Quote from 2cents:
not necessarily... simply put, i don't believe Iran nor the US nor the Quartet etc want / will allow WW3... and thats the only thing that cld have a long lasting effect on prices... as for supply / demand i suggest u do a little more research... there's an excellent thread on ET btw http://www.elitetrader.com/vb/showthread.php?threadid=66669 with excellent contributions from limitdown the thread starter, mtzianos on price discovery mechanism and actual supply / demand situation, etc etc... Pickens, Rogers etc are just self-serving...
I've read that thread already, and while I agree broken price discovery mechanism issues and hedge funds' affect on the markets are substantial, nothing changes the level of vulnerability to oil shocks we're at right now. The speculation premium only exists because the fundamental other issues. That thread's arguments are moot as nothing will change the problem quick enough from speculation premiums short of fast corrections that will NEVER possibly happen in the current oil-well-owning administration: removing excessive leverage from energy futures, adding and differentiating different crude types to exchanges, etc.
Anyway, even if there is a glut of sour crude on the market, its moot, since we need gasoline for our cars, not sour crude. When enough refineries are built that process sour crude nicely, then this will affect demand on the underlying. Again, a stupid argument, as these problems (building refineries) can't be solved in 3 weeks and an imminent supply crisis can happen in 1 day.
Cut off 2 or 3 million barrels a day from a market, only 3-4% of total supply, and we are left with the same fundamental problem: not enough of the resource that truly backs world economic growth: oil. (not gold)
I hope Iran doesn't want it, but who knows... They aren't exactly the most passive nation as of late in their dealings with the west.
And they are in control of this dilemma, not us, don't fool yourself. The market sees this.
Isn't it amazing just 5 years later, in a post Sep 11 era, that we are more vulnerable than ever to a global economic crisis by a non militaristic action (Iran merely ceasing oil exports) by the similar extreme fundamentalist 'enemy' that we were so proud to blunder billions to claim victory against? What a war in vain. Its a joke because Iran doesn't even need to act militaristic and block shipping channels to cause a giant crisis. Very scary.
Oil is not at $35 right now because just one rogue country can throw the whole world economy off with little effort. And get two or three to work together (ie Venezuela, Iran, Nigeria), and you have a true nightmare.
We're too late for a quick fix - the whole global economy is hanging on a thread, and too many people are in denial. Our continued complacency to tackle these issues head on will kill our economy, and that seems the only thing inevitable.
