georgephillip
Diamond Member
Wall Street is manipulating supply in order to create an artificial market.Do you mean the oil supply that's stored inside of supertankers that cruise in circles off San Francisco, waiting for Wall Street's projected future?Well, consumption and production daily may be around 85 million barrels, but those figures don't include supply that is stored or projected for the future.
Saudi Arabia has lots of excess supply in store, as does the United States and many other countries. Private business's have excess supply as well. Countries and business keep excess supply for logistical, business and security needs.
"Before most people were even aware there was an economic crisis, investment managers abandoned failing mortgage-backed securities and looked for other lucrative investments.
"What they settled on was oil futures.
"An oil future is simply a contract between a buyer and seller, where the buyer agrees to purchase a certain amount of a commodity -- in this case oil -- at a fixed price [source: CFTC].
"Futures offer a way for a purchaser to bet on whether a commodity will increase in price down the road.
"Once locked into a contract, a futures buyer would receive a barrel of oil for the price dictated in the future contract, even if the market price was higher when the barrel was actually delivered.
"As in all cases, Wall Street heard the word 'bet' and flocked to futures, taking the market to strange new places on the fringe of legality.
"In the 19th and early 20th centuries it bet on grain.
"In the 21st century it was oil.
"Despite U.S. petroleum reserves being at an eight-year high, the price of oil rose dramatically beginning in 2006.
"While demand rose, supply kept pace.
"Yet, prices still skyrocketed.
"This means that the laws of supply and demand no longer applied in the oil markets.
"Instead, an artificial market developed."
HowStuffWorks "How does oil speculation raise gas prices?"