Epilogue to Oil Speculation

During recent months the world has experienced something of a roller coaster on oil prices.

Click for larger image—Note baseline is 50

I've been very skeptical of allegations that speculators are to blame for this, although in previous entries I've examined ways in which they might have (1, 2, 3).

I believe I've exhausted that subject. Since mid-June, when I last wrote about the subject, oil prices have completed a mini-spike (from a base of $122/bbl on 5 June to a peak of $147 on 11 July), and subsequently fell to levels first seen in March. At the same time, the euro has also retreated to March levels.


(The euro-denominated price of oil rose 84% as much as the price in US dollars, using 2005 as a baseline.)


However, it is probably worth noting recent disclosures about a firm called Vitol (Switzerland). Vitol's oil trades were investigated by the Commodity Futures Trading Commission (CFTC):

WP (via War & Piece): The CFTC, which learned about the nature of Vitol's activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency. That figure may rise in coming weeks as the CFTC checks the status of other big traders.

Some lawmakers have blamed these firms for the volatility of oil prices, including the tremendous run-up that peaked earlier in the summer.

"It is now evident that speculators in the energy futures markets play a much larger role than previously thought, and it is now even harder to accept the agency's laughable assertion that excessive speculation has not contributed to rising energy prices," said Rep. John D. Dingell (D-Mich.). He added that it was "difficult to comprehend how the CFTC would allow a trader" to acquire such a large oil inventory "and not scrutinize this position any sooner."

BTW, please observe the special focus from Michigan congresspersons: oil prices have been especially devastating to Usonian car manufacturers, who have lost market share to better-engineered Japanese models.


Vitol was implicated in the UN "oil-for-food" scandal associated with the sanctions regime imposed on Iraq between June 1990 and March 2003.

IHT (20 Nov '07): Prosecutors alleged that Vitol, through an associated entity or third parties, paid $13 million in kickbacks to Iraqi officials in connection with oil purchases under the program from June 2001 through September 2002, but allowed false representations to be made to the U.N. that no kickbacks were paid.

Vitol's case is one of several that are the result of a wide-ranging criminal probe into the oil-for-food program.

Last week, Chevron Corp. agreed to pay $30 million (€20.2 million) to settle civil and criminal charges related to secret surcharges paid by third-party merchants in exchange for oil under the program.

While it's not obvious to me how the oil-for-food corruption is linked to illegal trades, it's hard to imagine how I can avoid mentioning it.
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All the same, while Vitol SA was able to briefly take a position on >11 million barrels of oil, the CFTC maintains that the real reason for the recent spike in petrol prices was supply and demand. So, while I'm aware of the Vitol story, I'm sticking to my original position.
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ADDITIONAL READING
David Cho, "A Few Speculators Dominate Vast Market for Oil Trading" Washington Post (21 Aug 2008)

Ann Davis , "'Speculator' in Oil Market Is Key Player in Real Sector" Wall Street Journal (20 Aug 2008)

GoogleMapCreator

Click for interactive map Link goes to custom map in MapTube made with GoogleMapCreator (CASA, UCL, London)

After wading through this paper, I realized I was reading an infomercial for a software called "GoogleMapCreator" (or simply GMapCreator).  The software is introduced and available for download here, and the name says what it does: it creates maps using data supplied from Google and whatever other appropriate sources one can find.

A shapefile is loaded into the application and displayed on the screen. [...] The displayed attribute, colouring of the data, geographic extents and maximum zoom levels are defined by the user. Colouring is achieved by setting colours and thresholds for values in the attribute data e.g. any region over 1.0 is red. [...]

This software was accompanied by a web hosting service, MapTube, which hosts maps created with GMapCreator.

This is pretty cool, although the output is a bit hard on the eyes.  The map appears as a layer in Google Maps although one could introduce a 3rd layer, like an historical map of London.

Hudson-Smith & Crooks paper (PDF--p.11), after introducing GoogleMapCreator and MapTube, turns to the idea of Neogeography, in which the many digital mappings of our world are linked to form a GeoWeb:

The ideology behind such developments can be linked back to David Gelernter (1991) in his seminal book Mirror Worlds: or the Day Software Puts the Universe in a Shoebox. 

Gelernter (1991) defines ‘Mirror Worlds’ as software models of some chunk of reality, some piece of the real world going on ‘outside your window’ which can be represented digitally. Gelernter predicted that a ‘software model’ of your city, once setup, will be available (like a public park)… it will sustain a million different views... each visitor will zoom in and pan around and roam through the model as he chooses’ (Roush, 2007).

Again, Hudson-Smith & Crooks have something to promote: a virtual London, modelling every building inside the M25, which is notable because they introduce the linkage between (a) a 3rd dimension in maps, corresponding to the built environment (now available for applying data with physical coordinates) and (b) the demands this raises for a navigational environment in a virtual manifold.*

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* A manifold is used here in the mathematical sense: the graph in n dimensions of a function of (n - 1) variables.  In the simplest form, this is a graph of a function y = f(x), or z = f(x,y).  In a computer imaging program, the simulated 3-space visible is accompanied by time coordinates (as, for instance, the effect of the sun moving over a simulated view of London).

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SOURCES AND ADDITIONAL READING

Centre for Advanced Spatial Analysis (CASA), The Bartlett (Faculty of the Built Environment), University College of London, UK

Wade Roush, "Second Earth," MIT Technology blog (18 June 2007)

Andrew Hudson-Smith & Andrew Crooks, The Renaissance of Geographic Information: Neogeography, Gaming and Second Life, Digital Urban blog (6 Aug 2008); links to their working paper of the same title (PDF).