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post #4 of (permalink) Old 09-10-2008, 11:00 AM
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Originally Posted by nzboardlife View Post
Its getting cheaper here...

I think everything like this just boils straight back down to the base idea of demand and supply. Hope that doesn't sound to stupid and obvious, but with our relentless demand and NEED for oil and the decline in oil (so they say), there is no where the price can go but up.
But that doesn't answer your question, does it? ... i'll wonder off now.
Oil and especially oil futures are no longer responding to supply and demand. They haven't been since the 80's. The current price of oil is influenced by a lot of things but the biggest influence (right now) is the buying and selling of oil futures. It's the new housing/dotcom bubble. Or at least it was back in July. Right now we're currently looking at a surplus (meaning we pump MORE than we use) of I think 1.5million barrels a day. With OPEC's recent cut, it's a surplus around 1 million. OPEC cut their output in an effor to prevent another 1998. Back then they pumped so much oil that no one was trading on it and the price fell to $10 a barrel. This hurt oil producing nations pretty bad since it's damn near their only export.

The sharp increase in oil prices lately has been driven almost entirely by people/corporations buying large quantities of oil and oil futures only to resell them at a higher price. These are then bought and sold by another company and another company etc. Most of these are trading hands 5 or 6 times before they get to a company that will actually USE them to produce gasoline or other petrol based products. This inflates the price WELL beyond demand as seen this last july. Oil really should be at $65-$70. That's would be a true supply vs demand situation. National governments need to take steps to prevent mass speculation especially the kind that allows you to bet on the increase in the price of oil without having to even BUY the shares. Until this happens, we're just setting ourselves up for yet another bubble.

I have a word limit on my cynicism
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