dilton_dalton

U.S. Recovery Could Push Oil Much Higher

Oil has risen to $(US)120 even though there is no shortage. Ther are no lineups at the pumps. The rules of supply and demand have been corrupted by speculation. We have even seen reductions in demand due to refinery outages cause crude price increases. If the US dollar gains strength, then the price of oil in US Dollars will decline. If the Federal Reserve lets it be known that interest rates will rise to prevent inflation, the price of oil will decline. If the US administration stop threatening oil producing nations, the price of oil will decline. If the regulators increase the margin requirement for buying and selling oil futures, the price of oil will decline.

Oil Demand Does Not Have to Cause Higher Prices

There is no shortage of oil, at least not yet. There are no lineups for gas at stations that have run out. There are no signs that say "Limit 10 gallons per customer". The current prices are high because of a fear of the possiblility of a shortage and because of speculation. Witness the increase in crude prices that occur when refineries shut down (because of fire, for maintenance, because of hurricain damage). Closed refineries should reduce crude demand but the price goes up anyway. The speculators are also driving up crude just like they drove up realestate. Unfortunately, when spculators drive up crude prices, you and I pay. The govenment should increase the margin requirements for futures. That would make speculating on oil prices less profitable.