Taurus,
Thank you for the immature tone pregnant in your response.
It brings out that the childishness within me... :0P
I deliberately picked out that point on "fair value" because it represents the crux of the problem, as well as the argument upon which you seemingly justify the latest price hikes in the oil market (dimishing resource.. nation's treasure... blah, blah..)
The debate is exactly how much monopolist control should OPEC be permitted to exert upon a captive market, when their VERY EXISTENCE AND SECURITY is so dependent upon their customers in the western industrialized nations.
And there are some correlations between the oil market and the gold market. Both use hedging strategies to lock in future profitibility for the commodities they plan on delivering in the future. Back when oil was $15/barrel, oil companies were hedging forward out of fear that prices would fall further, and the exacerbated the price decline. That oil is now being delivered in the present, as the approved strike price, and those customers who entered into those forward contracts with producers are reaping the rewards and profits.
But now the fear is that those forward contracts currently being negotiated could result in lower value for those products later in the year when the product is actually delivered, with the price they pay now quite likely be be higher than the price on the spot market at the end of the year. So here we see major concern on the buyers of those forward contracts that sudden downside volatility could leave them with major losses later this year.
The DeptEnergy wants to see stability in the energy market, but right now, oil contracts for delivery in the future are probably trading higher than the expected spot market price will actually be at the end of 2000. That's why it is important that when supplies are made artificially tight, it is in the strategic interest of the US to prevent price volatility than can negatively impact economic stability and reduce volatility.
And I can tell you that you'd find few truckers or transportation outfits who would disagree with me, since fuel costs are a MAJOR expense for them, with dreadful impact upon their profitability.
Regards,
Ron |
