OIL PRICE STUDY & CONQUERING INNOVATION
Just like some of you, I had one false friend when I was young. He was born rich, raised rich, and loved to be richer so as to enjoy superiority complex over the poor; yet he wanted my failure, say, even in communications with girls, secretly under the false friendly face.
You can leave such a friend at any time to protect yourself, since you know he is a false friend wishing your failure secretly no matter if you pity him in terms of communications with girls.
But, if you have a false expert, it would be very difficult even to find that he or she is a false expert.
(And, if you have a false wife, it would be very difficult even to find the very reason why she is false to you who love her so much for a specific reason she can exploit like a devil, so ironically.)
Now, let’s check words of experts on the recent astounding surge of oil prices, since some company would rather pay a million dollars for any notable expert or economist who would write a paper that defends such a company being engaged in a conspiracy to raise an oil price as much as possible to compensate for its huge loss in the subprime loan-related transactions.
Indeed one million dollars can be a price to sell his or her soul for any false expert or economist nowadays…
SECTION I: MR. MARTIN FELDSTEIN
There are some experts who argue that speculation has nothing to do with the recent sharp surge of oil prices.
They mostly rely on an economic theory that a provider will behave in a manner to maximize their profits in a given situation, which however cannot apply to the crude oil market whose discretion in withholding of goods is restricted so much politically and institutionally, though China as a huge source of demands is truly an emerging big factor.
--------------------------------
Although most experts agree that financial speculation was not responsible for the surge in the global prices of food and energy, many people remain puzzled about the source of these remarkable price rises…
Thus, when oil producers concluded that the demand for oil in China and some other countries will grow more rapidly in future years than they had previously expected, they inferred that the future price of oil would be higher than they had previously believed. They responded by reducing supply and raising the spot price enough to bring the expected price rise back to its initial rate…
http://online.wsj.com/article/SB121486800837317581.html
-----------------------------------------------------
An expert has often three ways to explain a situation based on correct facts, data, and theories.
But, he sometimes picks up one that has the least influence on reality.
In my observation, the ratio of speculation and other factors, including demands/supply relation, in contribution to a hike of crude oil prices is 90 to 10.
It is because the scale of the hike is beyond a range that can justify the argument by Mr. Feldstein, though some Japanese experts respect his argument for some reasons.
( http://wallstny.exblog.jp/8255952/)
SECTION II: MR. M R VENKATESH
If somebody is arguing something based on findings of a US Senate Committee, you had better check it for real.
----------------------------------
Today's oil prices are believed to be determined by the four Anglo-American financial companies-turned-oil traders, viz., Goldman Sachs, Citigroup, J P Morgan Chase, and Morgan Stanley. It is only they who have any idea about who is entering into oil futures or derivative contracts. It is also they who are placing bets on oil prices and in the process ensuring that the prices of oil futures go up by the day…
The answer to this question is fairly simple. After all, oil price is highly inelastic -- i.e. even a substantial increase in price does not alter the consumption pattern. No wonder, a mere 3-4 per cent annual global growth has translated into more than a 40 per cent annual increase in prices for the past three or four years.
But there is more to it. One may note that the world supply and demand is evenly matched at about 85 million barrels every day. Only if supplies exceed demand by a substantial margin can any downward pressure on oil prices be created. In contrast, if someone with deep pockets picks up even a small quantity of oil, it dramatically alters the delicate global demand-supply gap, creating enormous upward pressure on prices.
What is interesting to note is that the US strategic oil reserves were at approximately 350 million barrels for a decade till 2006. However, for the past year and a half these reserves have doubled to more than 700 million barrels. Naturally, this build-up of strategic oil reserves by the US (of 350 million barrels) is adding enormous pressure on the oil demand and consequently its prices.
Do the oil speculators know of this reserves build-up by the US and are indulging in rampant speculation? Are they acting in tandem with the US government? Worse still, are they bordering on recklessness knowing fully well that if the oil prices fall the US government will be forced to a 'Bears Stearns' on them and bail them out? One is not sure.
But who foots bill at such high prices? At an average price of even $100 per barrel, the entire cost for the purchase of this additional 350 million barrels by the US works out to a mere $35 billion. Needless to emphasise, this can be funded by the US by allowing it currency printing presses to work overtime. After all, it has a currency that is acceptable globally and people worldwide are willing to exchange it for precious oil.
No wonder Goldman Sachs predicts that oil will touch $200 to a barrel shortly, knowing fully well that the US government will back its prediction.
And, in the past three years alone the world has paid an estimated additional $3 trillion for its oil purchases. Oil speculators (and not oil producers) are the biggest beneficiaries of this price increase.
In the process, the US has been able to keep the value of the US dollar afloat -- perhaps at an extra cost of a mere $35 billion to its exchequer!
http://www.rediff.com/money/2008/jun/02mrv.htm
----------------------------------
In short, the increase in the US strategic oil reserves has given a chance for big profits to speculators while the US Government can enjoy the highly maintained value of the dollar, which have all happened while Goldman Sachs, Citigroup, J P Morgan Chase, and Morgan Stanley are suffering a huge loss from the debacle of the housing loan market involving Fannie Mae and the like.
SECTION III: PEAK OIL & ALTERNATIVE ENERGY SOURCES
Nonetheless, Mr. Feldstein is right that a future prospect of a decrease in oil prices will lower the current oil prices.
Yet, everybody knows that a future prospect of an increase in oil prices is backed by the expected peak oil situation, namely the depletion of petroleum under the ground.
Consequently, what Mr. Feldstein is saying as a proof of his conscience is “after all, sooner or later the price of oil will be skyrocketed high in a decade or two due to peak oil looming over the horizon casting an eerie shadow to the whole world.”
But, it seems to be the right way to offer a future prospect of a decrease in oil prices in order to lower the current oil prices.
And I think it is very possible if governments in the world do the following:
(1) Declare that no more oil/coal fired power generation will be allowed.
(2) Declare that no more vehicles with an engine using only oil-based fuels will be allowed.
(3) Specifically, they have to set a goal that in 10 years, all the countries on the earth will close oil/coal fired power generation plants by replacing them with alternative electric generating systems.
(4) Specifically, they have to set a goal that in 10 years, all the cars on the earth will be driven by electric motors or hydrogen fuels, if not by wind power.
If governments in the world or at least the G8 Governments act along with the above scheme, the price of oils will sharply decrease and mankind can laugh at the threat of peak oil.
**********************************************************************
I don’t think that Mr. Feldstein is paid one million dollars by Goldman Sachs, Citigroup, J P Morgan Chase, and Morgan Stanley.
But, I really suspect that Goldman Sachs, Citigroup, J P Morgan Chase, and Morgan Stanley are paying one million dollars to some experts to have them write that speculations have nothing to do with their recent big profits in the crude oil transactions market.
(So far, all I can present you is the following idea for free, if it is first presented in the world, for you are in blue.
And, driving and music-listening is really raising the temperature so high woefully...
http://www.fukuchan.ac/music/j-folk3/runaway.html)
Job 15:31 Let not him that is deceived trust in vanity: for vanity shall be his recompence.
Job 15:32 It shall be accomplished before his time, and his branch shall not be green.
Job 15:33 He shall shake off his unripe grape as the vine, and shall cast off his flower as the olive.
Job 15:34 For the congregation of hypocrites shall be desolate, and fire shall consume the tabernacles of bribery.
Job 15:35 They conceive mischief, and bring forth vanity, and their belly prepareth deceit.