Jul 13 2008

There’s no speculative bubble in water

Category: election 2008,energy,middle east,Obama,oil prices,politicsharmonicminer @ 9:00 am

It’s popular to blame oil speculators for the high price of gasoline. These are the people who buy the right to purchase a future amount of oil product at a given price. So when there is a “bubble”, they are betting the price will be higher in the future, and so they’ll pay for that bet, and the price of oil goes up.

Factors the speculators consider include the political situation in the Middle East, rising demand in Asia, the likelihood that new supplies won’t be developed elsewhere anytime soon, etc. It’s important to realize that ALL of these reasons boil down to guessing if there will be enough supply for the demand. Everytime Iran makes a threat, the price goes up, because no one knows what Iran will do in the future, if military action against Iran or by Iran will reduce supply then, etc.

Remember, if the speculators bet wrong, they lose money.

But not everyone buys that it’s the speculators’ fault:

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