I'm no expert in this field (or any other I can think of!) but as I understand it, it sometimes works approximately like this:
The financial institutions purchase really large amounts of oil, ship them and then have the tankers float around the ocean (along with Wave's chips and the 260,000 square mile floating island of rubbish) for extended periods thereby disrupting the supply chain.
At the same time, they make bets on the price of oil consistent with the materialisation of the product.
So they can win big on the oil and/or their bets on the market based on knowledge which others don't have. As I understand it, this is not illegal. It's only wicked and highly rewarding. Hence the folks who make these kinds of arrangements are not too excited about having them regulated.
Here's a similar situation I've just looked up, although this one seems to have crossed the line - http://www.econbrowser.com/archives/2011/05/oil_price_manip.html By the way, one of the comment-writers appears to have heard the same thing as me.
Please no one tell orda that the company which is purported to do this on the largest scale is none other than the great vampire squid itself, Goldman Sachs. I suspect it will be the cause of a major and perhaps fatal neural explosion.
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