Oil Futures Held Hostage and Not by The Axis of Evil
“China is using more oil.“
“Opec isn’t producing more oil.“
Remember those Headlines?
When the commodities market was designed, corn, wheat, natural gas, oil, they implemented the commodities futures exchange act. This act provided that if there were too many speculators in the futures market, it would affect prices artificially, instead of actual contracts being sold for real value. The act placed limits on how many speculators there could be in the market. Since 1980, Goldman Sachs and others got a secret exemption to this rule. By this exemption, they overtook the real supply and demand in the market. By 2008, speculators dominated the oil markets, namely, Goldman Sachs. Some nay sayers will say that the commodities bubble was due to a falling dollar. A falling dollar might explain a correction in the commodities market, but it doesn’t explain a barrel of oil being traded 20 times more than the previous five years. That amount of volume isn’t explained by a falling dollar.
In 2004 a barrel of oil was $45. By, 2008 it was $135 per barrel. Tracy Clark, ASU Economist, in an interview said that with increased demand from foreign countries, India, China, that might account for $85 per barrel, the rest would be speculative activity. When asked who would these speculators be, he opined that it is the same people that created the housing bubble and the stock bubble. He literally said, they simply needed somewhere else to put their money.
In this oil debate, Michael Moore brings up an interesting point. While we are debating oil refineries and cars, oil is steadily declining from being drawn out of the earth. The major problem will be, he said, the petrochemical based products: fertilizer for our plants; plastics for our eyeglasses. While we can build an electric car, or build a windmill for housing electricity or solar panels, we can’t reproduce petrochemical products in some other way.
The Media Didn’t Do Its Due Diligence
Meanwhile due diligence and smart minds have said that a barrel of oil should be actually $60. And, as i look at my chart indeed, Light Sweet Crude Oil Futures, it’s at $64.74. For those not paying attention it was a bubble plain and simple. The demand for oil had not increased in over 30 years. All of these media blitzes saying that China and India were demanding more oil were false. The refineries, state side, are still to this day operating at 80% capacity. No one did any due diligence to even look at that.
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