Oil prices are now a huge part of every daily news show and many discussion segments. It seems that anyone who is given the opportunity to be on television is offering their reason(s) as to why oil has doubled within the past year. Those reasons range from a basic supply & demand issue to a conspiracy issue. There is any number of explanations, with many variations, depending upon who you are listening to.
My View
On CNBC’s Power Lunch today there was a segment entitled Saudi Arabia Oil Summit. Kyle Cooper with IAF Advisors and Arthur Gelber of Gelber & Associates were the guest. CNBC’s Melissa Francis, who has just returned from the summit, participated in the discussion. Nothing unusual about this segment by today’s standards except for one thing Arthur Gelber said. While addressing what part speculators had played in the current price of oil, Gelber said (in reference to speculators) “a different word should be used”. My mind immediate turned to how the term “trickle down economics” has been changed not once but twice over the past decade or so. This latter term was changed because Wall Street & politicians realized the average American worker had become too savvy to what it meant, which was putting more of our tax dollars in the pockets of large businesses without any real return. So I wondered if there was an attempt to apply this same strategy to speculators. I didn’t have to wait long to realize my suspicion was right. In the very next segment, CNBC host were picking up on this. One even said maybe someone could come forward with a new word and definition. So here we go. If you are familiar with any of my stuff, you will already know my point of view on this; “if the definition of a word or phrase is uncomfortable to you, just change the definition or apply a different word”. One last thought on Gelber’s comment. On Gelber & Associates web site under “About Us & Our Work“, you will find the following; “Gelber & Associates is a nationally recognized energy consulting and advisory firm specializing in energy trading practices (bold added) and protocols”. So why do you suppose Gelber would like to use a different word for “speculator” in reference to what part speculators are playing in the price of oil. This bears repeating for this case: “If you are uncomfortable with the definition of a word, just change the word”.
One other thing was discussed several times on CNBC today, and that was how production volumes would, or could, affect oil prices. Now we all know that under a true “supply & demand” scenario, as production increases to offset shortages, prices go lower. We have certainly been bombarded with that “fact” by the many politicians and oil industry leaders who are telling us that if oil companies are allowed to drill in restricted areas, oil prices will come down. Although I am in favor of opening up certain restricted areas, it’s very hard to believe them. All we have to do is look back over the past twelve months. Oil prices have doubled during that time. Are we to believe that the demand for oil has increased to such a level in just twelve months it justifies doubling the price? We have also been told by these same people that the price of oil will come down just on the news that we are going to open up these restricted areas. I have to certainly question that. With the news today that the Saudis has agreed to increase production by another 200,000 barrels a day, that brings the total production increase by the Saudis to 700,000 barrels over the past three months. And during that time oil has gone up about $30 per barrel. Added to that, gasoline usage has dropped by nearly 2% during that time in this country alone. Oh, sure, there could be all kinds of “reasons” argued for that. But there is only one real reason; the producers now know that, overall, most of their customers are willing to pay the current prices for gas. So it is no longer a supply & demand issue; it is an issue of “what people will pay”.
Listings)
Myspace Layouts
