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My guess is that speculators in the market have done a number on the price .Oil trading has increased by almost 10 times in recent years as new players have flooded into the market.
My guess is that the declining value of the dollar has something to do with it . Some holders of the dollar are probably converting them into commodities of all kinds. Gold and Silver are also on the rise.
Geopolitically the threat of a Turkish invasion of Kurdisatan and the possible disruption of the flow of oil through that region played a part . Also the possibility of rising tensions with Iran is fueling the speculators. There are some hot spots in key oil producing nations like Nigeria and Sudan . Also;much of the world supply is held by countries that have nationalized their industries ,with all the inefficiences that represents.
This is not peak driving season . But stockpiles are not as high as they should be ,and there is a greater demand from countries like China and India . However ;I think supplies will be restocked and if I was holding onto futures I would sell them off now ;or before the new year.Goldman Sachs recommended clients to take profits, predicting the price could fall back to US$80 a barrel by April.If I was a new investor I would NOT be investing in oil at this price.
My guess is that you want to address the idea of post -peak oil . I am not convinced that is true however since there is a lack of exploration and infrastructure investment . There has not been a new refinery built in the US since I was a young man. New platforms need to be built and exploration in some prohibited areas begun before I am convinced that the world wide supply is in a post peak decline.75% of the US’s oil supply is currently off limits to drilling
I got a cost comparison for consideration. Back in the 1970s I had a gas guzzling clunker that went about 10-12 mpg. I paid $30 at the pump and went apx 200 miles when it was tuned up . Today for the same $30 I travel 300-400 miles in a car that excedes 30mpg . Was I better off then or now ?
The price of oil, in terms of its relationship to other commodities, has not risen. On the other hand, the price of the dollar, in relationship to those commodities, has fallen.
To wit: In 1958 I could buy a gallon of gasoline with a quarter and get change. In 2007, I can still buy a gallon of gasoline with that same silver quarter and get change.
The price of oil, in terms of its relationship to other commodities, has not risen. On the other hand, the price of the dollar, in relationship to those commodities, has fallen.
To wit: In 1958 I could buy a gallon of gasoline with a quarter and get change. In 2007, I can still buy a gallon of gasoline with that same silver quarter and get change.
excon
That is exactly right Excon. You understand our economic plight in the "free world." Oil is priced in dollars. When the federal reserve prints excess dollors, the dollar will not buy the same amount it did at a lower inflation rate. Same with a can of beans or a loaf of bread. The average wages go down too. If you are making $10.00 per hour and the Fed prints more money, you are then making less money per hour. When they cut the intrest rate, the middle class people that save, lose part of their savings, wages and pay more for goods at a higher price.
It is the rich stealing from the poor and making them poorer.
tomder55 agrees: yes that is part of it ;but there is alot of liquidity out there and people are looking for investment venues. Thus alot of speculation . My guess is the hedge funds don't have real estate anymore so they went to the commodities.
You basically said it yourself but in the terms they, the government economst use, "Liquidity." That means the Fed has printed too much money and the rich are looking for places to put it while the middle class is still wondering where it went. It was siphoned out of their hands and loaned to the big corporation which in turn let it "trickle down" in the Corporate welfare state we call America. The cop[orations have the huge lines of credit that the fed prints up. The fed makes mega huge profits from the intrest rate to the corporations and the government. (Bonds or IOUs) That is why the deficit will never be paid.
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