If you need evidence that it is commodities trading and not supply and demand that drives oil prices, just go fill up your tank. The current crisis in Libya has not appreciably affected the oil produced by that country. Libya provides about 2% of the world's oil, they are producing at close to pre-crisis levels, and Saudi Arabia has promised to increase their production to meet any shortfalls. So the supply hasn’t decreased, and the demand certainly hasn’t shot up in the last week.
There haven’t been any major problems with global oil production to drive up oil prices. Current global production is actually very high – domestically we have been increasing production for years, yet the prices jump.
The reason is that oil is traded as a commodity on the futures market. You aren’t paying for gas, you’re lining the pockets of futures traders.
There used to be position limits on futures trading for oil. Not any more.
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