Are Oil Importers Trying to Manipulate the Market?

Government manipulation of the oil markets is growing, and the governments of oil importing countries are mounting an attack on the governments of oil exporting nations that control most of the world's oil reserves. Britain's Prime Minister Brown is calling on his country's oil and gas industry to help avert a global energy crisis. This is only a step away from new laws that will force those industries to "help." He has called on nations to stabilize the price of oil. Sky News reports rumors that:

A source at Opec said its 13 members were uncomfortable with the current price of crude, which last week hit a record $135 a barrel. Based on present supply and demand, he said it should be fetching $60-$70 a barrel. Experts say oil has been driven to its present level by speculators who see it as a safer haven for their money than the weak dolllar.

That rumor mongering by OPEC, if true, is a form of governmental market manipulation. And as I type this, on CNBC Vince Farrell just agreed with my recent posts that noted that Asian countries are reducing subsidies on gasoline to make their consumers more price sensitive. And he agreed with me that China and India will soon have to follow—China after the elections and India after upcoming elections. See my blogs here and here. Whether we're right or not only time will tell. I'd say there's an 85% chance we're right.

Comments

[Eric Fox:]

And don't forget Taiwan, Indonesia and Malaysia - they are also reducing subsidies for refined products.

2008 May 29 11:30 AM

[Jack Yetiv:]

In the US, much of our oil goes to personal transportation rather than use by businesses and industry. I'll bet that is not true in the developing nations.

Therefore, a smaller increase in personal use of gas as subsidies decrease may not have that big an impact.

Economies growing at 5-10%/year will need more oil regardless of its price (within reason, of course).

Jack

2008 May 30 01:29 PM