>If the bulk of 'the discovery' proves to be oil, then its legit.......if it turns out to be nat. gas, then its a conspiracy and it stinks badly.
Hey, weren't you the one that insisted to me on several times that the price of oil was purely predicated on supply and demand, and that there was no conspiracy going on?
First, that's not exactly what I was arguing in that particular post. When the Chevron discovery was announced, the word was that it might have as many as 15 billion barrels of oil. In the next three days, the price of crude came down nearly $4. That means that within the month gas prices will be dropping rather significantly. Who benefits from falling gas prices? Precisely. And please note when the announcement was made....just before the midterm elections. Coincidence? I don't think so.
Now remember that the expectation is that there are upwards of 15 billion barrels of oil in that discovery. However, in an article I posted recently, geologists are saying that given the area of the Gulf where the discovery was made and the nature of its formation, its more likely that the discovery is mostly nat. gas and not oil.........that means the effect on the price of crude would have been much, much less had it been announced as a nat. gas discovery.
So yeah, you could call that a conspiracy but that's not quite the conspiracy that you were proposing with crude. The degree of difficulty in pulling off this kind of simple conspiracy announcement is about zero to none......pulling off a conspiracy with the price of crude is a whole different story. The degree of difficulty is significant. Just for starters there is oil coming into the US from all over the world by 3 or 4 different shippers to several different refiners in the US. The price of that oil is not set by the refiners but by traders in world markets. To make matters even more confusing, Saudi Arabia has tankers full of oil traveling the world's seas. If for any reason there is a shortfall in a particular location, one of their ships will go to that region. Now understand this is not simple largess on the part of the Saudis. Their particular oil is about as 'sour' as oil can be and is not as sought after as the 'sweet' stuff.
And if you are suggesting that the problem is between the refiners and the gas station......that is still highly unlikely. You would see a significant divergence in the price of gas throughout the country, and not just a few pennies. And if the refiners are acting in concert to keep the price of gas high at the pump, then that's an anti trust violation. If there were any real evidence of that, I think Congress would have done more than jawbone the issue.
In reality, supply and demand does play a major role in the pricing of oil but with a twist. It used to be there was a lot more supply than demand. But starting in the late 1990s, China began to rev its economy and suddenly demand went through the roof........not just for oil.......demand for almost all energy and metal commodities have gone parabolic in the past 5 years. Here is a two year price chart for copper:
futures.tradingcharts.com
And the charts for silver, zinc, nickel, gold etc look very similar. And let me just add........very few Americans understand how quickly China has industrialized. What took the US nearly 100 years, China is doing in 2 decades. In ten years time, Shanghai has gone from an Asian backwater to a major competitor to Hong Kong, Tokyo and Singapore as a center of Asian business. That is why Chinese demand for commodities has accelerated and so badly upset the balance of global commodity consumption.
At the same time, as China's needs began to escalate, the frequency of negative geopolitical events in commodity producing countries also began to increase. That brings to mind Iraq and oil or Nigeria and oil but there is Peru and copper or Indonesia and nickel or zinc and Portugal. Any time there is a problem in one of those countries the price of a particular commodity jumps up significantly. Why?
Well for starters, conspiracy really has little to do with it.....the size of the global economy makes conspiring a bit difficult. However, because supply and demand are more in balance then ever before and because geopolitical events can potentially upset the production of a particular commodity, the contango effect on pricing comes into play. That's the twist I mention up above. If you want to learn more what that means, here is an article that does a great job of explaining the effect.......better than I would:
thestreet.com |
