[Pops]

Dallas Fed: Don't Blame Bankers speculators for $147/bbl oil:

$this->bbcode_second_pass_quote('', 'O')il market speculation became an especially popular topic when the price of crude tripled over 18 months to a record high $145 per barrel in July 2008. Of particular interest to many is whether speculators drove oil prices beyond what fundamentals would have otherwise justified. We explore this issue over two Economic Letters. In this article, we look at evidence from the physical market for oil and conclude that fundamentals, and not speculation, were behind the dramatic rise and fall in oil prices. In our companion Economic Letter, we examine the futures market.

[Cloud9]

What we need to blame the bankers for is the quadrillion dollars they created out of thin air when they built a series of casinos consisting of the subprime market, derivatives and a whole host exotic instruments we have never heard of. They were able to finance fantastic lifestyles for themselves as they created earnings by trading these instruments among themselves. Then when they had created the illusion of value in these exotic products, they sold them to us.

The money sloshing around the system created the huge demand the world over for oil. The brick wall of a finite resource exposed the scam. You may build a field of dreams full of mcmansions in the Arizona desert, but when oil gets to $147 a barrel, they will not come.

[Bruce_S]

$this->bbcode_second_pass_quote('Pops', 'D')allas Fed: Don't Blame Bankers speculators for $147/bbl oil:

http://www.dallasfed.org/research/eclet ... l1111.html

[Plantagenet]

When global oil supply cannot easily meet rising global oil demand, then the price of oil will rise. This is an inevitable consequence of of world oil production "peaking".

Thats what happened from 2005-2008----good to see the Dallas Fed confirming this.

[Bruce_S]

$this->bbcode_second_pass_quote('Plantagenet', 'W')hen global oil supply cannot easily meet rising global oil demand, then the price of oil will rise. This is an inevitable consequence of of world oil production "peaking".

Thats what happened from 2005-2008----good to see the Dallas Fed confirming this.

[Bruce_S]

"Economic Letter is published by the Federal Reserve Bank of Dallas. The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System."

Putting the Seal of the President on an 8X11 sheet of paper doesn't mean it came from the President. The above quote is in the article, no matter who stamped it, with what.

The question I've got is why would the Fed NOT give it their seal of approval?

[GoIllini]

$this->bbcode_second_pass_quote('Bruce_S', '&')quot;Economic Letter is published by the Federal Reserve Bank of Dallas. The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System."

Putting the Seal of the President on an 8X11 sheet of paper doesn't mean it came from the President. The above quote is in the article, no matter who stamped it, with what.

The question I've got is why would the Fed NOT give it their seal of approval?

[Bruce_S]

$this->bbcode_second_pass_quote('GoIllini', '
')The point of the disclaimer is that these ARE Fed employees, but they don't necessarily speak for the Fed. It is the same way that an oil analyst at Shearson says "I think Gulf Petroleum's a good deal", but may not be officially speaking for the firm. We attribute the view to Shearson, but in reality, it's Shearson's analyst taking that view.

[GoIllini]

Well, that kind of a disclaimer is fairly common at the Fed. For instance, take a look at Bernanke's June press conference:
$this->bbcode_second_pass_quote('', 'T')hroughout today’s briefing, my goal will be to reflect the consensus of
the Committee while taking note of the diversity of views, as appropriate. Of course, my
remarks and interpretations are my own responsibility.

[Bruce_S]

$this->bbcode_second_pass_quote('GoIllini', '
')Look, it would not get printed to the Fed website a Fed employees hadn't done a thorough study.

[fletch_961]

$this->bbcode_second_pass_quote('pstarr', ' ')Everybody knows oil speculators brought crude to ridiculous levels.

[GoIllini]

$this->bbcode_second_pass_quote('pstarr', 'Y')ou realize, of course, that I am very sarcastic? Either that, or I have no idea WTF you are talking about.

How about this; I translate my comment for ya' . . .

certain people (unable or unwilling to consider that peak oil has occurred with resulting catastrophic and cascading financial social and military effects) still populate this board with denial horsesh#t that ticks me off.

And then I get sarcastic.

[mad_marten]

Oh boy, somebody cue the "Not this shit again" picture

There is much evidence that this dallas fed guy is lying his A$$ off.

First his own chart 1 shows rapidly falling world GDP intersects rising oil prices between 2007 and 2009. Falling GDP especially by mid-late 2008, would lead one to predict falling oil prices, not exploding ones.

I just got done reading this chapter in Matt Taibbi's Griftopia, and it should be mandatory reading.

He gives pretty damning evidence and a good narrative, but here are some specific figures he gives. Ok people like to blame China's increasing thirst for oil, and that is a factor but cannot solely account for prices in 2008. Between 2003 - 2008 China bought 992 mil barrels of oil. But according to the CFTC, speculators almost bought just as much 918 mil barrels.

Ok, the guy in dallas-fed states that other other commodities went up at the same time as oil, but that is because speculators often bought into a commodities basket. The S&P GSCI and the DOW-AIG went up at the same time. The amount of money invested in commodities rose from $13 bill. in 2003 to $317 bill in 2008 ( an increase of 25x in five years). The average increase of the commodities represented went up 200%, and none decreased.

Citigroup in April 2008 called it a "Tidal Wave of Fund Flow" [in commodities]. Greenwich Associates a month later wrote: "the entry of new financial or speculative investors into global commodities markets is fueling the dramatic run-up in prices." And the top oil analyst at Goldman-Sachs said in 2008 that, "without question the increased fund flow into commodities has boosted prices."

Keep in mind that many of these [new] investors were new institutional investors like retirement funds that got talked into purchasing these commodities funds by the Wall St. investment houses, that was allowed by new roll-backs of regulations pertaining to these.

Finally, Goldman in general disclaimer wrote: "Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are CONTRARY [emph added] to the opinions reflected in this research. Our asset management are , our proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.
We and our affiliates, officers, directors, and employees,excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy and sell, the securities or derivatives, if any, referred to in this research."

So they can tell people what ever they want, even if internally they think the opposite.

Anyway this is per Griftopia.

Mad

[GoIllini]

$this->bbcode_second_pass_quote('pstarr', '')$this->bbcode_second_pass_quote('GoIllini', '')$this->bbcode_second_pass_quote('pstarr', 'Y')ou realize, of course, that I am very sarcastic? Either that, or I have no idea WTF you are talking about.

How about this; I translate my comment for ya' . . .

certain people (unable or unwilling to consider that peak oil has occurred with resulting catastrophic and cascading financial social and military effects) still populate this board with denial horsesh#t that ticks me off.

And then I get sarcastic.

[Pops]

$this->bbcode_second_pass_quote('GoIllini', 'L')et's be clear- the picture isn't fantastic- the west's oil consumption has probably peaked, but let's not get ahead of ourselves and say world oil production has peaked.

[GoIllini]

$this->bbcode_second_pass_quote('Pops', 'S')o why do you think OECD consumption has peaked? The millions of new PHEVs? Tens of millions of homes running some kind of PV or wind generator? Maybe it's programable thermostats?

Or could it be that this year oil prices are going to average $100 a barrel?