Bernanke put the oil speculation nonsense to rest today
- Thread starter ChkitOut
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Quote from olias:
http://www.theatlantic.com/business...mines-the-price-of-gas-a-visual-guide/237968/
(excerpt)
"1. The Supply and Demand Factor. Fuel demand from China, India and Brazil -- three countries with a combined population of 2.7 billion -- is the chief factor behind rising prices. China's fuel demand increased 12 percent in 2010. Meanwhile Saudi oil production has fallen, as AEI's Steve Hayward told me. Perhaps the Saudis are pulling back after overstating their reserves, in which case we're in serious trouble. Or perhaps they're accepting higher prices in the short term to spend more money on their people to avoid a Libya-type revolution, in which case the production shortfall should be temporary. Either way, supply matters and there's less of it.
2. The Middle East. Break the past year in gas prices into three phases. First, in the summer and fall of 2010, gas prices were pretty steady around $2.80. Second, beginning in the late fall, they started to climb gradually for six months. Third, since February, they have increased dramatically. What happened in February? Revolutions swept the Middle East, then Libya descended into civil war and its oil production fell by more than 50%. Ongoing uncertainty about the region continues to push up prices.
3. The Weak Dollar. A falling dollar can be good for Americans. It makes our exports more attractive and imports less attractive, which keeps more money in the U.S. economy. Unfortunately, as the dollar loses value, oil becomes more expensive.
4. The Summer. The EIA estimates that good weather and vacations cause U.S. summer gasoline demand to be 5 percent higher than during the rest of the year. Better weather means more vacations, which means more gasoline use. Think of it as a naturally occurring demand enhancer.
5. The Speculation Factor. Oil speculation -- investors betting up the price of oil in the futures market -- is a controversial factor in rising gas prices, and Hayward doesn't believe it's a deciding factor. Burned by the bust of oil prices in the 2009, it's unlikely that oil speculators are back in the market bidding up the price of crude. But it's a possible, if marginal, factor.
6. The Drill, Drill, Drill Argument. The U.S. can drill all it wants but it's hard to find anybody who expects greater domestic production to move gas prices by more than, say, two percentage points in the next six months. The problem is that the market for oil is global and U.S. supply is too small to make an impact."
i'm sorry, but you can't use a resource that makes the asinine comment "a falling dollar may be good for Americans". it shows the author has no concept whatsoever of today's economy and is touting the "Ministry of Truth's" party line.
now point one indicates a more deep problem with oil in terms of peak oil. i'll certainly yield that has a lot of truth to it.
but this doesnt account for the meteoric rise in nearly every other commodity on planet earth since QE was initiated by the federal reserve.
I've said it a zillion times. Oil from $10 in 1998 to $147 10 years later, back to $38 in 6 months and now upwards of $113 is NOT due to increasing demand as a primary cause.
If this were the case we would have seen a much, much steadier increase in the price of oil with very sticky prices during that decline in 2008. I'm sorry, a commodity does NOT decrease by close to 80% in less than 6 months if there is such constant demand.
Guys like Olias have been so indoctrinated by propoganda that they have literally NO capacity to form their own opinion. They will always hide behind mainstream media soundbites and take great comfort that they are in allignment with "the politically correct theory".