$70 OIL, FREE MARKETS, SUPPLY & DEMAND, THE ECONOMIC *#@!()

WHEN IT COMES TO OIL, ALL ECONOMIC THEORIES SUCH AS DEMAND AND SUPPLY, FALL BY THE WAY SIDE. TODAY IT IS CLOSE TO $70 A BBL, THE PRICE THE SAUDIS WANT. DEMAND FOR OIL IS FAIRLY LOW, SO HOW DO YOU EXPLAIN THIS HIGH PRICE.

OILS IS BEING BOUGHT AND HOARDED FOR SPECULATIVE PURPOSES, , THIS DATA IS PUBLICLY AVAILABLE. TRADERS IN THIS COMMODITY HAVE KEPT IT HIGH.

THE QUESTIONS TO BE ASKED, HOW MUCH OF THIS SPECULATIVE MONEY BELONGS TO SOVEREIGN WEALTH FUNDS, THESE ARE FUNDS RUN BY FOREIGN GOVERNMENTS.

SO PERHAPS BECAUSE OF THIS THE LAW OF SUPPLY OF DEMAND DEMAND DOES NOT WORK. THE JOE ON THE STREET IS BEING GOUGED BY THE BIG GUYS AS USUAL.

THIS WOULD CRY OUT FOR A GOVERNMENT INVESTIGATION, IT DID NOT HAPPEN IN THE PAST, WILL HAPPEN IT NOW., DON'T HOLD YOUR BREATH.

MORAL OF THE STORY: WHEN IT COMES TO OIL, LAWS OF NATURE, ECONOMICS AND GOVERNMENTS DONT WORK.

OIL AFTER THE OLYMPICS

OIL IS HEADED DOWN, DRIVEN SOUTH BY THE APPRECIATING DOLLAR AND LOWER DEMAND. THE DEMAND FROM EMERGING ECONOMIES SUCH AS INDIA AND CHINA WAS OVERRATED TO START WITH.

ONCE THE OLYMPICS ARE OVER EXPECT THE OIL TO BE DELOW $100, TRADING BETWEEN $90-$100. THE CONSUMER IS SPOOKED, THE DEMAND FOR OIL WILL CONTINUE TO DECLINE.

THE OIL BUBBLE HAS BURST AS PREDICTED.

IN MY JUNE POST, I HAD PREDICTED THE BURSTING OF THE OIL BUBBLE. SO IT HAS.
HOW FAR DOWN WILL OIL GO. IT IS POSSIBLE TO SEE $70-$80 PER BARREL, BY YEARS END. CONSUMERS HAVE WOKEN UP AND ARE MOTIVATED TO CONSERVE AND USE LESS OIL. SO $ 75/BARREL IS A REAL POSSIBILITY,

THE MAJOR FINANCIAL COMPANY ANALYSTS PREDICTED OIL GOING TO $200/BARREL
THEY WERE WRONG ON SUB PRIME , AND ON OIL. MAY IT IS TIME FOR WALL STREET TO BE IN TOUCH WITH MAIN STREET.

OIL EVEN NOW PROVIDES THE BEST BANG FOR THE BUCK, ie IT PROVIDES A QUICK SOURCE OF ENERGY AND POWER. TILL A REAL ALTERNATIVE COMES ALONG OIL WILL BE MAIN SOURCE OF VEHICLE POWER.

Plenty of oil, No Buyers

So much for the supply and demand theory. Pretty soon we shall see a drop in prices and one more speculative bubble in oil will burst.


From The Times
May 22, 2008
They're wrong about oil, by George

Rip up your textbooks, the doubling of oil prices has little to do with China's appetite

Now consider the situation today in oil markets: the Gulf, according to Mr Rothman, is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell. That physical oil is in excess supply at today's prices does not mean that producers are somehow cheating by storing their oil in tankers or keeping it in the ground. All it suggests is that there are few buyers for physical oil cargoes at today's prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year. This situation is exactly analogous to the bubble in credit markets a year ago, where nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for “financial derivatives” that allowed investors to bet on the future value of these bonds.

In short, the standard economic assumption that supply and demand drive prices is only a starting point for understanding financial markets. In boom-bust cycles, the textbook theory is not just slightly inaccurate but totally wrong.

Good article, more@

[link to www.timesonline.co.uk]