FactFinder
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- Mar 1, 2009
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There is definitely a shortage of supply. Right now we allow OPEC to set the price of oil by reducing and increasing the supply of oil since we're producing very little here. If we would produce more here we would reduce our dependance on them and be able to lower the price.
There is a perpetual increase of demand. China is nearing the point that their demand equals ours. That is not good because we get pretty decent treatment and agreements to buy oil right now and because we use so much we can make a stronger case for tying oil to the dollar instead of another currency. If we get passed by the Chinese then we need to be producing more here and less overseas or the market can get bad quick. India is another threat in much the same way.
Mike
Right now we let the speculators set the price of oil. OPEC is a bit player and scapegoat for scum like the ilk of Goldman Saks. Don't believe it? Search for Bernie Sanders and the CFTC.
Considering all I invest in is energy stocks I'm very familiar with how the speculation market works. The problem is that you have to have speculators or oil won't move. While its true that speculators actually trade the prices, OPEC could announce today that they are cutting production by 20% and the price of oil would skyrocket.
Without speculators no one would assume the risk of production and oil would not be able to be traded rapidly like it is today because people would not know the cost ahead of time. Right now you can buy a contract and lock in a price of oil. Absent that, how would a plastics company operate? How would they be able to set production costs and how would they be able to sell their wares if they can't tell someone "We'll make 20,000 widgets for you at $x.xx a piece, they'll be ready in 4 months"? Instead it would be "We'll start manufacturing your widgets and it will cost you $y.yy + the petroleum cost at the time of production". The alternative would be for a company to hold their petroleum on time. How does that work?
Mike
There are plenty enough legitimate users (those who will take delivery) to keep the market stable. We don't need a bunch of weasle middlemen. That is a very lame excuse for gouging.