April 10, 2008

The Facts

Today crude oil hit a record price, just over $112 per barrel at its highest. The price for a barrel of oil jumped almost $3 over the last two days on the news that fuel supplies were low. Many industry experts think a barrel of oil will hit $120 pretty soon.

UPDATE: Today, April 28, 2008, OPEC president said there is no reason for oil not to go to $200 per barrel. And others are talking about the same thing that I talk about below. Two of Neil Cavuto’s guests on Fox News were saying on Saturday, April 26, 2008 that demand for oil and gasoline is falling. Mike Norman was saying speculators had turned oil trading into a “casino atmosphere”. Norman continued on by saying the last $30-$40 run up of oil and the last $1 in gasoline was due to speculators. Tyson Slocum said that we have to start regulating the energy trading markets. Read the transcript. An example of this speculator scam happened last Friday, April 25, 2008 at 10:00 AM. The price of oil jumped up over $1 because a US contractor ship in the Persian Gulf fired warning shots at two Iranian patrol boats. This action had no effect on oil production; rather it was just another excuse for speculators and traders to run the price of oil up.

My View

Back in November of last year I wrote a post about 100 dollar oil, 4 dollar gas. That was about the time that Wall Street traders had decided that gouging the price of oil was a very easy way to make a lot more money off oil than they had in the past. In other words, they decided they would start controlling the price of oil instead of the oil companies doing it. Not that the oil companies weren’t doing a good job at controlling the prices at a level they wanted, much like DeBeers does with diamonds.

Last month I wrote a post about the president of Shell Oil’s US operations, John Hofmeister, saying that triple digit oil was way out of line; that 85% of the oil in the Gulf of Mexico OCS was inaccessible; and that we were no where near running out of oil as suggested by most of the so-called experts. He is the only executive of an oil company that will even allude to price gouging. So what does this tell us?

Since supply & demand is no longer dictating the price of oil and gasoline, then what is; it’s our oil traders. Supply & demand has been replaced with maneuverable tactics driven by greed. What will this lead to? Left up to these greedy traders, oil will hit $200 or more per barrel and gas will hit $10 or more per gallon. The results will be tens of thousands of companies going out of business, hundreds of thousands of jobs, maybe millions, lost, and consumers will suffer a fate many times worse than those during the depression that followed the stock market crash of 1929. And what for? So a few traders and a few very rich people can make a lot of money. That will be about the time that oil will drop to about $20 per barrel because no one can afford to buy anything, including gasoline. Isn’t a free market great?