[Graeme]

Towards And End To Crude Oil Price Speculation ?

$this->bbcode_second_pass_quote('', 'A')s of the present we have a menacing but periodic slump in the upsurge of commodity prices, signalled by a slump in oil prices. This of course leads the bigger hedge fund strategists to predict a "V", betting on previous performance and drawing on the now conventional wisdom that oil is a scarce resource.

Global economy optimists however say that "Malthusian illiteracy" lurks behind remaining adherents of Peak Oil theory - which basically says conventional oil production will stagnate and fall but demand will go on growing. Since the sole interest of global economy consumers and their minders in Big Government is the oil price, the most important fundamental, for them, should be the massive and constant or fundamental manipulation of its price.

We cannot expect or reasonably hope the current energy economic system will generate, sustain and channel investment into the best energy choices. The default real world result is well known to us all: rising energy prices in more and more disconnected and unrelated domains - for example declining electricity prices but rising transport fuel and agricultural fuel costs. System-wide energy economic modelling and analysis provides the best tools for rational choices, but at present this rational approach is swamped by financial speculation, government needs for rising tax receipts on energy to palliate the finance and debt crisis, and passing fads of the ruling elites like global warming fear.

In this context Peak Oil is relatively useful as a signal for change. It is not however a catastrophe because alternatives do exist, both on the demand side and supply side. Making this evident needs the elimination and replacement of the present entirely speculative oil price setting and fixing system.

[peeker01]

I dare you to read this article and tell me where it is wrong. Global Research

[Bill Hicks]

You gotta be kidding me with this idiot. Here is a quote from his story:

$this->bbcode_second_pass_quote('', '
')Over the past couple of years global crude oil production has increased along with the increases in demand; in fact, during this period global supplies have exceeded demand, according to the US Department of Energy. The US Department of Energy’s Energy Information Administration (EIA) recently forecast that in the next few years global surplus production capacity will continue to grow to between 3 and 5 million barrels per day by 2010, thereby “substantially thickening the surplus capacity cushion.”

[AgentR11]

$this->bbcode_second_pass_quote('article', 'T')he large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil,

[peeker01]

FAIL

Short term physical purchases create the illusion of demand, and therefore an increase in
futures prices.

[AgentR11]

Nope. No illusion at all. A futures contract is only delivered physically once. Where a new contract is issued, old ones expire and are delivered. You could *possibly* argue, that at the beginning of time, there was a one time increased demand when the first futures contracts in the history of the world were issued and bid; but since then. Nahh.

[peeker01]

If the 2008 crude price chart looks normal to you, I suppose there is nothing more I can do
to educate you.

[AgentR11]

It looks reflective of the market dynamics of the time. Strong economy tapped a hard limit on available supply; I'm amazed the price didn't spike to $500 / bbl.

[peeker01]

Are you serious?

http://www.usatoday.com/money/economy/2 ... rter_N.htm

[AgentR11]

Yep.
Deadly.

edit nb: Did you even bother to read the article, or were you just joyful at a headline that looked kinda like what you wanted?

That article is written at the peak just before things went belly up. Including sentences like:
$this->bbcode_second_pass_quote('article', 'T')hird-quarter growth was the strongest since GDP expanded at a 7.5% rate in the third quarter of 2003.

[kublikhan]

$this->bbcode_second_pass_quote('peeker01', 'I') dare you to read this article and tell me where it is wrong.

[peeker01]

Kub- the article is about the role of traders in running up the price of crude oil. You know, we
can still believe in peak oil, while acknowledging goldman is a criminal organization operating
under government protection.

[AgentR11]

Just because Goldman may be evil incarnate, does not imply that the run up in the price of oil a while back was an incorrect expression of the market conditions. Just because an evil person eats dinner, does not imply that eating dinner causes one to be evil.

Oil spiked because demand tapped available production limits at the time. The price people are willing to pay to accomplish certain economic activities that consume oil is VERY, VERY high; so when placed into a price competition mode, the sky's the limit.

[peeker01]

Agent - oil manipulation has progressed well beyond the "implication" stage. Many prosecutions
under way, leaked emails, opec cheating, all going to culminate into proof that Goldman's
oil operations are as filthy as their mortgage swindle.

Of course, Blankfein will become the next Sec of the Treasury, but at least we will know what's
going on.

[AgentR11]

Scapegoats are goats... Might impress or at least mollify the masses. I'm not impressed.

And yeah, pstarr, that's kinda the point; people are willing to pay absolutely obscene prices for oil; the only limiter becomes their ability to do so. Given a zeroed out supply vs demand gap; the price goes up till ability to pay goes away, thus destroying some of that demand, restoring the gap between supply and demand that is required to keep the system operating smoothly and gently.