...it seems very much as though speculation involving many millions of dollars, and billions in some cases, create a self-fulling prophesy for oil futures.
No doubt fears over peak oil, as well as the miserably falling dollar, are fueling some of that speculation.
And you can't ignore the influence of sheer unbridled, unregulated greed of fossil fuels execs. For these people, there's literally no such thing as enough.
But whatever the rationale, speculators and hedge fund managers are at the top of the list of who to blame for this epic gouging.
Here's
a particularly lucid and well-argued article on the subject. And here's a few of the opening paragraphs:
Perhaps 60% of today’s oil price is pure speculation
by F. William Engdahl
The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. 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. It has to do with control of oil and its price. How?
First, the crucial role of the international oil exchanges in London and New York is crucial to the game. Nymex in New York and the ICE Futures in London today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil—West Texas Intermediate and North Sea Brent.
A third rather new oil exchange, the Dubai Mercantile Exchange (DME), trading Dubai crude, is more or less a daughter of Nymex, with Nymex President, James Newsome, sitting on the board of DME and most key personnel British or American citizens.
Brent is used in spot and long-term contracts to value as much of crude oil produced in global oil markets each day. The Brent price is published by a private oil industry publication, Platt’s. Major oil producers including Russia and Nigeria use Brent as a benchmark for pricing the crude they produce. Brent is a key crude blend for the European market and, to some extent, for Asia.
WTI has historically been more of a US crude oil basket. Not only is it used as the basis for US-traded oil futures, but it's also a key benchmark for US production.
Supply and demand is, as you say, a true and tested tool of capitalism. Which would be fine if there were such things as free markets. However, subsidization of the oil biz by the feds, using my tax money, kills much of the free market's system of incentives and disincentives. If anything, the shitheels should be subsidizing intensive R&D into sustainable and non-polluting energy sources, most of which probably don't exist yet or, if they do, they exist as drawings on butcher paper and will never move beyond that because most people don't have the money to get a patent, much less assemble the resources necessary to take the drawings into the lab and actually produce something useful. Our Failed Oilman in Chief would rather eat razor blades than fund anything that might cut into his fortune and those of his pals, "the haves and have mores."
In addition, I'm simply not naive or indoctrinated enough to believe that ExxonMobil actually competes with Chevron. If they did, you'd see competitive pricing, albeit at ridiculously high per-gallon levels. Instead, they're price fixing. The cost goes up at the corner Shell station and, within an hour, the price at the BP station across the street is "adjusted to reflect revised pricing structures based on constantly changing market realities," or some such inane pseudo-economic babble.
The problem really lies in the fact that the industrialized world is one giant unsuccessful half-way house where billions of addicts talk endlessly about how much they want to quit and, when the shakes begin, they're right back at it. Absent a serious alternative that provides close to gasoline's power/consumption ratio, the addicts aren't going to quit using until the last drop flows from the last pump and we all go back to horses and local economies.
Actually, that's not all that bad an outcome. Beats the living shit out of commuting in tin coffins for the privilege to occupy a cube in a building designed by Torquemada for maximum physical and spiritual misery.
Anyway, see what you think about the article.
wp
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