The oil price is going down. Have the oil speculators gone away because Obama and Durbin threatened them? I don’t think so. Did someone lose a lot of money on the price going down? It would seem to be the case, since the trading business is a zero sum game. Will those traders be in for a U.S. Government bailout? Why not, everyone else who made bad decisions is.
Did demand cause the price to go down? It certainly was a factor. We have cut our demand sharply here. China and Europe are having economic problems and their demand is down. Combine this with the Saudis increasing supply by 250,000 barrels a day and you probably have the real facts on the price drop.
Will the Saudis keep that supply tap open? Would you? If you are giving up more of a scarce resource for less money, would you keep doing it? No. Nor will they. They and OPEC have announced they are cutting production by 500 thousand barrels a day. This will begin to tighten up the market again. Maybe not today, but down the road. OPEC has a price goal in mind and they will do what they need to do to meet that goal.
The real lesson is the facts about speculators and all the other conspiracy theories. Demand outstripped supply and the price went up. Supply increased and demand went down and the price went down.
Where will the price go in the future? Already, sales of fuel efficient cars is down here. How would you like to be the CEO of GM and have the Saudis playing games with you and your own government sleeping? What size cars are you going to build this week?
This isn’t about speculators, its about the fact that we need to control our own destiny in this country on energy so we can manage the price curve.
One thing is sure. The Chinese are going to put millions of new cars on the road in the near future. If new sources of supply aren’t found somewhere in the world, supply will not keep up. That’s a sure thing.
Notice how quiet it’s gotten on speculators? Hardly a squeak. Nothing got done by congress and the price went down. That just doesn’t hang together.
Fools like Bill O’Reilly are still buying it. They have to, they, like congress, were over invested in that conspiracy.
