The Chicago Mafia and the Price You Are Paying for Gasoline

The Chicago Mafia and the Price You Are Paying for Gasoline

This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

No, no! This is not about the mob holding up service stations and running off with their gas tanks. No, it has the makings of something much more sinister than that, something that has the makings of reaching into all of our pockets, making the oil boys rich beyond their wildest dreams while putting the American economy at risk and family budgets in the trash can.

Overlooked, by and large, is the fact that Chicago is to commodity trading what Wall Street is to financial markets. The world's most significant trading exchange, the Chicago Mercantile Exchange Group (C.M.E. Group) is headquartered there, does its business there, establishes its policies there, and projects its power to influence institutions, the press and government from there as the world's leading and most diverse derivatives marketplace. It proudly brays that it is to the CME Group and in turn Chicago, "where the world comes to manage risk." It is an intrinsic part of Chicago's economy and culture. One could almost say as the C.M.E Group goes, so goes Chicago.

Well and good, while all the while we have in Washington a president whose very political formation was in sinews of Chicago politics, from his first elected office to his ascent to the White House. And the ties to Chicago continue to be strong if not even stronger than before.

President Obama's first chief of staff, Rahm Emmanuel, left the White House to run for and be elected Mayor of Chicago, where he currently serves. Until the end of last year the mayor was William M. Daley, Secretary of Commerce under President Clinton, and former Midwest Chairman of J.P. Morgan Chase with its overarching business ties, and most significantly, son of the fabled, all powerful Mayor of Chicago, R.J. Daly (1955-1976), and brother of the dauphin Mayor of Chicago, Richard M. Daly (1989-2011). In other words, a man with noble Chicago blood running through his veins.

With these luminaries in place, the C.M.E. Group has a head start by a mile in protecting its turf from government interference or otherwise said regulation. It has fought tooth and nail to keep things as they are with massive lobbying and all. This in spite of the growing appreciation throughout the land that commodity exchange trading has, and is distorting the norms of supply and demand, extracting an enormous tax on consumers to the benefit of the commodity players, the banks and their proprietary trading and in the case of the oil industry, vast riches being transferred to the oil producers out of the pockets of the many.

And yet, over the years years, and certainly during this administration, nothing has been done to rein in the excesses that the commodity exchanges have propagated. The Commodity Futures Trading Commission (CFTC), with one of the five commissioners being ex-C.M.E. operative on board, had become the 21st century version of the 18th century castrati whose talent was to sing beautifully, while the CFTC's is to hold hearings endlessly. (Please see "Time to Dismiss the CFTC Chairman and his Commissioners," 12.27.10). This in spite of such power players in the field as Rex Tillerson, Chairman and CEO of the world's largest publicly traded oil company Exxon Mobil, telling a Senate Banking Committee in May of last year that at least 30 to 40 percent of the price of a barrel of oil is due to speculation. You would have thought the CFTC and the government would have jumped all over that. Yet, a crucial comment of that magnitude was swept under the rug never to be heard from again, and probably much to the C.M.E. Group's relief.

As featured on The Huffington Post:

There was a bright moment back in April of last year, giving hope that the influence the Chicago Mafia was giving way to the nation's interest as a whole. Amidst much fanfare was the announcement of the "The Oil and Gas Price Fraud Working Group" and the prospect of all the skeletons that were about to be uncovered (also please see "Obama Administration Announce Formation of Oil/Gas Pricing Fraud Panel. Really?" 04.27.11). But seemingly today, one could readily conjecture that the CME had gotten its tentacles into the heart of that commission, because nothing has been heard from that august body. Next month it will have been a year since the fanfare of its announcement.

To understand the dimensions and the scope of the CME's trading one need only refer to their press release of February 8, 2012, barely four weeks ago:

NEW YORK, Feb. 8, 2012 /PRNewswire/ — CME Group, the world's leading and most diverse derivatives marketplace, today announced it set a new record for trading volumes for its energy products on Tuesday, February 7. Trading volume for energy futures and options contracts totaled 3,489,302 contracts yesterday, climbing 13 percent higher than the previous record of 3,098,129 contracts on February 22, 2010. These contracts are listed by and subject to the rules of NYMEX.

Referring to current gasoline prices, President Obama commented but two days ago, "What's happening in Detroit will make a difference (doubling automobile mileage standards by 2025). But it won't solve everything. There is no silver bullet for avoiding spikes in gas prices every year."

No, Mr. President, there is a silver bullet. Go after the commodity exchanges and the distortions to price that they enable. By mandating transparency and both rigid and effective supervision you could bring down the price of gasoline by one-third in short order. And going one major step further is still achievable within several years' time, by initiating a massive program to convert our transportation vehicles to environmentally safer compressed natural gas, going on to encourage Detroit to retool, building a new fleet of cars that run on compressed natural gas rather than petroleum-based gasoline.

The price of natural gas closed at $2.48/mmbtu on Friday, March 2nd. At that price, oil would be forced down to about $15 (fifteen) a barrel to compete in order to deliver an equivalent quotient of energy (oil closed Friday at $106.74/bbl.) Given the new technology that has led to massive and expanding discoveries of natural gas within our borders, what are we waiting for!?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Dr. S A Visotsky  |  April 10, 2012
With the resurgence of muscle cars (large V-8s), the ONLY message that USG is getting, is that people evidentally WANT to pay more for gasoline. As long as people are driving SUVs and putting boats in the water on the weekend, USG could care less, they know through your lifestyle, that you want to pay top dollar for your gasoline, and will continue to do so. Due to the "alledged" emergency situation needed, to authorize use of NATIONAL STATEGIC RESERVES, the only solutions left are: 1) TOTAL BOYCOTT of gasoline, or its rationing (would give Homeland Security something to do besides getting fatter and riding around on Segways), so its a positive. 2) Subsequent suspension of ALL MOTOR SPORTS. * If there is a limited supply, as they are telling us, MOTOR SPORTS should be the first to go, full stop.To ignore this, is to be complicit. 3) This can be taken care of with a simple Executive Order from the White House (gives them something to do as well) another positive, but unlikely in an election year where southern states are hard enough to win with the historically low voter turnouts.
bart johnson  |  April 09, 2012
Somebody want to inform this genius Learsy that oil and gasoline are traded on the NEW YORK Mercantile Exchange? NYMEX was purchased by CME a few years ago, but the energy trading has not moved from Battery Park City. Look at a map, Raymond, and you'll discover that New York is not, in fact, in Chicago. I'll also point out that natural gas is at 10-year lows, but also has daily speculation volumes that rival crude. Why do these evil speculators want to drive up oil and drive down gas?
Karl Hodgson  |  April 09, 2012
Oil is a global commodity and we live in a global economy which yes is more controlled by American/Anglo/Dutch types as the dollar is the Petrodollar (since Nixon) and our troops keep it that way for now. Just business and the global investment bankers run things not Obama. Whats true is natural gas is dirt cheap! Cheniere is trying to export the stuff when just a few years ago they built Sabine Pass to bring in LNG. T Boone Pickens has been pushing natural gas and the price is so low they shut down rigs here. Cheney went over to Qatar and locked that gas up for EXXON and Teekay and I think they should forget the electric cars for awhile and do like Honda and convert to CNG-like a lot of buses and trucking companies. Get David Rockefeller on the damn phone-he actually does have power. Only trouble with this is oil needs a fairly high price to extract now compared to gas so they piss off Iran etc. etc. I never frankly never understood opening up Communist China they were happy riding bicycles but thats history now unless we have World War 3 and we SHOULD have finished World War 2 when we could have like nuking them in Korea instead of getting rid of McArthur and Patton. Water over the damn, just business.
Michael R. Smith  |  April 09, 2012
Poorly written and researched article. Rigzone is international and this analysis is nonsense in world terms. The oil price is high right now for many global reasons, key of which is supply constraints(either above or below ground). Have a look at for proper global analysis of supply.
Bruce Stephens  |  April 08, 2012
The commodities market was deregulated in 06 in order to float the price of oil, reducing OPECS control of setting the benchmark price. $100/bbl oil was necessary in order to bring our Bakken and Eagle Ford shales into production. Unfortunately, at this price we can afford to export this precious commodity at the expense of the American people. The last benchmark price OPEC set was $65/bbl. We have made them twice as rich and powerful than they were.
Al Stein  |  April 07, 2012
I am so t-i-r-e-d of hearing 1/2 truths the people you seem to be accusing are not even close the real reason being.... North America as a whole has lost control of our natural resources to both the Arabs and the Chinese, I would like to mention that this has been going on since the 1970s our own stupid Federal Governments (U.S. & Canada) have made us and all North Americans the "biggest slut" in the World with your smarts, you darn well know that "many" countries, are to-day involved in setting gasoline prices this I believe is because our own government has sold us out and is our real only enemy, and they do not intimate nor fool me Al Stein.
Patricia  |  April 07, 2012
In a word,.............. oppression,................... all way round!
BD Arata  |  April 07, 2012
The real reason for the price of oil rising is too many cheep euros and dollars being printed and oil is the only true hedge for inflation. We all know that their is not an area of or lives it doesnt affect and make life better.
BD Arata  |  April 07, 2012
First oil it traded in New York on the NYMEX yes is is part of the CME. NYMEX set up a open and transparent market for oil and was a big reason for the price of oil dropping from the 30s to the teens in the 1980s.
Big-Un  |  April 07, 2012
Ha Ha Politics, too many sheep & not enough dogs to fend of the coyotes. We cant keep score no more? Why that would hurt someones feelers.
J Beigh  |  April 07, 2012
The author has some of it right. Its complicated, but to give Obama and Rahm Emmanuel so much credit to control this scene is farcical. Big Oil will trump all governments and wall street all day everywhere. The Fed, ZIRP, decling dollar value in global parity terms, the Euro crisis, increased demand from India and China, and a depleting diminishing commodity which gets marginally more costly to produce per unit... This cant end well. I wonder how many of those absurdly grand profits that Big Oil is reaping are being re-invested in commodities to keep their price where they want it? Manipulation is rife: when 911 occurred, the marketplace reaction would reasonably be that prices of oil would skyrocket: we had sub $2.00 gasoline through Christmas. Made NO rational, objective market price discovery sense. We are victims and guppies. Substitution will come on, when the price gets untenable. You know were getting there when a V10 driving patch worker starts to walk, take a scooter, ride a bike, play closer to home... My most radical enviro friends take is, drill baby drill... get that stuff up, out, and used so we can MOVE FORWARD w/o oil. That earth the meek will inherit will be rode hard, put away wet, and the inheritors will probably be in a new species of irradiated exoskeletal critters resembling cockroaches. Now, the simple deal, if you believe in personal responsibility, choices, and consequences is this: You are NOT a victim. Where in the constitution is the clause guaranteeing $2.50 cent per gallon gingrich-promised oil to Americans (screw the rest of the world: were exceptional!!) Bottom line: less oil = more freedom. Opt out.
Kevin Smith  |  April 07, 2012
You will not loose your job in the oilfield. Currently we are losing rigs drilling for natural gas, because we are drilling for this over priced oil. We need to get automobiles converted to natural gas. This could stabilize the industry for a few decades instead of the boom and bust cycle. I am in the industry too, but we need to end the speculative trading. It is destroying the dollar and our country. We need an entire new congress and a new president.
Kevin Smith  |  April 07, 2012
White collar criminals Have nothing to fear Have a sip of their whiskey A drink of their beer Some call it justice Serving one year In a country club prison With nothing to fear One day we will wake up To political fear But we are all too damn lazy Sipping whiskey and beer
phil  |  April 07, 2012
Is this the way is heading with thinly disguised attack pieces in Obama mascaraing as serious discussion points. If it is Im going to start heading over to upstream online first for my o&g news than here. Which would be a shame after 7 years on relying on you guys for good coverage.
Rolando Canseco  |  April 06, 2012
Very enlightening! Never rest till your voice is heard and acted upon.
al  |  April 06, 2012
When you Buy It, You have to take Delivery. That would be a Stopper for all Oil Speculationm, TRANSPPARENCY and UNDERCOVER..... Prison Time Starts at Ten Years, No Passing Go. Look what these thieves are doing to your Kids, Wake Up before this Adm. Buries America, and then some one will bury them.
Rick Incorvia  |  April 06, 2012
What are we waiting for" Where have I heard that before.. The natural Gas idea is a no brainer.. And this talk about Oil being the price it is because of speculation, is something that is so true and it is allowed to continue.. Its terrible and should be dealt with in the same matter as any crime..But with harsher penalties being they are stealing from all Americans.
Carl Calabro  |  April 06, 2012
You want Cousin Vinny from the Bronx to go over to New Jersey and rough up Mr Learsley?
Dennis  |  April 06, 2012
7I work in the oil patch, drive a gas guzzler ford v 10 which i mostly park now and take my scooter everywhere instead when possible.I notice in India that they get ever last bit of any resource including driving their vehicles until the tires are ready to fall off. many of which run on natural gas bootles and significant use of diesel power. I worked on wells for tailsman resources for natural gas where the plan is to convert this gas to diesel fuel this fuel would cost in the neighborhood of 40 cents a liter depending on in put cost of the land sale royalty tax rate ect...I hope no one ever clues into this because cheap fuel would throw a lot of well paid oil workers, like me, out of work
Kevin Smith  |  April 06, 2012
It is time for this speculation to stop. We are devaluing the dollar while allowing mass fraud in commodity speculation. We need to stop this speculation and get 10-20 percent of our vehicles running on natural gas. We also need to raise interest rates. It is a crime what we are doing to the dollar.
frank shattuck  |  April 06, 2012
Sandman  |  April 06, 2012
It does not matter the direction one turns the deceit is like a Stage 4 Cancer, we are all being victimized! Perhaps Michael Douglas got it right in Wall Street...Greed Is Good and Wall Street Money Never Sleeps...Your all &*!@%^ was a opening line of his speech to investors.The world is in crisis,and not much is being done to reverse it. If in fact there is any truth that the meek will inherit the earth, my guess is...will they want it.