Energy Spikes Related to Market Speculators

by admin on January 12, 2009

Why Did Energy Prices Go Up So High?

Many remember when just a few months ago a barrel of oil was as high as $150 a barrel. Senior energy analysts and experts all had different opinions if the price of oil and natural gas futures had to do with supply and demand or investors speculating on the price of energy. A recent 60 minutes special did a detailed report and what they found was that JP Morgan had a large controlling interest in commodities like natural gas that were delievered to residential homes. Keep in mind that JP Morgan and other brokerage houses were involved in marketing investments in energy commodities to investors as a package deal and way to pull money out of the stock market and into more profitable energy futures. While energy commodity retailers that actually buy the real energy commodities and physically sell them were saying that $150 a barrel was way out of line with supply and demand the JP Morgan’s of the world were all saying that the price was directly related to supply and demand.

Investment Firms and Enron Traders

Now which energy companies would really know if the price was really based on supply and demand or not? The retail companies physically selling the energy like natural gas and oil or the investment firms like JP Morgan? The 60 minutes special went on to explain that the same Enron traders that succesfully manipulated electricity prices to gouge their customers out of billions of dollars are the prized possessions of the investment firms. The report explained that they believe the Enron traders are now at JP Morgan and other investment firms and were the ones responsible for manipulating the price of oil and natural gas futures that caused these energy commodities to triple in price. The price has come back down now as energy speculators bet that the price would fall back down based on the realization that there is enough supply out there to meet demand. Now prices are in a much more comfortable price range for car and truck owners and for those heating their homes this winter.

How Do Energy Commodities Relate to Texas Electric Prices?

How does this all relate to Texas energy prices? Texas electricity is generated primarily with natural gas powered power plants. This steam turbines are fueled using natural gas which causes steam that turns these very large turbines that then produce the electricity that goes out to all the cities on the Texas power grid. When electric service customers had their energy prices jump on them to as high as 24 cents kWh in some cities it caused some businesses to close their doors as the price was much to high for many Texas customers to be able to even conceive. Much of the electricity price jump had to do with Texas’ own Market Clearing Price for Energy but with already high natural gas prices it made the situation even worse.

Energy Futures and Why it Happened

The energy futures situation has started to become clearer as to who was responsible and why it happened. This energy price spike had a lot to do with little government over site that allowed Enron traders to do some of the exact market manipulations they had done with Enron. The only difference is that these energy futures traders are now at investment firms with little government regulations and checks to even know what they are doing. Much of the claims made by us and 60 minutes are unsubstantiated to some degree because no one can prove who it was that manipulated the energy markets because companies and individuals can buy and sell energy futures in secret. Just how much price manipulation there was and by who is still up for debate but according to those who physically sell energy and based on govertment storage reports there was plenty of supply to meet demand.

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