[Zar]

Originally Posted by Tietäjä

And most importantly politics. If you look at what happened during the last oil crisis, there's a common factor. Speculation isn't borne out of nowhere - investors don't speculate on random products simply for shits and giggles, they do it for gains. And they do it on goods that have the potential to produce such gains. Generally, goods that are under an efficient market aren't subject to as much speculation simply due to the fact that the probability of the potential gains is smaller.

If you've ever worked as a trader, indeed any form of front office Investment Banking, you'll slowly come to realise that people can and do speculate on products such as oil, without being able to produce any factual evidence on future supply and demand constraints. Indeed a form of speculation is to speculate on other traders purchasing or selling the product, without regard as to why they are doing it. This is better described as 'jumping the bandwagon'.

It's interconnected. You cannot ceparate speculation from it's source. If the oil production/supply wasn't controlled by a minimal amount of people with an incentive to gain profits from it themselves, it wouldn't be such a good product to speculate on.

You're not getting my point. I'm asking you to rationalise why oil prices have suddenly shot up when the supply and demand for oil hasn't changed by a proportional amount.

The fact that (Iran/)Iraq control vast supplies of oil has been rumored as one of the factual reasons of the US attacks to Iraq. Some would go to the extent of saying that all the anti-terrorism talk, the export of democracy and the liberation of the Iraqi people is a footnote in compared to seizing the oil. You'll probably outright deny this, because this would imply that a part of the reason for oil prices must indeed originate from the owners of the sources - the cakefaces who happen to own the land the stuff is in.

I don't disagree with you here.

There's a lot of opinions on this. I think the general consensus is that we're never going to see "cheap" oil again, but that's a matter of perspective. If you compare a 145$ a barrel (which they just broke today) to a 250$ a barrel, the 145 is definately cheap.

I would venture that the days of cheap oil are over. The world will have to slowly adjust to oil regularly surpassing $100.

On this note, if you read what I said, you're supporting it at the moment. While I didn't form it as it should be on a scientific mag (which this isn't), I was essentially trying to say that the bottom reason oil market is so ****ed up is because the ownership of it (I'm repeating myself, I'm aware) is centralized and oligopolistic. OPEC isn't a random club of gentlement. They're in it to make money.

Of course they are. Why wouldn't anyone else do the same thing?

There hasn't been much anything you could call a speculative attack on the Euro since it was established as an official currency. On the contrary, prior to and during the great regression of the early 90s, there was significant speculative attacks on the Finnish Markka. Why isn't anyone hitting out at Euro? Because it's far stronger than a feeble local currency ever was, or ever could have dreamt to be.

I wouldn't be too trusting of the demand for the euro just yet. It's still a young currency and concerns about inflation will continue for a while.

Did I cover my case on why the structural problems of the oil market are a core reason to the price of the barrel going upwards? Mind you, this isn't exactly nothing new, I'll actually continue to elaborate my claims with a real example. The oil crisis of the 1970s. Here's a graph for you. The cakefaces mentioned several times decided to pull a plug on the supply. The resulting incidents lead to the collapse of the Bretton Woods and a depreciation of the dollar, while the oil prices were on the rise (yes, there seems to be a negative correlation between these two. now, a sharp-sighted person would not close out the possibility that this correlation is partly/purely statistical, and doesn't necessarily apply without other factors involved).

The reason for high oil prices now have very little in common with the reasons for oil prices during the 70's. Oil suppliers haven't pulled the plug on supply.