{"id":2500,"date":"2014-12-05T12:03:17","date_gmt":"2014-12-05T17:03:17","guid":{"rendered":"http:\/\/olduvai.ca\/?p=2500"},"modified":"2014-12-05T12:03:17","modified_gmt":"2014-12-05T17:03:17","slug":"plummeting-oil-prices-could-destroy-the-banks-that-are-holding-trillions-in-commodity-derivatives","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=2500","title":{"rendered":"Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives"},"content":{"rendered":"

Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives<\/a>.<\/p>\n

Could rapidly falling oil prices trigger a nightmare scenario for the commodity derivatives market?\u00a0 The big Wall Street banks did not expect plunging home prices to cause a mortgage-backed securities implosion back in 2008, and their models did not anticipate a decline in the price of oil by more than 40 dollars in less than six months this time either.\u00a0 If the price of oil stays at this level or goes down even more, someone out there is going to have to absorb some absolutely massive losses.\u00a0 In some cases, the losses will be absorbed by oil producers, but many of the big players in the industry have already locked in high prices for their oil next year through derivatives contracts.\u00a0 The companies enter into these derivatives contracts for a couple of reasons.\u00a0 Number one, many lenders do not want to give them any money unless they can show that they have locked in a price for their oil that is higher than the cost of production.\u00a0 Secondly, derivatives contracts protect the profits of oil producers from dramatic swings in the marketplace.\u00a0 These dramatic swings rarely happen, but when they do they can be absolutely crippling.\u00a0 So the oil companies that have locked in high prices for their oil in 2015 and 2016 are feeling pretty good right about now.\u00a0 But who is on the other end of those contracts?\u00a0 In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing absolutely colossal losses.<\/p>\n

It has been estimated that the six largest \u201ctoo big to fail\u201d banks control$3.9 trillion<\/a>\u00a0in commodity derivatives contracts.\u00a0 And a very large chunk of that amount is made up of oil derivatives.<\/span><\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives. Could rapidly falling oil prices trigger a nightmare scenario for the commodity derivatives market?\u00a0 The big Wall Street banks did not expect plunging home prices to cause a mortgage-backed securities implosion back in 2008, and their models did not anticipate a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[195,1668,236,592,1669],"class_list":["post-2500","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-debt","tag-derivatives","tag-economic-collapse","tag-oil-price","tag-wall-street-banks"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/2500","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2500"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/2500\/revisions"}],"predecessor-version":[{"id":2501,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/2500\/revisions\/2501"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2500"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2500"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2500"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}