No. of Recommendations: 2
And here I thought they came up with it all by themselves.

A little light reading: Congressional hearings in 1979, regarding daisy chaining, price gouging, kickbacks to prevent DOE audits

auditors in May of 1978 found that a
major oil company in the United States, which was both a producer
and a refiner, bought back at a price of approximately $12 a barrel
the same oil that it had sold at a price of $5 a barrel.
...our preliminary investigations indicate that the practices under scrutiny are such as should be immediately exposed, he said. Sawhill said that a special staff of 30 investigators would continue to probe, which the agency calls Project Escalator.

FEA identified five types of possible violations: Kickbacks and payoffs to brokers; excessive brokerage fees; excessive transportation and handling costs; necessary movement of the oil to boost handling charges to utilities; and violations of FEA rules governing direction of oil supplies. The agency said that there was also evidence that some brokers altered invoices, changing price control crude oil, which sells for $5.25 per barrel, to new oil, which sells for some $10 to $11 per barrel.

In the typical daisy chain, each member of the chain only marks up the oil a modest amount, to avoid charges of gouging, then passes the load to the next link, which marks it up some more. Everyone makes a "modest" profit, but the oil doubles in price by the time it makes it's way back to where it started.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.