Discussion in 'Economics' started by julu2005, May 28, 2008.
All components have their influence. Select the one you think is more relevant.
Or read one of the 120 threads already posted on the subject in these forums.
The Oil Bubble is no different than the Housing Bubble
By Richard Suttmeier
Updated: Tuesday, May 27 2008 01:05M
In my opinion the spike in the price of Nymex crude oil is at least a third commodity speculation, which gained momentum after the FOMC pushed the funds rate below 3% back on March 18.
Around the time of hurricane Katrina oil peaked at $70.35 in the first week of September 2005. Then in November / December Congress held hearings grilling oil companies CEOâs including Lee Raymond still the CEO of Exxon Mobil. At $60 per barrel Mr. Raymond told Congress that $20 per barrel was added on by speculators. That would put todayâs fair value below $90 per barrel.
The oil bulls who say its pure supply and demand cite strong demand in Nymex futures by commercials. My response is that the actual users of energy are merely getting ahead of the speculators to hedge against the parabolic bubble. Where would oil be if the regulators raised margin requirements?
This speculation is similar to the Housing Bubble. In late 2001 the FOMC pushed the federal funds rate below 3%, which marked the beginning of speculation in housing, credit and commodities. Once the funds rate was pushed to 1% in June 2003 and kept there for a year, the Fed-led greed took over. Homes were flipped preconstruction where the buyer never intended to own the home outright. By 2005 home values in some parts of the country were increasing $300 per day.
Isnât this whatâs happening today in Nymex Crude Oil, as speculators futures contracts and ETFs on margin never wanting a truck of oil delivered to them?
U.S. Treasury Secretary Henry Paulson disagrees saying last week that rising oil prices are not driven by market speculation but instead reflect tight supplies and growing global demand.
The sentiment of panic is the main contributor to the rising oil prices.
The panic has set in because the markets are not comfortable with the ongoing change in dynamics and wealth distribution (slowly) propagating worldwide.
The Tulip mania.
Separate names with a comma.