After the Civil War.JD Rockefeller and friends(Henry Flaggler ) manipulated grain markets since the South was a non productive farm belt. Grains doubled,bucket shops flourished.I remember pre-oil options.and1986 when the US mint needed copper (for pennies no less)which went from.60 to $1.27, the govt. made margin requirement 100% in futures, same for options...WHY NOT OIL????? I have asked this for 2 years.After JD Rock made the money in grains he started Standard OIL.$10,000 a share(IPO) Flaggler was in, he bought all the RR's in Florida.Created a land boom.It's a dirty game.Option buyers finish out of the money ...97% ...I remember when there were no rules or oversight on commissions for options. Some companies used Black -Shoals models, +25-35 % commish.They got away with it for years. CFTC my ass.Hunt Bros were fools,pigs get slaughtered, get out don't look for the last dime.Do you guys know what a REG D and REG S are and how little protection they offer " stock " purchasers? SEC my ass.
Oil has now risen at greater pace than the dot.com stocks of 2000, at a rate of 697% since 2001. It is now also showing nearly the same technical action from a chartist's perspective that the dot.com stocks were showing immediately prior to the bust. Whether you think either point is relevant is up to you: http://www.bloomberg.com/apps/news?pid=20601109&sid=au.c3bEf58NI&refer=home Oil Rally Topped Dot-Com Craze in Speculators' Mania (Update1) By Michael Patterson and Elizabeth Stanton June 13 (Bloomberg) -- The rally that drove oil to a record $139.12 a barrel last week surpassed the gains in Internet stocks that preceded the dot-com crash in 2000. Crude rose 697 percent since trading at $17.45 a barrel on the New York Mercantile Exchange in November 2001, and reached 28 record highs this year. The last time a similar pattern was seen in equities was eight years ago, when Internet-related stocks sent the Nasdaq Composite Index up 640 percent to its highest level ever, according to data compiled by Bloomberg and Bespoke Investment Group LLC. The Nasdaq tumbled 78 percent from its March 2000 peak, erasing about $6 trillion of market value, as investors concluded that prices weren't supported by profits at companies such as Broadcom Corp. and Amazon.com Inc. Billionaire investor George Soros and Stephen Schork, president of Schork Group Inc., say oil is ready to tumble because prices aren't justified by supply and demand. ``There's nothing different between this mania, the dot-com mania, the real estate mania, the Dow Jones mania of the 1920s, the South Sea bubble and the Dutch tulip-bulb mania,'' said Schork, whose Villanova, Pennsylvania-based firm advises the Organization of Petroleum Exporting Countries, Wall Street firms and oil companies on the outlook for energy prices. ``History repeats itself over and over and over again.'' China, India Oil climbed on growing demand from China and India, whose economies expanded the past seven years at an average annual pace of 10.2 percent and 7.3 percent, respectively. Supply disruptions in Nigeria and Iraq and declining production in Russia also boosted prices. Investors added about $250 billion to commodity index trading strategies since 2003, according to Mike Masters, president and founder of Masters Capital Management, a St. Croix- based hedge fund. Crude futures fell 1.4 percent to $134.84 a barrel at 10:37 a.m. in New York today. The Nasdaq added 1.6 percent to 2,441.92 on oil's decline and a government report on consumer prices that matched economists' forecast. Money is flowing into oil as the global economy slows. The worst U.S. housing slump since the 1930s and more than $390 billion of writedowns and credit losses at banks will slow global growth to 2.7 percent this year from 3.7 percent in 2007, according to the World Bank. Investor Demand The U.S. economy's expansion may slow to 1.3 percent this year from 2.2 percent in 2007, dragging down oil demand by 240,000 barrels a day, according to economists surveyed by Bloomberg and Energy Department data. In China, the second- biggest fuel consumer after the U.S., economic growth may fall to 10.1 percent from 11.9 percent, the Bloomberg survey shows. ``I don't know if you can classify it as a bubble or not,'' said Masters. ``But there is no question that investor demand is having an effect on price. Very little of it has to do with physical supply and demand of crude oil.'' Masters testified at a Senate hearing in May on the role of speculators in commodities markets. Gains in oil are the result of a ``bubble'' caused by speculation from index funds and a tight balance between supply and demand, Soros said in testimony before the Senate Committee on Commerce, Science and Transportation on June 3. ``The bubble is superimposed on an upward trend in oil prices that has a strong foundation in reality,'' he said. `Momentum Players' Commodity index traders account for about 40 percent of the open interest, or outstanding contracts, in the 12 agricultural commodities for which the Commodity Futures Trading Commission reports data, according to Chicago-based Bianco Research LLC. Crude futures more than doubled in the past year and surged $10.75 a barrel on June 6, the biggest rise on record and the largest in percentage terms since June 1996. Robert Aliber, a professor of economics emeritus at the University of Chicago Graduate School of Business, says the risk of a ``correction'' has increased because prices climbed so fast. ``You've got speculation in a lot of commodities and that seems to be driving up the price,'' Aliber, co-author of ``Manias, Panics, and Crashes: A History of Financial Crises,'' said in an interview from Hanover, New Hampshire. ``Movements are dominated by momentum players who predict price changes from Wednesday to Friday on the basis of the price change from Monday to Wednesday.'' Limited Supply Burton Malkiel, a Princeton University economics professor and author of ``A Random Walk Down Wall Street,'' says the rise in oil may be justified because supplies are limited and demand in developing economies is increasing. That distinguishes oil from the market for technology stocks in the 1990s, where supply ``could be expanded infinitely'' and new stock issues helped push down prices, he said. ``The picture is fundamentally different than the Internet picture,'' Malkiel said in an interview from Princeton, New Jersey. ``I'm not saying we're running out of oil, but we're clearly supply-constrained. Five and 10 years from now, the price is going to be higher than $134.'' The Nasdaq reached a record intraday high of 5,132.52 on March 10, 2000, in a rally that started in June 1994. Investors plowed $199 billion into mutual funds dedicated to U.S. equities during the 10-month stretch leading up to the peak, including $36.5 billion in February of that year, data from TrimTabs Investment Research in Sausalito, California show. The flood helped boost the price-to-earnings ratio on shares of Irvine, California-based Broadcom to 617 in March 2000, according to Bloomberg data. Shares of the semiconductor maker, which surged 351 percent in 1999, lost 89 percent over the next three years. Broadcom gained 3.4 percent to $26.17 in Nasdaq trading today. ``You can look at the chart and say oil's taking on the characteristics of a bubble,'' said James Bianco, the president of Bianco Research. Still, ``it may have a long way to go before it eventually peaks,'' he said.
The fact that this is one of the most wanted LIMITED quantity commodity with no real substitutes which production has been plateauing since 2005 (and finally this fact started to sink in) has probably nothing to do with it....
But at what price if demand oustrip supplies? $500? $1000? per barrel? At what point would you think oil is at a bubble? I don't think demand increased THAT much in a matter of a few months. Oil probably won't be 40 anytime soon but a 50% cut from here is probably in the making in a year or two.
Or maybe, people are angry about the fact that it actually hurts people and more importantly poor people struggling to live in poor countries. I don't advocate price control or whatever else the government is proposing to curb speculation. But, to think this is pure supply and demand is absolutely stupid. Look at Wheat. It went from 12.50 to 7.50 in 2.5 months, Did the world all of a sudden stopped buying wheat? When CL jumped almost 9% last week, did every chinese and indian all of a sudden fill up their gas tank in unison? Exactly.
It is pretty much impossible to say. Knowing the basics, oil is still cheap at the current price. Demand might not have increased that much in the last few months, but people's perception of reality did. In the last few months if not exactly using the words, but Bush, OPEC and several big oil CEOs all ACKNOWLEDGED peak oil and that is a big step forward to face the problem. P.S.: I guess when the priceincrease finally starts to destroy demand but the price still keeps rising, then you have a bubble...
I'm no longer arguing that oil is or isn't a bubble. The argument has devolved into a semantical one at this point centered around what constitutes a 'bubble,' and I no longer care to engage in trying to get that dog to hunt, and in truth, it really doesn't matter, because whether there is a bubble or not won't determine what will happen to oil prices over the short and maybe even intermediate term. All I know is what the data shows regarding consumption and oil price increases. I only posted the last article from Bloomberg because I think it's interesting that technicians are commenting on similarly eerie chart patterns between oil and past bubble-esque 'things.' Whether they have a relevant point or not, I do not know.
Demand for energy is rising around the world, according to the U.S. Department of Energy and the International Energy Administration. Data show global demand for oil and natural gas will likely grow 45% by 2030 compared with 2006. The Department of Interior estimates there are 112 billion barrels of technically recoverable oil beneath U.S. federal lands and coastal waters. Thatâs enough oil to fuel 60 million cars for 60 years, when you take into account the average yield of gasoline from a barrel of crude oil and the average number of gallons of gasoline consumed annually by a passenger vehicle.
What is happening now is without historical precedent. If one wants to get really depressed just google "olduvai theory". The sad part of the story is, that "peak oil people" predicted drastic price increases years ago as a sideeffect of oilproduction peaking, but of course they were not taken seriously until the price well, increased drasticly. Now most people here on ET wants to approach the problem from the trader's point of view. Should I be long oil or can I start shorting it? In my opinion the analogy of the dotcom bubble is lacking, because dotcom companies weren't limited in numbers and the demand for their products and services were statisfiable... The price of oil will fluctuate, but the general direction will be up. There are certain factors that could cause a drop in the price like the dollar getting stronger or a worldwide epidemic. Or pessimisticly looking at it, that is less than 4 years of world usage or 15 years of US current usage...
I don't understand your argument at all. Please explain how it is possible to manipulate the market using unregulated exchanges? I'm not saying its not possible, but so far I have not seen a decent explanation of how its being done. Links, please.