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I'm pretty damn far from an authority on oil prices, lol...but I have been trying to wrap my head around the topic and reading up on it.
The question I'd honestly ask is: who DOESN'T accept that speculation has been a critical factor in the pricing volatility?
The debate seems to be to what degree speculation has contributed...not that it wasn't/isn't highly relevant. I think you'll be harder pressed than you think to find many who will say that $140+ was a reasonable price, purely determined by market fundamentals.
there's a ton of info (sure, much is opinion) out there, but here's a sample:
http://www.thestar.com/Business/article/497056
| quote: | Institutional investors caused the rapid rise and subsequent steep fall in oil prices in 2008, according to an independent report released by U.S. lawmakers yesterday.
The report, co-authored by hedge fund manager Michael Masters, said that from January to May index traders poured $60 billion (U.S.) into commodity markets, causing a big spike in oil prices.
When the U.S. Congress held hearings May to July about reining in speculation, traders pulled $39 billion from the market, the report stated.
Masters said his company paid for the report to help lawmakers as they consider new regulations for futures markets. But critics note that Masters' hedge fund invests in the auto and airline industries, which would benefit from lower oil prices.
Oil hit a record $147 a barrel in July, then started falling sharply until it reached $102 this week.
"The bottom line here is that with regard to commodities, money going in pushes prices up, money going out pushes prices down," Masters said.
The portfolio manager for Masters Capital Management based his analysis on data available to the public from the Commodity Futures Trading Commission, the Energy Information Administration and other investment sources.
The study conclusion is not surprising. It echoes Masters' remarks at several congressional hearings this year about the impact of speculators in futures markets.
An influx of large index traders into commodities markets has been blamed by some for pushing up oil and food prices. Masters said institutional investors should be banned from all futures markets or be greatly restricted.
"I think they greatly distort the marketplace," Masters said.
Lawmakers unveiled his report on Capitol Hill to bolster their efforts to rein in what they believe is excessive speculation in oil markets. The Commodity Futures Trading Commission is to report to the U.S. Congress within days on the role speculators played in the oil market.
Meanwhile, in Vienna yesterday, the Organization of the Petroleum Exporting Countries said it would trim overall output by more than 500,000 barrels a day by adhering closer to production quotas – a compromise to avoid a backlash from the biggest oil consumers and stop the rapid decline in oil prices.
Oil prices dipped to fresh five-month lows yesterday, falling 68 cents to settle at $102.58 a barrel after dropping as low as $101.36, the lowest since early April.
Also yesterday, one of Canada's more outspoken economists dramatically ratcheted downward his bullish forecasts on oil.
Jeff Rubin, chief economist of CIBC World Markets, said the slowing global economy means oil will not hit his previous target of $150 a barrel this year. He now predicts the annual average price will be $115 a barrel this year and about $130 in 2009. He dropped any reference to 2010, when his previous notes said it would hit $200. |
http://www.globalresearch.ca/index....ext=va&aid=8878
"Perhaps 60% of today’s oil price is pure speculation’" is the article heading.
http://uk.reuters.com/article/oilRp...T26543120080804
| quote: | TOKYO, Aug 4 (Reuters) - Japan's new energy minister Toshihiro Nikai said on Monday that crude oil prices were at "abnormal" levels that even hurt oil producers in the Middle East.
"I think this is an abnormal surge in crude oil prices," said Nikai, 69, who was reappointed on Friday as the minister of economy, trade and industry, succeeding Akira Amari.
He told a group of reporters in an interview that Middle East oil producers told him earlier this year that they thought of $60-$70 a barrel as the limit for oil prices and that they too had been inconvenienced by the significant volatility in oil prices. (Reporting by Osamu Tsukimori) |
I can't find it now, but I read another report earlier in the year which argued that market fundamentals provided for a price in the $80-85 range, with speculation being responsible for the price being much higher.
[[ LINK REMOVED ]]
| quote: | | Oil was at $50 a barrel in January 2007, then $75 a barrel in August 2007. Now at $130 or so a barrel, it is clear that oil pricing is speculative activity, having very little to do with physical supply and demand. An essential product—petroleum—is set by speculators operating on rumor, greed, and fear of wild predictions. |
regardless of who this person is...it's the #s that are relevant. If there is no corresponding change in the balance of supply and demand, then such a radical upward trend in price has to be due to other factors, at least in part.
http://www.atimes.com/atimes/Global...y/JE06Dj07.html
| quote: | | As much as 60% of today's crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. |
really, the sources are endless...but it is indeed a debate, with nothing being gospel. From what I've read, I'm inclined to agree that speculation, not supply and demand, is behind the volatility (for now).
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