Did Speculation Fuel Oil Price Swings?

[Lester]

60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand
http://www.cbsnews.com/stories/2009/01/ ... 7770.shtml

[cgarison]

All I can say on that story is:

"No $hi+!!!!"

And the only reason the price of oil started to trade lower was that investment banks needed cash to pay down the losses on the mortgage fiasco.


Although, they left out a significant twist which throws a hole in their thesis as presented on air which is the weak dollar causing the spike in the fall of 2007. Oil climbed from the mid $60s/barrel to circa $100.00/barrel only on the weakness of the dollar and the lack of a progressive monetary policy. All the increase after January 2008 was on pure speculation.

[Lester]

No Sh!t is right... go look through the old threads on this board... everyone here knew the cause... I suspect a large chunk of America knew the cause... but no one with any real authority would stand up and call foul.

In 107 days, will I see a change?

[AmpedNow]

Makes perfect sense now... We were right all along.

We have been in a recession officially since December '07. A recession is an all-around contraction of the economy. Oil demand does not skyrocket during recessions. It declines.

One could argue that the $4 per gallon gasoline over the summer accelerated the severity of this recession. Many people had to sacrifice in other areas of their lives just to get back and forth to work. Meanwhile the speculators dined on steak and lobster all summer long, until the feds caught on and their little powwow came crashing down.Then they scattered like the roaches they are, and oil prices finally came in line with actual demand.

This cannot be allowed to happen again. If they want to create a Pepsi futures market and run the price up to $5 a bottle, and the market will support that price point, then so be it. People can live without Pepsi (well, most of you), but we presently cannot live without oil. It's not right to hold hard-working people over a barrel (pun intended) with a commodity they absolutely need.

Lord knows how much I spent on gas driving back and forth to Houston in July... Today I could make the trip on one-third of that price.

[cgarison]

In 107 days, will I see a change?

I really hope a change happens. I am not worried about changes in the pricing models for oil as much as the back lash to many of the price controls on electricity in the eastern states that are going to expire in the early days of 2011. Eastern PA is expecting to have a 20-30% increase in their utilities. In Kentucky, it is expected to be around a 65% increase in the price of power. I am not sure about the rest of the east US, but I say KY will be typical of the south and PA typical of the north.

So to stop that from happening, the same mechanism that caused the oil bubble a.k.a. as the Enron Loophole needs to be closed ASAP. The clock is ticking and the nation cannot afford this kind of hit in the wallet.

Natty Gas? Don't get me started on this boondoggle because the rest of the world pays only a fraction of the price that we pay in the US which puts this nation at a competitive disadvantage in the petrochemicals arena due to the high price of the methane base stock for the majority of poly compounds. Dow, DuPont and Rohm & Haas have been beat up on the income statement side because of the skyrocketing price of natty gas. Also impacted is the steel industry which uses natty gas as fuel to power blast furnaces.