Speculators do play an important role in setting the price of oil and other raw materials. But they do so based on their expectations of future trends in supply and demand, not on whims. If they had somehow managed to push prices to unjustified heights, then demand would contract, leaving unsold pools of oil.
The futures market does sometimes signal that prices are likely to rise, which might prompt speculators to hoard oil in anticipation. But it is not signalling that at the moment, and there is no sign of hoarding. In the absence of rising stocks, it is hard to argue that the oil markets have lost their grip on reality.
Some claim that oil producers are in effect hoarding oil below the ground. But there is also little sign of that, either among companies or countries: all big exporters bar Saudi Arabia are pumping as fast as they can.
As I recall, the first time Oil went to $100 a barrel, back on January 2, the person who bid it up quickly dropped his price down to $99, and commented: I just wanted to see if I could do it!
I quote that most despised of sources, the New York Times:
Crude oil futures for February delivery hit $100 on the New York Mercantile Exchange shortly after noon when a single trader bid up the price by buying a modest lot and then sold it immediately at a small loss. Prices eased somewhat in later trading, settling at $99.62. But while the trader was apparently looking for vanity bragging rights, the spike in crude prices of $3.64 for the day reflected deeper worldwide trends
No, speculators are not to blame at all.
Jim Elliott
The article ignores another market force that is driving the price up. Oil is sold in US Dollars. The dollar is being deliberately devalued [I think to “pay off” long term US debts like Social Security, Medicaid, etc.]. There has been a flight of capital to commodities because of this planned inflation and the result has been completely predictable.
Hey, but anyone touting a departure from fiat currency is just crazy, right? So, enjoy the fruit of the fiat currency printed by the Fed.
Hey, #2: Why do you avoid the real reason for the drop in the dollar? It’s because Cheney/Bush & Co have run up TRILLIONS of dollars in debt for the Iraqi occupation! GWB inherited a SURPLUS, and has blithely chalked up more debt that ALL previous administrations combined! THAT’S the elephant in the room!
Because, little cabbage, running up debt does not actually inflate the currency. Printing more currency inflates the currency. Now, I admit that part of the reason the Fed is printing currency is the incredibly stupid spending that the Democrat controlled congress and the Republican president have done. But that isn’t the whole issue. There is also the sub-prime/housing melt down and we should never forget the Social Security Ponzi scheme and the unfunded debt that it represents. But, as I said, debt does not actually cause inflation. We could just as easily have recession/depression because of the debt if the response to the debt was to raise interest rates and taxes instead of inflate the currency.
I am pretty angry about the level of stupid spending by our Government too. But, don’t forget, the president only has the power to propose a budget and sign/veto the legislation that is passed by congress. Congress holds the purse strings and congress is responsible for the debt that we have. And, the Democrats have controlled congress for some time now. There is plenty of blame for both parties. I was going to vote for Ron Paul, but since he is no longer running, I will be voting for Bob Barr, Libertarian Party. Don’t just get angry. Do something constructive about our runaway debt. Vote for a third party. Vote for Nader if you can’t vote for Barr. Just don’t vote for a Republicrat.
$53 trillion is what federal, state and local governments owed to repay debts and honor future benefits promised under Medicare, Social Security and government pensions. [As of 2004].
The future costs to maintain Social Security and Medicare alone will exceed available revenues by $41 trillion over the next 75 years. $41 trillion is the gap between how much we promised and how much the current revenue sources can pay in the future. The lion’s share is for health care.
— $12 trillion in unfunded liabilities for Medicare Hospital Insurance
— $13 trillion not covered by government revenues for Medicare Part B
— $8 trillion in unfunded liabilities for Medicare Part D
Total health care costs we have already pledged…$33 Trillion! That’s 66 times the cost of the Iraq War.
Social security unfunded debt is about $8 Trillion. That’s 16 times the cost of the Iraq War.
Contrast that with the Iraq war. As of today, the Iraq war has cost about $553 Billion. That’s a lot. Too much, actually. But the war cost is NOTHING compared to the Social Security debt and Medicaid/Medicare debt.
BTW, GW has been a very poor president in my opinion. But, the “surplus” that he “inherited” did not count this looming debt from our social spending. The military budget is peanuts compared to our welfare society expenditures.
Take a look at where the money goes: http://www.irs.gov/pub/irs-pdf/i1040a.pdf look on page 77.
About 19% of outlays were to equip, modernize, and pay our armed forces and to fund the Global War on Terrorism and other national defense activities. Social security, Medicare, and other retirement benefits take about 36%. About 13% of total outlays were for Medicaid, food stamps, temporary assistance for needy families, supplemental security income, and related programs.
49% of our budget goes for Social Security, Medicaid, and Medicare.
That is the real elephant in the room.
Get your thinking cap on and look at reality instead of partisan propaganda.