Personally I think these index funds are creating artificial demand. But then they will create artificial supply when Oil drops and people ask for their money back. Problem is that the damage to the world economy will have been done. By the same token the damage to the Oil market will have been done, maybe just maybe that will be good for the environment, to take a valuable source of hydrocarbons like Oil and burn them is shameful.
Bingo. The reason I'm singling Pickens out is that he, as much as anyone, should know that 'demand' has not and could not explain a doubling in the price of crude in one year and an increase of 42% since December, at a time when WORLD DEMAND IS GROWING AT 3% PER YEAR. Yet Pickens goes on TV and states the price run up is "demand driven." He's a bald-faced, liar. The reason why institutional investors such as University Pension Funds, have now piled in, is because they the price run up, cause by the manipulation and distortion of true supply/demand data as caused by those in on the racket, and the % increase draws them in. In the interim, U.S. consumers and businesses are devastated - and the benefits of that devastation flow directly to those responsible for the manipulation. That's the textbook definition of theft. Daal and other apologists for the thieves here attack me in an ad hominem fashion, rather than even attempt to rebut the article that Phil Davis wrote and that I posted. Has a single defender of the manipulators even tried to prove a single data point in the original article wrong? Nope. This is Enron and Amaranth 2.0, but it is on a much, much larger scale, and the consequences are much, much more devastating. And to the traders and investors here, this is one of the greatest reasons your positions in great companies such as Boeing (as airlines scale back aircraft ordering and try to fend off bankruptcy) and trucking firms (same bankruptcy concerns) and Freightliner, and many other companies are down. You're being cheated. Let's hope true light acts as a disinfectant, and that those responsible for this great theft of wealth don't get away without criminal sanctions. Watch them scurry like cockroaches seeking cover now that the light is being turned on in the room. The situation is so serious, is causing so much real inflation in the world, and threatening so many individual consumers, companies and economies, that causing the spread of false information about true supply and demand should be a capital crime - it's grand theft larceny on a magnitude of a 1 million times.
Could you please explain why an increase of 3% in demand can not explain a 42% price increase? I don't quite understand why this would be impossible. What economy theorem states that a 1.0% increase in demand results in a perfect 1.0% increase in price? Who says it can't cause a 10% increase in price?
To believe that, you'd be stating that every 1% increase in oil consumption has a 33x (33%) unit price increase effect. That's pretty incredulous. Do you believe that? http://www.columbia.edu/itc/sipa/math/slope_linear.html http://www.bized.co.uk/learn/economics/maths/graphs.htm
I've been saying this all along, and I don't need charts and graphs to prove it. I just use my nose. The stench is profound.
Use common sense. Let's say 10 of us go to a sold out concert without tickets. 20,000 people paid $50 each to get in the door. Only 3 of those 20k decide to "scalp" their ticket. It's possible that one of us 10 needing tickets will pay $200 for a seat that 20,000 people paid only $50 for. Mark Douglas does a good job in his first book (The Disciplined Trader) of describing how just a dislodged 1 lot can move a market. Just look at the effect of cascading stops in the order book. Think of oil as food. If the equilibrium of supply for every buyer was pierced would their be any price you'd consider too high if starvation was the alternative? All it would take is for 1 less hot dog to be available and the price of hot dogs would be in the thousands of dollars.
These conspiracy theorists have no concept of how futures markets operate. Contracts expire. If the price was artificially driven up, why wouldn't the expiring month sink when the funds roll? These people have no credibility, and anyone paying attention to their ideas will go broke. Call me crazy, but Boone has made a couple billion bucks in the oil patch, so when he talks, I'll be paying attention. Very close attention. The real problem is that the next administration will likely be staffed by idiots who will try to "do something" about a nonexistent problem. The last time that happened, in the '70's, we had long gas lines, 55 MPH speed limits and a demoralized country. Meanwhile, they will do their best to prevent anything that could address the problem, like more nuclear plants, more coal plants, more drilling. Now they also want to impose hefty carbon taxes under the insane cap and trade scheme.
Ahhh, there's your answer! 20k Tickets, 1 Less Hot Dog. Now, read 40k tickets, 1 more hot dog available, and price still rising. I have yet, nor have ANY of you YET, been turned down for one drop of gasoline. Seems we're awash in the stuff, yet price continues to rise. Yeah, pure supply and demand. Shit, a child could figure this out...
Other than the "Walter Mitty" types who've never had a trade on, these conspiracy theorists are probably the same idiots who were short at every top. Great observation.