The latest in the contango files. Here at Hamradiocentral, we, I mean I, post on the subject from time to time.

Some excerpts:

"Blame huge refinery profit margins, falling gasoline production, tensions with Iran and American drivers themselves, who are -- believe it or not -- buying more gas now than they did last year."

Or how about:

"Throughout, refinery profit margins on the West Coast remained almost twice as high as they were last fall, adding to the price drivers pay at the pump. The difference between what West Coast refiners pay for crude and the price they charge for refined products has risen to $37 per barrel from about $20 last fall."

And:

"Consumer advocates charge that refiners are purposely restricting gas supplies as a way to drive up the price. They doubt that all the recent mechanical problems are real or require as much downtime as the companies say. And they note that no government agency polices refining companies to make sure their executives are telling the truth."

I like this one:

"Still, no one has been able to prove manipulation. And many experts say the huge margins for refiners simply represent the dynamics of the market, where supply is squeezed and demand keeps rising.

For all the times California officials have investigated gasoline prices, they have never been able to demonstrate that refiners are gaming the market. The state attorney general's office has one such investigation under way right now but has not reached any conclusions."

Sound familiar? It should, because that was the exact scenario California went through with Enron and others on 2001. Where is the outrage?

The clue can be found here:

"Yet, even some oil executives acknowledge that California's gasoline market is broken, or at least seriously warped.

The state uses its own unique, pollution-fighting blend of gasoline, made by a limited number of refineries. That limited supply makes the state prone to wild swings in price and is one of the main reasons Californians typically pay more at the pump than other Americans."

What's wrong with the way that the above is framed in this article? EVEN SOME OIL EXECUTIVES ACKNOWLEDGE...as if it's established fact that the real reason there's a problem is because of those hippie environmentalists. That's the implied from above. But don't you think the oil executives have an incentive in highlighting the above limitation to create an impression that it is the real cause of the spike in prices, and omitting or downplaying the real cause (artificially limited supply to create higher demand and, thus, higher prices in a short period of time)? Uh, yeah. The spikes in prices are not just here in California.

This kind of thing is right out of the Bush Administration's playbook, in fact. Remember WMD? It's the same tactic: oversell the flimsy evidence to create the conditions to get what you want. "Even oil executives acknowledge," my ass. They are the first to want to acknowledge that red herring, not the last.

I'm still surprised at how little attention was given to this report, which I linked to last year. Nobody seems to care. The dems have subpoena power now. Where is the movement on this? Is it not a priority because key Dems want to incent people to stop driving? Is it because the Dems in the House and the Senate also have friends in the oil industry and owe them a few favors? A combination of the two? None of the above? If it's none of the above, then what is it? I don't get it.

Mark my words, if the Dems manage to win either the House, the Senate, or both, you will see investigations into the numerous spikes in gas prices, and I guarantee an Enron-type scandal will be unearthed (or worse). This is precisely what happened in the wake of the California "energy crisis" once Jeffords bolted the GOP and turned the balance of the Senate to the DEMS in May of 2001. As one might recall, the shortages in California began in February of 2001, not a month after Bush's inauguration. Why? In my mind, these folks knew they now had political cover and saw an opportunity to manipulate supply. And that's exactly what they did. And the excuses we hear now about the sudden spike in oil prices were similarly outlined back then. As if energy use suddenly went sky high after January 20, 2001. Note: there were dire predictions for that summer, when people would be using more energy for air conditioners, etc. Didn't happen. Why? Their political cover was gone once the Senate went to the opposition. The crisis was over by June, and Enron's story broke a few months later. Think elections don't have consequences?


The folks in that industry who engaged in the practice of contango can try and cover up their profiteering under the rubric of "trying to stockpile in anticipation of the hurricane season, the peak driving season, China, India, or blah blah blah," but I'm telling you: no prices in any goods go up that fast relative to an otherwise stable economy unless there's some serious playing going on. They were gambling, pure and simple. And, for a time, they made a killing off of it, as now evidenced by stories coming out this week such as this one.

And why do you suppose the prices are going down now? No one will be able to prove collusion with the folks that give them political cover, and the need for things to, um, cool down come November. But I choose to believe the worst case scenario, because if it is not clear by now how evil our President and his Administration, and the right wingers in Congress are, then when will it be? I think (hope) the nation is finally growing tired of the bald faced lies that stream out of the White House like so much spam. I can only hope.

On the subject of Contango, if this report is true, then how else to explain the sharp rise of oil prices during the same period?

Everybody dance the Contango. The conspiracy theorist in me can't help but wonder: is the time near to dump off all of that excess inventory? November's two months away. There are hints already.