Did you ever get the feeling you’re being played?
The cost of fuel is not just a matter of supply and demand. It’s more a matter of speculators grabbing a profit wherever there’s a chance.
Like the investors and the mortgage fiasco, where huge investment funds were buying what they had to know were bad investments, knowing full well that the government (meaning the taxpayers) would bail them out when the market fell. —Care to wager on whether or not that the same thing will happen in the energy field.
June 9 (Bloomberg) — Crude oil fell more than $4 a barrel in New York after Saudi Arabia’s oil minister, Ali al-Naimi, called for a meeting of oil producing and consuming nations to discuss how to deal with record prices.
“The increase in prices isn’t justified in terms of market fundamentals,” the Saudi government said today in a statement distributed by the Saudi Press Agency. Oil climbed $10.75 on June 6, its biggest gain ever, because of a weakening dollar and threats of supply disruptions.
Pump prices in the U.S. passed $4 a gallon for the first time over the weekend. Regular gasoline, averaged nationwide, rose 1.8 cents to a record $4.023 a gallon, AAA, the nation’s largest motorist organization, said today on its Web site.
May 20 (Bloomberg) — Crude oil rose above $129 a barrel in New York for the first time after billionaire hedge-fund manager Boone Pickens said oil will reach $150 a barrel this year because supply isn’t keeping up with demand.
Producers are “running out of oil,” Pickens, the founder and chairman of Dallas-based BP Capital LLC, said on CNBC today, reiterating comments he made to Bloomberg News on April 29. Goldman Sachs Group Inc. and Deutsche Bank AG also said in the past month that prices would rise.
Pickens’s BP Capital Energy Equity Fund fell 14 percent in the first two months of the year amid soaring prices for natural gas and crude oil. He told CNBC on Feb. 21 that he was short on both oil and natural gas. –He went short and now he’s trying to drive the market to make up his losses.
The folks who say it’s just supply and demand point to China and the increased demand, but China capped fuel prices to limit inflation. Which begs the question: How much of this high priced oil will the government of China be willing to subsidize?
They point to Russia and their reduced output. They have no shortage, they simply reduced their output to punish the former Soviet Block States for trying to join NATO, and you can expect their output to remain down until they can get a pipeline deal to deliver product directly to Europe.
They point to a possible strike in Nigeria.
According to the DOE:
During the 16 months preceding the election, militant activity in the Niger Delta (especially near Warri and Port Harcourt) has severely impacted Nigeria’s oil production potential by shutting-in an estimated 20 percent of total production. —If this has already happened, why do the speculators point to The possibility of strike sometime in the future as one of the reasons for an an increase in the price of crude?
Heating oil for June delivery climbed 9.99 cents, or 2.7 percent, to settle at a record $3.775 a gallon in New York, after reaching $3.792 a gallon, the highest since trading began in 1978. Some traders use heating-oil futures to hedge purchases of diesel and jet-fuel, which are chemically similar.
“Worries about Middle East supply have increased because of Israeli reports about U.S.-Iran policy,” said Bill O’Grady, director of fundamental futures research at Wachovia Securities in St. Louis. “Outside of a war it’s difficult to see how these price gains can continue because at some point the economy will implode.”
Well stated. “The economy will implode,” meaning those of us that are working stiffs will be unemployed or underemployed. The cost of things like food will rise to the point that we will buy nothing but the necessities. Our consumer driven economy will fall into full blown recession / depression. And the taxes paid by those of us that still have jobs will go to bail out the next “Morgan Stanley” that made bad investments in oil.
The scary part of his statement: “Outside of a war.”
Given King George and his Court Jesters’ ties to the oil market, and their repeated statements about Iran and all the “Axis of Evil” bullshit, it might be a good time to start giving credence to the probability that the Neo-cons will get their war with Iran before the next President takes office.