Oil Bubble?

[midcan5]

What's Really Driving the High Price of Oil? By Ralph Nader

"Oil was at $50 a barrel in January 2007, then $75 a barrel in August 2007. Now at $130 or so a barrel, it is clear that oil pricing is speculative activity, having very little to do with physical supply and demand. An essential product—petroleum—is set by speculators operating on rumor, greed, and fear of wild predictions.

Over the time since early 2007, U.S. demand for petroleum has fallen by 1 percent and world demand has risen by 1.3 percent. Supplies of crude are so plentiful, according to the Wall Street Journal, “traders of physical crude oil say their market is suffering from too much supply, not too little.”

Iran, for instance, is storing 25 million barrels of heavy, sour crude oil because, in the words of Hossein Kazempour Ardebili, Iran’s oil governor, "there are simply no buyers because the market has more than enough oil.""

Ralph Nader: What's Really Driving the High Price of Oil?

 

[Paulie]

To say that the high price of oil is being driven merely by speculation is pure folly.

I've posted a few threads here recently that show with numbers, that the devaluation of the USD is what has caused most of the increase.

You can't blame speculation, and not even consider the fundamentals that are DRIVING the speculation.

I'd be speculating too, if I was a wealthy investment firm.

I just don't see how it can be a bubble. How is the price of oil going to drop drastically anytime soon? We'd have to do several things politically before that would ever happen, and it sure doesn't seem like any of those things are in our foreseeable future.

Trading Day : May 30, 2008

 

[Toro]

If speculation is driving energy and commodity prices, why have the prices of commodities that cannot be traded risen more than the prices of commodities that are traded on exchanges?

 

[Paulie]

If speculation is driving energy and commodity prices, why have the prices of commodities that cannot be traded risen more than the prices of commodities that are traded on exchanges?

Uuuuhhh, ummmm, it's the oil companies then!

It's anything but the Dollar!!

 

[Zoomie1980]

To say that the high price of oil is being driven merely by speculation is pure folly.

I've posted a few threads here recently that show with numbers, that the devaluation of the USD is what has caused most of the increase.

You can't blame speculation, and not even consider the fundamentals that are DRIVING the speculation.

I'd be speculating too, if I was a wealthy investment firm.

I just don't see how it can be a bubble. How is the price of oil going to drop drastically anytime soon? We'd have to do several things politically before that would ever happen, and it sure doesn't seem like any of those things are in our foreseeable future.

Trading Day : May 30, 2008

Nonsense, in normal times less than 10% of the money in the oil market is speculative. Today over 50% is speculative. SPECULATIVE DEMAND has been driving this market for over three years now. And if there is one commodity I know, it is oil, it my family's business. It is the MAJOR cause of the run up, with the falling dollar second.

The market hasn't obeyed supply/demand laws for several years now. Anyone who claims it's all about short supply is an IDIOT. There IS NO SUPPLY SHORTAGE and NEVER HAS BEEN. Not one delivery has been missed or delayed due to lack of supply. Demand peaked about three months ago and still trailed supply by about a million barrels a day. Demand now is DOWN almost a million a day since it's peak and speculators are FINALLY figuring it out.

Oil had peaked and now we'll see if the speculators run away as fast as they came. I wouldn't be surprised to see oil crash to 70 or lower in the coming year before actually over shooting in the opposite direction before reaching real supply-demand equilibrium. And gold will follow oil. Grains are already headed down so long as overly bad weather doesn;t hit North America

 

[BrianH]

There's now significant investigation into the rise of oil prices. Congress as well as other officials speculate price manipulation. This will be very interesting. I personally don't believe that it's all Supply and Demand economics or an oil shortage that is raising prices. It's rising because the oil companies are manipulating prices because they know the AMerican public must pay for it. We have to get to work, kids have to go to school, etc....

http://www.usmessageboard.com/economy/54458-oil-bubble.html

 

[dilloduck]

There's now significant investigation into the rise of oil prices. Congress as well as other officials speculate price manipulation. This will be very interesting. I personally don't believe that it's all Supply and Demand economics or an oil shortage that is raising prices. It's rising because the oil companies are manipulating prices because they know the AMerican public must pay for it. We have to get to work, kids have to go to school, etc....

http://www.usmessageboard.com/economy/54458-oil-bubble.html

I assume you have something to back up that speculation or is this the old "Bush Did it" theory.

 

[Toro]

I assume you have something to back up that speculation or is this the old "Bush Did it" theory.

Speculation is playing at least some part in the rise, but by how much is not known. For example, 10% of all the gold purchased in the first quarter was done so by exchange traded funds, up from 0% a few years ago.

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=53375&sn=Detail

CFTC is investigating oil trades.

CFTC Investigating Crude Oil Market - TheStreet.com

 

[BrianH]

I assume you have something to back up that speculation or is this the old "Bush Did it" theory.

Did you once read "bush did it" in my post??? I did not even mention Bush. The article may have but if I had wanted to cite Bush for the problems, I would have. My blame is on the oil companies and price manipulation. Read my post correctly and look at the link I posted as well before you accuse me of a Bush hater. (I voted for him)

 

[Paulie]

Did you once read "bush did it" in my post??? I did not even mention Bush. The article may have but if I had wanted to cite Bush for the problems, I would have. My blame is on the oil companies and price manipulation. Read my post correctly and look at the link I posted as well before you accuse me of a Bush hater. (I voted for him)

Do you even know what you base that on, or is that just a feeling you've got?

Oil companies profit less than most other sectors in the market.

People needed to go to work 10 years ago, and kids needed to go to school. That hasn't changed, so why all the sudden NOW when oil is so high do you suspect it must be the oil companies, when they could have been doing this for decades, according to your theory?

And Zoomie, you mention your family being in the oil business every time you post about oil, but yet you always get shown up on your theory.

You think speculation is the key cause, then provide some data. So far, the only thing you ever provide is your opinion and some numbers. After that, explain WHY the speculation exists to begin with, and why in these geopolitical times investors SHOULDN'T be speculating in oil.

Let's see your fundamentals.

 

[Toro]

I think oil is in a bubble.

 

[dilloduck]

Did you once read "bush did it" in my post??? I did not even mention Bush. The article may have but if I had wanted to cite Bush for the problems, I would have. My blame is on the oil companies and price manipulation. Read my post correctly and look at the link I posted as well before you accuse me of a Bush hater. (I voted for him)

my bad---do you have anything to back up you claim that the oil companies are manipulating oil prices ? Never in my lifetime have I seen a bunch of theoretically smart adults have to guess why the price of oil is so high because they don't have a clue as to what the REAL reason is.

 

[Toro]

my bad---do you have anything to back up you claim that the oil companies are manipulating oil prices ? Never in my lifetime have I seen a bunch of theoretically smart adults have to guess why the price of oil is so high because they don't have a clue as to what the REAL reason is.

Oil companies do not manipulate oil prices. (Much)

 

[BrianH]

Do you even know what you base that on, or is that just a feeling you've got?

Oil companies profit less than most other sectors in the market.

People needed to go to work 10 years ago, and kids needed to go to school. That hasn't changed, so why all the sudden NOW when oil is so high do you suspect it must be the oil companies, when they could have been doing this for decades, according to your theory?

And Zoomie, you mention your family being in the oil business every time you post about oil, but yet you always get shown up on your theory.

You think speculation is the key cause, then provide some data. So far, the only thing you ever provide is your opinion and some numbers. After that, explain WHY the speculation exists to begin with, and why in these geopolitical times investors SHOULDN'T be speculating in oil.

Let's see your fundamentals.

I'll first say that I posted one article in my first post that is driving my speculation....why do you have to be such a smartass just because you disagree. Why don't you ask politely first and then be a smartass when I can't provide the reason I'm speculating something....?

Second, here's another article on price manipulation...

"SANTA MONICA, Calif., May 29 /PRNewswire-USNewswire/ -- The
announcement that the Commodity Futures Trading Commission is investigating
possible price manipulation in oil futures markets is a welcome indication
that the Bush administration now accepts the possibility of manipulation in
$130 oil prices, said Consumer Watchdog."
Consumer Watchdog Welcomes Investigation of Oil Price Manipulation, Cautions That CFTC May Be Ill-Equipped


Oil prices to be probed by US regulator CFTC - Telegraph


Around December, oil prices were at around 90 dollars a barrel...are you saying that Demand has changed this much in the last 6 months to jump it up to 130 dolars a barrel? There's more to it than you suggest, IMO.

This is where I'm getting my speculation from. Am I right??? We'll know when the investigation is over and they have some conclusions....but remember the definition of (Speculation....)

 

[BrianH]

my bad---do you have anything to back up you claim that the oil companies are manipulating oil prices ? Never in my lifetime have I seen a bunch of theoretically smart adults have to guess why the price of oil is so high because they don't have a clue as to what the REAL reason is.

Read the source I posted and read the supplamental article I posted above this one. I'm not claiming it's proof or that it's exactly what I say it is. There is now an investigation into price manipulation....there wouldn't be an investigation if there wasn't redflags that pointed to it. The law doesn't investigate a murder if it hasn't happened or if there isn't any clues that one happened.

Price per barrel was at 90 dollars a barrel around December...why has it now jumped to 130 dollars a barrel? Is it because...for some odd reason, Americans want more gas between the months of Dec. and May? Demand has not risen that much....it's almost unbelieveable to believe that Demand has increased so much as to raise the price to 130 dollars a barrel in 6 months. As far as oil shortages, that's bullshit. If we were really having a gas shortage, it would be rationed...IMO.

The actual specifics of this is my own personal opinion. But the investigation is not. They seem to have a reason to investigate....

 

[Zoomie1980]

Do you even know what you base that on, or is that just a feeling you've got?

Oil companies profit less than most other sectors in the market.

People needed to go to work 10 years ago, and kids needed to go to school. That hasn't changed, so why all the sudden NOW when oil is so high do you suspect it must be the oil companies, when they could have been doing this for decades, according to your theory?

And Zoomie, you mention your family being in the oil business every time you post about oil, but yet you always get shown up on your theory.

You think speculation is the key cause, then provide some data. So far, the only thing you ever provide is your opinion and some numbers. After that, explain WHY the speculation exists to begin with, and why in these geopolitical times investors SHOULDN'T be speculating in oil.

Let's see your fundamentals.

T Boone Pickens six weeks ago presented the following very simplistic overview to a quarterly meeting a shipping companies in Houston,

The cost to the producer to produce and ship a barrel of oil to the consumer (refinery) is roughly the same today as it was two years ago, about $38 vs $44 in 2nd qtr 2006 dollars, due to fuel costs for the transport ships that they pass on. Add in a normal profit for the producer and the TRUE price of oil TODAY is $45-$50. This what a barrel of oil should trade for today in 2006 dollars without any speculative pressure.

There has not been nor will there be any shortage of oil for at least the next five years. All demand will be met with no missed deliveries due to lack of supply. In other words, there IS NO SHORTAGE and if the market was obeying simply demand-supply laws and a stable trading currency, that would be the price.

The difference from that price and the actual price today of $125-130 is made up of two and ONLY two things in light of this reality, the change in overall value of the currency compare to all other major currencies the commodity is priced in (the dollar) and speculation.

The dollar/euro rate has gone from .74 in Jun of '06 to .64 today. The dollar/yen rate has gone from 122 to 104. Roughly a decline of 13-14% in two the world's major currencies. So that would account for about $7-8 of the run up. The rest is all SPECULATION driven.

They why is a bit tougher but most of it is the combination of the 15-20% decline in stocks, the unattractive yields of US bonds, the real estate bust, there's not much of a choice for speculative cash these days that offer attractive returns, except commodities. And when that much "touchy" money is in a market, that market gets EXTREMELY VOLATILE and is subject to every tiny little whim and influence, and oil comes from the most politically unstable parts of the world. As I said, normally speculative investment is near or under 10%, today over 50% of the market is speculative.

I'd say the reason is obvious to even a simpleton.

 

[Zoomie1980]

my bad---do you have anything to back up you claim that the oil companies are manipulating oil prices ? Never in my lifetime have I seen a bunch of theoretically smart adults have to guess why the price of oil is so high because they don't have a clue as to what the REAL reason is.

Commercial oil companies only control about 13% of the world's oil supply. The rest are national oil companies. Speculators drive the market these days, plain and simple. Who controls the speculators? Whoever does, can be said to be doing any price manipulation.

I remember the last time there was a major crisis in a commodity market, the soybean market in 1990. There was poor harvest in 1989 and chronic heat and drought in the first half of the 1990 growing season. Oct soybeans went from $4.95 to 11.00 from Apr to early Jun, as speculators rushed into the market. The federal government promptly cut the daily up limit in half on all US exchanges and severly limited the number of contracts that could be offered in any one market period beyond what producers, shippers and actual consumers needed to hedge their positions. That pretty much squashed the run up and ran the speculators off.....

 

[Zoomie1980]

If speculation is driving energy and commodity prices, why have the prices of commodities that cannot be traded risen more than the prices of commodities that are traded on exchanges?

They are ALL traded on exchanges. Rare earths are traded on a number of world metals market exchanges.

 

[Toro]

They are ALL traded on exchanges. Rare earths are traded on a number of world metals market exchanges.

Actually, I recognize a few, though I didn't know bulk rice was traded on futures exchanges until it exploded.

But what exchange is molybdenum traded on?

I was reading The Gartman Letter a few months ago, and he was buying a molybdenum company as opposed to molybdenum futures for the molybdenum exposure. I believe he said that one could not buy molybdenum futures, though maybe I'm remembering wrong.

There is no commodities futures market in molybdenum. Yes, there are many more moly traders than trading companies buying and selling uranium. But, it is a small market.

Investor Exposure to Molybdenum

I can't find a contract for cadmium.

It says here that there is no rhodium contract.

http://www.commodityonline.com/news/topstory/newsdetails.php?id=8702

Where is ferrochrome traded?

http://www.ourmetals.com/index.php?c=england&t=06&cat=1&subcat=89&one=487

Or manganese?

Is iron ore traded?

In the absence of iron ore futures

http://en.ce.cn/Insight/200511/23/t20051123_5292526.shtml

Steel trading was launched in Dubai in October. Is it traded elsewhere?

The first steel futures contract that is already available is the Dubai rebar futures contract. This is traded on the Dubai Gold and Commodities Exchange (DGCX). It was launched on 29 October 2007 and, if successful, will be the first of several steel futures contracts to be launched by DGCX designed to serve the Gulf States region. The rebar contract is a deliverable contract for 10 tonne lots of BS4449 (1997) W460B Type 2 rebar from exchange-approved mills. Visit http://www.usmessageboard.com/economy/www.dgcx.ae for more information.

The other steel futures contracts currently available are both in India. The country's National Commodity & Derivatives Exchange (NCDEX) offers a small steel ingot contract and the Multi Commodity Exchange of India (MCX) offers a HRC and ingot contract. Trading on these contracts is understood to be very limited. Visit http://www.usmessageboard.com/economy/www.ncdex.com and http://www.usmessageboard.com/economy/www.mcxindia.com respectively for more information.

In addition, The London Metals Exchange (LME) has plans to launch two steel futures contracts for rebar-quality square billet during 2008.

http://www.steelbb.com/steelfutures/

Heck, I don't even know what ruthenium is.

If all those metals are traded, please let me know, and where. I might be interested in trading them.

 

[Zoomie1980]

Actually, I recognize a few, though I didn't know bulk rice was traded on futures exchanges until it exploded.

But what exchange is molybdenum traded on?

I was reading The Gartman Letter a few months ago, and he was buying a molybdenum company as opposed to molybdenum futures for the molybdenum exposure. I believe he said that one could not buy molybdenum futures, though maybe I'm remembering wrong.



Investor Exposure to Molybdenum

I can't find a contract for cadmium.

It says here that there is no rhodium contract.

Why there is no future market for Rhodium

Where is ferrochrome traded?

OurMetals.com | NEWS | News headlines | European Q2 ferrochrome prices jump 60 pct

Or manganese?

Is iron ore traded?



Turbulent iron ore market calls for steel futures_Insight?China Economic Net

Steel trading was launched in Dubai in October. Is it traded elsewhere?



Steel Business Briefing explains steel futures and how they affect the steel industry

Heck, I don't even know what ruthenium is.

If all those metals are traded, please let me know, and where. I might be interested in trading them.

You have to essentially invest in companies that basically trade mining stocks or ownership shares in individual mines that mine the stuff that is too rare or small a market to have a formal exchange. These companies form a "psuedo exchange" for oddball rare-earths.

Here's a link on how to invest in these:

Resource Investor - Rare Metals - How to Invest in Rare Earths and Thorium

In most cases rare earths are actually in a significant shortage, unlike oil. I guess that's why they are "rare". So their prices have exploded as the earth is flat out running out of some of these. And even a tiny amount of speculation through holding companies can really effect the market for these....but usually the run ups in rare earth's are legitimate shortages and are obeying real supply/demand, unlike things like oil and gold.