How Koch Became An Oil Speculation Powerhouse
"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."
"– October 6, 1986: First oil derivative is introduced to Wall Street by traders at Koch."
– 1990-1992: Koch, along with several oil companies and Wall Street speculators, form a coalition lobbying group to deregulate oil speculation. A coalition called “The Energy Group” is organized to press the Commodity Futures Trading Commission (CFTC) to allow oil derivatives to be traded off the NYMEX or any other regulated exchange. Participants in the coalition include Koch, Enron, Phibro (a powerful commodity speculator firm recently sold from Citigroup to Occidental Petroleum), J. Aron & Co (a commodity trading division of Goldman Sachs), BP, and other companies.
– January 21, 1993. Wendy Gramm makes first major move to deregulate oil speculation. “On the final day of the [George H.W.] Bush administration, January 21, 1993, [CFTC chairwoman] Wendy Gramm … approved the rule exempting key energy futures contracts from government regulation and returned a great chunk of the energy market to the grand old days of unregulated futures trading,” writes author Antonia Juhasz in the book Tyranny of Oil.
– 1997: Koch continues to shift from oil refining and pipelines to financial products. As Koch continues its embrace of selling exotic financial products, the company pioneers the first “weather derivatives,” essentially insurance policies sold to utility companies that bet on future temperature and weather patterns.
– December 12, 2000: Sen. Phil Gramm (R-TX), after being lobbied by Koch and Enron, creates the infamous “Enron Loophole” vastly deregulating the oil speculation market. On the night of December 12, 2000, Gramm attaches a 262-page amendment to the Commodities Futures Modernization Act, which is then attached to an omnibus spending bill that is signed into law by President Clinton before leaving office. The Gramm amendment, which received absolutely no public scrutiny or committee hearings, radically expands and codifies the energy deregulation agenda began by Gramm’s wife during the first Bush administration.
– 2008: Rampant oil speculation spikes prices to unprecedented levels. As academics from the Peterson Institute, the James Baker Institute at Rice University, and others conclude, non-commercial speculators begin to dominate the market, forcing up prices.
– 2009: Koch presentation to ICE boasts that Koch is on the level of transnational big banks and can now be considered one of the world’s top five oil speculators.
– 2010: Koch’s Tea Party front groups and lobbyists fight financial reforms designed to reign in the unregulated energy market.
– 2011: As oil speculation again hits record highs, leading to record high oil prices, Koch’s allies in Congress fight to undermine new reforms and allow unchecked speculation to spiral out of control."
How Koch Became An Oil Speculation Powerhouse | ThinkProgress
