an unsurprising scapegoat of Congress and airlines alike. Perhaps more surprising are the findings that have begun to emerge from investigations by the U.S. Commodity Futures Trading Commission (CFTC).
When I think of cloak-and-dagger commodities trading, I think Switzerland. Sure enough, a Swiss outfit called Vitol is drawing special scrutiny today. Holding more than 10% of all oil contracts on the regulated exchange operated by NYMEX Holdings
Vitol's no stranger to controversy. Last year, the firm pleaded guilty to grand larceny charges stemming from the Iraq oil-for-food scandal. This scheme involved paying kickbacks to officials in order to take delivery of Iraqi crude. I almost respect the company for admitting guilt, as opposed to Chevron's
The commodities-trading scene is a many-tentacled thing that I can't claim to understand in full, but it certainly goes far beyond the basic contracts traded on the Nymex. InterContinental Exchange
With more platforms popping up around the world, I can only presume that the possibility of chicanery increases. The argument can be made for increased competition and improved price discovery, but the loopholes in these trading systems are becoming painfully obvious.
I've got no beef with speculators. A trading firm's presence helps more than it hurts -- unless it gets so large that it can move the whole market. That situation now appears to be more serious than skeptics previously suspected.