On basis of its Marathon case, the CFTC has not been unaware of attempted reporting manipulation(s) through the physical trade. From Aug 2007:
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Washington, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) today announced the issuance of an order filing and simultaneously settling charges against Marathon Petroleum Company (MPC), a subsidiary of Marathon Oil Corporation, based in Findlay, Ohio, for attempting to manipulate a price of spot cash West Texas Intermediate (WTI) crude oil delivered at Cushing, Oklahoma on November 26, 2003, by attempting to influence downward the Platts market assessment for spot cash WTI for that day.
(http://www.cftc.gov/newsroom/enforcementpressreleases/2007/pr5366-07.html)

Then, more directly related to Cushing, change in forward curve and inventory levels, this Oct 2007 WSJ article by Ann Davis:
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By the end of last year [2006], independent oil-storage firms around the world were 97% full, according to Sanford Bernstein analysts. Two tank owners in Cushing say that by this April they were turning potential customers away. Some traders even leased ocean tankers to use for storage, although that cost twice as much, or more, than land-based storage. Through it all, U.S. consumption was relatively flat. Over the summer, OPEC ministers pointed to high oil inventories in the U.S. as a reason to keep a lid on production.
(http://online.wsj.com/public/article_print/SB119162309507450611.html)

Krugman’s error, though, had more to do with reliance upon theory which presupposed physical trade to be price determinant; also to say that he (unconsciously) demanded reality conform to theory — not uncommon and obviates need for sufficient research esp when become commonplace stories seem to validate.

You can usually tell that you are correct when you state the obvious and are attacked wildly. So it is not surprising that Yves was treated so rudely.

I had the same reaction in various places when I criticized Krugman’s rather silly posts – although a smart economist, he obviously had NO idea of the extent of hedge fund positions or the way that futures markets can be manipulated by small perturbations of the data. BTW, I like his columns and think he is a terrific writer.

A bubble is a bubble, and they all end the same way, with a 50% haircut. Nikkei, NASDAQ, Shanghai, crude. So that means we will see $75 oil, probably in the spring. Ya listenin’ there, T Boone?

Also, I wonder what happened to the U.S. and this concept of “good faith” dealings? I’m 42, so I’m not that old, but there’s this gaming of the system now that seems utterly pervasive. Either that or I’m not as naive anymore.

And, yes, Yves should be congratulated for pointing out the obfuscatory and opaque nature of the cash market in oil, but not for going after “speculation”–whatever that might mean, and if she really, in fact, did.

Markets are supposed to diffuse this sort of thing…ironically, they are probably contributing to this cluster f.

I look at the graph of the price of oil, and I say speculative bubble. You may differ, but that’s my honest (unbiased) opinion. Unbiased, in the sense I had no money on either horse and was honestly unsure at the time when Yves was making the call. Now maybe I’ll retract that in two weeks if the price of oil shoots back to 140, but that’s my honest opinion (and I’ll emphasize *opinion*) today.

On the other hand, Krugman’s argument against speculation depended on the premise that inventories were tight. If inventories weren’t tight but just misreported, his argument would seem to fall down. Or am I missing something?

British Petroleum own most of the delivery market storage (Cushing). They have been manipulating that market for years.

The Government has known about it since they investigated BP for propane price fixing.

The problem? BP has been pushing the prices down to get crude cheaper to sell it at higher prices later and get more money for storing crude.

People who look down on regulators always end up crying for their help. To wit: the entire financial industry today.