Good questions John,
With regard to the private speculators holding onto oil, that is probably already starting to happen. According to a recent This Week In Petroleum the recent run up in the crude inventory can be explained by the contango in the oil futures market. People were filling all the available space in the tank farms to make an easy buck out of the futures market. (the street) So yes private speculators can do this, but since oil is quite bulky the cost of hoarding it is not negligible. The price of oil has to increase quite quickly to be able to pay back the cost of holding the oil. It currently has to increase by at least 15% a year to be at all profitable.(It is very dependent on nominal interest rates as well as the price of oil)
For the oil producing countries however they don't have to deal with the cost of physical storage of in ground reserves and so the only carrying cost they have to deal with is associated with the opportunity cost of not getting the revenue immediately. They can make a profit hoarding oil even if the price of oil is increasing only a little bit faster than the cost of money.
$this->bbcode_second_pass_quote('JohnDenver', '"')The oil market must be one of the harder things around to pump and dump (unless you are the CEO of Aramco everyone knows you don't have any better information than the next guy)."
It seems to me (and to you?) that the oil market is being pumped with talk.
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Oil price: It's All Your Fault For Talking About Peak Oil
by nero » Fri 24 Jun 2005, 02:28:42
Wow, that's an old quote. I don't think the market is being over inflated by talk. Talking about peak oil is not "pumping and dumping" because we have very little expectation of moving the market by our talk. If the the market players do start to believe that peak oil is imminent they will change their behaviour to take into account that information. To the extent that talking about peak oil informs the market players with useful analysis it will have an effect. However since most analysis is just hot air I doubt any single person can influence the price and therefore deliberately "pump" up the price above the "correct" level.
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by BabyPeanut » Fri 24 Jun 2005, 08:30:35
$this->bbcode_second_pass_quote('nero', 'S')pare capacity isn't equivalent to hoarding.
But failure to grow supply is the equivalent of shortage now.
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by nero » Fri 24 Jun 2005, 10:53:40
$this->bbcode_second_pass_quote('', 'B')ut failure to grow supply is the equivalent of shortage now.
That was sort of my point. That the belief that peak oil is imminent is a self-fulfilling prophesy.
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by Doly » Fri 24 Jun 2005, 10:56:23
$this->bbcode_second_pass_quote('nero', ' ')the belief that peak oil is imminent is a self-fulfilling prophesy.
You don't really mean it, do you? Hoarding in the past wouldn't have made much of a difference on prices. It can only make a difference when supply and demand are really tight.
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