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  • July 2, 2008 09:41 AM EDT by Elizabeth MacDonald

    Part Three: The Oil Speculator Witch Hunt

    Before I get to the thunder bolts being thrown at oil speculators from Mount Washington--some of it a needed attempt at more transparency in oil trading--there's more lazy thinking on the oil supply and demand front that ignores the bigger, macroeconomic factors at play.

    Don't let the facts get in the way of the narrative here, the thinking goes, don't let the truth ruin a polluted stream of oil consciousness. I find the oil witch hunters a tedious, self-serving, unreflective and rather boring crowd. They are habitually self deceiving, and listening to their orgy of self-righteousness, I can feel my brains running out of my ears.

    They tend to lead with their muscle and not with their minds, because it's oh so much easier to get out the rakes and torches. Especially elected officials who find it easier to pass the blame buck in this political season, with scapegoats now in season, rather than make the tough legislative decisions to make energy affordable for cash-strapped American taxpayers hit with soaring costs for health care, college tuition, you name it.

    Thinking about their daily struggle, I find myself constantly grinding my teeth into Tic Tacs on their behalf.

    Now you'll hear an attempt at a reasonable argument from the witch hunt theorists who say oil speculators are solely to blame for oil price spikes--which on closer look is just lazy spitballing that ignores what the pros are saying.

    Trust me, I think oil speculators are partly to blame, but they are part of a much larger picture. I've said so repeatedly on camera and in prior blogs, based on my reporting--no one can say definitively and with any veracity how much oil prices have risen due to oil speculators. You'll see estimates that are all over the map.

    However, watch what the Paris-based International Energy Agency, the big oil industry think tank, just said about oil speculators, that there is "little evidence" that large investment flows into the oil futures market have sparked an imbalance between supply and demand and led to the surge in oil prices.

    Or that the IEA specifically said that "money flows and speculation can have a day-to-day influence on prices, but it is not one that can be sustained for any length of time without a market imbalance being apparent," adding in its report that "the economy is impacted by fluctuations in spot oil prices, not futures prices."

    Or that the IEA says demand is to blame as demand for oil is rising, as it is still forecasting global consumption of oil products will increase 1.6% a year on average through 2013, largely due to demand from non-OECD countries, including China and India.

    Or that the agency also says because oil production is slowing worldwide, that caused it to cut its outlook on global oil supply levels in production from the Organization of Petroleum Exporting Countries members and non-OPEC nations.  The IEA also said that poor supply performance since 2004, combined with strong demand from the developing world, started to push prices higher.

    Despite those facts, you'll hear from the oil speculator witch hunt crowd that oil price spikes are not a supply and demand issue, because US gasoline reserves are at their highest levels since the early 1990s, laudable since the nation's refineries like Valero (VLO) have been dialing back on their gas production as their margins have declined.

    You'll hear too from the oil speculator witch hunt crowd that there is no supply problem because average gasoline reserves on hand have risen since this past October, and the US oil stockpiles in this country have gone up nearly every week this year.

    To wit, the argument is that because there's more stockpiling going on, there's no shortage of gasoline or oil in the U.S. today, because we have near-record reserves on hand.

    You have just witnessed an advanced case of severe rectal cranial inversion.     

    What's missing in this argument? The reason why countries stockpile and set up reserves to begin with: because countries are doing so in the face of rising demand or supply shocks. 

    Just as a publicly traded company books increasing cookie jar reserves to take care of future losses, (witness the financials now), so, too, do countries stockpile to protect against future rising costs and/or losses in oil supplies. Or in the face of growing demand. As China is now doing with its offline stockpiling so it won't face embarrassing shortages during the summer Olympics in Beijing.

    And as reserves rise, it's the quality of the oil increasingly coming on-stream that has also helped oil prices go ballistic. There is a glut of sour crude, sulphurous grades that is way more expensive to refine than the sweeter crudes, now becoming increasingly rare, say oil traders and oil statisticians at the IEA.

    Oil prices go up after Nigerian oil attacks because Nigeria pumps out light sweet crude that's cheaper to refine, versus the sour grades swamping the markets, according to sources. The Sauds pumping more sour crude--when it has historically pumped sweet--is not a good sign for the markets. And has been taken as a negative, which is why oil futures have risen.

    You can talk all you want about how gas reserves are at their highest levels. But if all the world has to refine is an increasing amount of sour crude, then listen to the oil pros and oil majors who say that going forward, you can expect a squeeze on those reserves. Which is why oil prices are going up.

    "Refiners are paying record premiums for the high-quality crude oil they use to produce diesel and petrol, a sign of strong demand in the physical oil market that calls into question claims that soaring oil prices are being driven by speculators," the Financial Times reports.

    It's a big reason why Valero Energy may sell one-third of its refinery operations due to poor margins in recent months.  

    You'll also hear arguments from the Cotton Mathers in the oil-speculators-are-solely-to-blame crowd that this is not a demand issue, because demand in the US is flat-lining or expected to go down due to higher gas prices. The US is the world's largest oil consumer with 20.7 mn barrels of oil consumed in the country daily (a quarter of the world's consumption).

    Now it's true that the US government's energy officials now expect US demand will be lower than had previously forecast due to the recent gas price surge. The IEA has predicted that global oil product demand in 2008 would grow by 0.9% or a teensy 800,000 barrels a day, with predictions that US demand would drop up to 2.5% this year, down to 20.3 mn barrels daily.

    But yes and let's sit on our couches with our remotes and Cheez Doodles (*(I love cheese doodles, the hard kind) and never go outside our own front door to see what else is going on in the world.

    It's expected that 1.8 bn new entrants will join the middle class next 12 years by 2010. The world's middle class will grow to a staggering 52% of total world population, up from 30% now. That means increasing demand for gasoline.

    Explosive middle class growth in formerly poor countries, such as China, Russia and the Middle East means they will consume more crude oil than the U.S., burning 20.67 mn barrels a day this year, an increase of 4.4%, according to the International Energy Agency in Paris.

    Economic growth of more than 8% in China and India, coupled with increasing car ownership among the countries' combined populations of 2.45 bn people, will more than compensate for falling U.S. demand, the IEA says. Oil use worldwide will increase 2% this year because of growth in emerging markets, the Paris-based IEA says.

    China has a tiny 15 passenger cars for every 1,000 people--meaning it's Japan circa 1963, when Japan had 13 cars per 1,000.

    China has 1.6 bn people. Which is why the US automakers are saving themselves by piling into the Middle Kingdom. Which means gas consumption will soar in this country for decades to come.  

    Demand is rising everywhere. Last year Mideast's six largest petroleum exporters, Saudi Arabia, United Arab Emirates, Iran, Kuwait Iraq and Qatar curbed output by 544,000 barrels a day. At the same time their domestic demand increased by 318,000 a day.

    You'll also hear arguments from the Pierre de Lancres of the oil speculator witch hunt crowd, that oil production is still moving apace, with some suggesting oil production is expected to increase by 3.3% in the second quarter, and by as much as 4.1% by the third quarter.

    The game here is this: throw a dart at stats pasted to a barn door, with the game's rules saying you get 1,546,789 tosses to hit the stat you like to suit your argument.

    Officials at OPEC and the IEA say oil production is decreasing in 54 of the world's top 60 oil producing nations, including the US which produces 5 mn barrels a day, down fm 11 mn in 1970. The overall amount of oil discovered has been falling for 40 years. Sadad al Husseini a former top executive at the state-owned oil company Saudi Aramco, says Saudi production already hit a peak and will begin dropping in 15 years or less.

    I'm exhausted, there are more oil production stats I can give you, but I am getting bored.

    Ok I'll go on.

    You'll also see the argument from the witch hunters that all is well, that the U.S. daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 mn barrels in excess capacity today.

    What's missing here? A worldwide outlook-enough with the US-centric focus here. You need to compare the worldwide spare cushion to overall daily demand, and that comparison is terrifying.

    The world's spare capacity, the oil cushion as it were, has dwindled to just over 2 mn barrels per day with global demand at 86 mn barrels a day. That's way down, by more than half, from 5 mn nine years ago vs 76 mn barrels consumed daily, says the U.S. Energy Information Administration. And again much of today's surplus is sour crude, high in sulphur, which refiners loathe.

    Don't forget that the oil price spike story is a weak dollar story too.

    David T. King, a former chief of the New York Federal Reserve's Industrial Economies Division, noted on the editorial page of the Wall Street Journal earlier this year, when oil prices were at around $120, that last August the dollar price of oil was $70. King points out that the current spike in oil and other commodity prices coincides almost exactly with the Fed's decision to turn on the monetary spigots to save Wall Street.

    The day that the barrel price of oil in dollars was exactly the same as in Euros was in 2002, when both were about 25, King notes. Since then oil has risen by 50 Euros in the past five and a half years. It now stands at 75 Euros, triple what it was then.

    But check this out: in the US, the price is over $120, about five times what it was then, King says. He says that the collapse of the dollar exchange rate explains at least half of the increase in the pump price of gas over the past five years.

    The falling value of the dollar has caused the price of gasoline to soar. Gee that was hard to figure out wasn't it?

    I've said at the outset that speculators are adding to the price spikes, we just don't know by how much. The hope is that more sunlight in their trades will help market watchdogs and regulators stop the torquing that goes on, especially when a hedge fund like Amaranth Advisers or a miscreant firm like Enron want to game the system.

    Really?

    NEXT UP: The regulatory blow torch aimed at oil speculators.

    FOOTNOTE: After this story was published, the IEA released a report stating that supplies may not keep up with demand, noting that the growth in global spare capacity will peak at about 2.5 mn barrels daily in 2010, dropping to--watch out--less than a million a day for the ensuing three years. Crude oil prices hit a record in trading after hours on the report. Already the haymaker of inflation has come a cropper, due to oil price spikes.

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William G Stockglausner

There are plenty of people who disagree with you on this, so don't sound so sure of yourself. By the way, I think you should have to disclose your financial interests in the crude oil futures market.

July 2, 2008 at 5:52 pm

GeneralGaoChicken

I think I enjoyed most post Katrina on c-span in congress was this: All the US oil corporation CEO's where there. Accused of price gauging ? a sane response brought forward that - oil prices are set globally. I have observed Liz MacDonald to emphasize this too - and others. Off subject, when people suggest drilling locally in the US will change that the price of oil is set by globally demand ? All that one can argue is that the profits at least won't go to an indoor ski resort in the desert in Dubai, but they will go to a ski resort in Aspen Colorado probably ! (If "I" ever go to Aspen, it will be wondering about the trees in the snow, NOT to go watch some flat screen TV in the mountains in some resort. ) But my favorite point made was that refineries are kept DOWN intentionally - as you can make more money selling less gas at a higher price. That many refineries are in hurricane alley ? No one objected. (I'm just focusing on the risk here, not environmentally, just the risk of further a constriction on demand). So -that post Katrina c-span interview with the oil corp's CEO's helped me separate oil from gas - AND understand that gas is controlled more so by intentional minimalism on refineries. It looks though like current problems aren't about refineries crimping gas output, but mis-use of what futures according to Muriel Siebert are or were designed to be used for - price setting for industry specialists, not yayhoo 30 yr olds who can stand there smiling on Fox- or any network really- stating how much they are raking in playing the futures to their advantage, all the while playing part in creating what I think we can all agree is - ARTIFICIAL DEMAND. This term 'artificial demand' hasn't surfaced yet but I think it's KEY to understanding what mechanism is involved in oil futures skyrocketing. What DRIVES that mechanism MIGHT be money that is too afraid to be put into Wall Street otherwise - I just considered that today, regarding expected write downs. Maybe the people who KNOW how badly their investment firms are hit hard, are playing futures because they know the real write downs coming ? ok ok - that's crossing to paranoia ! oh well... I recommend Telemann's Fantasia VIII (IIX if you're conservative ! Odd IIX isn't traditional) in E Major to forget all todays troubles (third movement is just killer, short of a few measures I swear that don't belong, but hey, it's his gig) - In fact, I wager until hearing the third movement - one is missing out on just how celebrative happiness CAN be expressed in music. Hope everyone has a bike ! Saudi's gave bush one ! I think it's sarcasm on their behalf !

July 2, 2008 at 5:48 pm

Greedom

Note to admins here: Although I think i'm DONE with MarketWatch - an 'edit' feature does exist for correcting typos etc. Perhaps consider adding an edit feature here too - I'm sure it's GOT to be the same tech staff that does MarketWatch as FBN. If not, take a look at MW. I do so much hitting return and seeing a blatant typo or misspelling. Thanks.

July 2, 2008 at 5:03 pm

Greedom

Wow Dow down 160 today what's it going to be like when the resets start showing up on peoples balance sheets ? sheesh 9500 dow ? 8500 ? as 100's of billions slam wall street - leaving people going 'but but - I was doing so well on oil, no, not now ! not now ! ' Is that part of it ? people are AFRAID to invest ? because they deep down KNOW there's going to be some serious fallout yet to come ? and they're all playing in the commodities sand box ? Even if people aren't afraid of the markets aside from oil, with write downs coming from the resets they oughta be afraid ? hmm, no, fear is never a good motivator, it has its place, but I wonder what the best strategy for these up and coming write downs should be. negative 160 today riding on the coat tails of the worst june since 1929, sheesh. It's EXPECTED to get worse when these phony mortgage started in 2003 start to come through yes ?

July 2, 2008 at 5:02 pm

pfft

u hedge. "I’ve said at the outset that speculators are adding to the price spikes, we just don’t know by how much." but with magical reasoning, u conclude that speculators aren't primarily responsible for the price spike when u admit that u don't know how much they are adding. pfft. u also conveniently set up straw men of cotton mathers who believe that ONLY speculators are to blame. and bravely light them on fire. boring... to polish off your piece, u use the shotgun approach and fire off other causes also responsible for the oil spike to completely cover all bases and rear ends. the standard techniques combined with the prosaic bluster and belittling used to mask ... bored. oil is different from the supply and demand curves of widgets sold. oil isn't the final product. costs will be passed down. products will become more expensive. inflation. recession. i ate, but i still feel hungry.

July 2, 2008 at 4:54 pm

Greedom

I once saw a person from China discussing food in China. Here in PA, I see General Tso's Chicken. In MA? I notice it's General Gao's Chicken. This person on this food show said 'There is no such product in China' Somewhere in here - with the www.gao.gov there is a joke to be had between - things that don't exist, China and the Government Accounting Office ? Perhaps it can go like this: "I ordered General Gao's chicken and they served me a box filled with worthless US Dollars" ok, - that's weak. Hmm- somewhere - over the rainbow - there is a pot of gold that can be traded for TWICE it's amount in oil by the end of any trading day on commodities futures exchange ? I better get back to work, I'm flaking out here ! I don't like the network - or Murdoch's grip on media, but I think FBN has a handful of good people there. I'll look PAST the Fox part for now.

July 2, 2008 at 4:49 pm

Zoidy

Hmm At least commodities don't drive people's ability to care for each other ! On THAT ? These hard times are merely a temporary blip on the screen of hard time for humanity until the big ole meteor hits ! Fox had on some 'smilin' jim recently talking about how he played the $10 margin between 130 and 140 - I couldn't help thinking, wow, this guy actually thinks base 10 means something, he was smiling saying "yeah, I win if it goes up, and I short it if it goes down" After seeing the Muriel interview ? I think if Murial was in the same room with this guy ? He had to be maybe 30 yrs old ? and believed it was alllllll about how you could play the system, you know, someone that didn't care about anyone but his own personal afterlife plan, wait, no, that's hitting below the belt, he didn't bring up religion, but they guy might as well be some yayhoo in a casino. Somewhere Wall Street perhaps has turned into Vegas. I think that's what I picked up from Muriel Siebert (I am terrible with names, but her name I will remember). When the mob discovers people are exploiting the games, they take em into the back room and 'ask em some questions' - maybe this is needed on Wall Street ? Somewhere - without apparent demand matching the prices, something is askew. Everyone relies on everyone else to figure it out, I'm here because I deduce I can rely on MacDonald's insights to get closer to the truth. I wonder what the finality will be on what's driving oil though.

July 2, 2008 at 4:44 pm

Zoidy

Hey let's not discount you've got the US head of the Comptroller of Currency touring the US saying 'big problems ahead for the US Dollar, all this borrowing is killing us, and enslaving our children' Government Accountability Office is offering up BAD news lately. Could it be ? the US Comptroller of the Currency has a clue ? I mean, they ARE at the top ? viewing the 40,000 foot view. Probably the 80,000 foot view. In bizarre ways, maybe we CAN call this the 'China Syndrome' As the US borrows more from China, sending down the value of the dollar ? Oh well - it's a catchy title - idddn't it ! 2 years ago I was tearing up the W.Post boards on China's new driving class creating a new demand on oil - that their middle class alone is 300 million. I don't know that that is the issue anymore, BUT I do know that the USD is losing face to the world.

July 2, 2008 at 4:27 pm

Zoidy

btw - linear temporal models go out the window with entry of acausality - (seems spell check here doesn't even like that word) - but if you're any fan of Cantor or Hilbert, you need this concept to understand the transfinite. Too bad David Hilbert isn't around, I'm sure he'd have some insights into trends in global futures markets. Nothing is random, everything has some history to it. Oil futures have a cause behind them. I'm VERY happy to see this subject up on the chopping block here - but unfortunately it's not in such a venue to allow for heavy commentary - as one might expect on Washington Post or MarketWatch or so many of the online forums people share their insights (and insults unfort. Hey, I'm guilty too- workin' on it, workin' on it) using. The above article left me wondering, is this sarcasm ? then I wasn't sure if it was stating -hey - look - it's not that simple, alas the barn door comment, OR ? is it as simple as I'd LIKE it to be, which is the US dollar is simply worth less, and therefore oil, food, durable goods, services, etc take MORE dollars. UK's retail consumer index of 3.x % when it was expected to be negative left me thinking was it perhaps UK citizens buying US products ? and therefore under the radar of what was SOLD in the UK ? as I'm sure that's involved in computing that figure- MORE support perhaps the US dollar is wreaking havoc around the world.

July 2, 2008 at 4:20 pm

Zoidy

jeronne, to be fair you point out at the end of your comment: "There is plenty of blame to go around for both parties, but the dem’s are in the driver’s seat right now …" There exists a paper by Wolfgang Pauli and Karl Jung on ACausality. It's an interesting concept - that not everything has to fall under canopy of causal/non-causal. It's the same concept of moral/immoral and amoral - I might suggest a healthy path of apartisan approach to trying to understand economy - I mean, it's not necessarily fitting that all matters of economy BE branded with democrat OR republican. Just suggesting this approach could prevent unnecessary dichotomy causing even more riffs - At some point, moving from a black and white world - you have to accept 3 primary colors and abandon duality of black and white. I've not read or heard that before (I want CREDIT heh- jk) but it seems like fitting words to say what I'm trying to express jeronne.

July 2, 2008 at 4:13 pm

Zoidy

jeronne, you complain people blame bush and all you do is employ the VERY same thinking system. What ? doesn't your health care cover psychologists ? This entire NATION is suffering from traumatic stress if you ask me perhaps the children who's parents were blown to bits in Shock and Awe are suffering 'just a little bit' But - hey, missing white girl in aruba - that's all that matters or my FAVORITE line of all time flipping the dial... "And Geraldo, how many feet was the pay phone the runaway bride used - from the 7 Eleven building" And THAT is journalism ? that's noise - distraction... obfuscation... hideous... I noticed some yayhoo faith healer on God TV or something like that going "and watch Fox tomorrow, we're going to be on Geraldo" right. I don't buy into that phony - Verb_here.

July 2, 2008 at 3:56 pm

Zoidy

I also agree with DonaldD on every mention of Iran seemed to increase oil in the start. I used to have a formula - if a missing white girl on Fox came up - US was closer to attacking Iran. I'm currently working on a set of 8, 10 and 20 sided dice - That states what will happen in the world based on what Fox News reports. Lost Child (come on, this happens 250 times a day, Fox uses these sensationalism stories to distract, unless Fox News WANTS to become the Missing Persons network, it's manipulative to cherry pick which kids get the national coverage, and which are left to be ignored) on the 8 sided die will mean - 7 US Soldiers die. Where's Natalie ? more like - where's Fox's coverage of Iraq ! One girl in Aruba - or perhaps 'Where's missing woman named America' ? Really, what is it ? the new BCP pipeline that can't be completed without Iran out of the way ? is that it ? Where Exxon, BP and Shell will pull in 7.5 million barrels a day instead ? Chevron already OWNS 28% of the BCP out of the Caspian, how much is enough

July 2, 2008 at 3:52 pm

lincoln

Greg with one g, looks like you have a poem there, why don't you do a rap with FOX?

July 2, 2008 at 3:49 pm

Zoidy

jeronne, Bush took the US to war on his own - the way I see it. Even McLellan comes out to say Bush used the CIA data to promote a 'reason' for war. But DonaldD's points - if you read past the first two sentences - made a lot of sense and had nothing to do with bush. It seems YOU are the one that's obsessed with partisan dichotomy. But Iraq is on bush's head, no one else promoted it to boot. PLUS ? I tend to side with Secretary Paul O'Neil who writes that within the first weeks into office Bush went about saying "Find me a way into Iraq". Granted Paul was Bush's first firee. It's also interesting to note Sec. Treasury O'Neil spotted a document on Bush's desk WAY before 9.11 that was titled 'Western Oil Corporate candidates for the Iraqi Oil fields'. The writing is on the wall with bush, no 'christian' goes 'shock and awe- wanted dead or alive' The guy has no integrity, no character, and will be forgotten as soon as his grip on power is gone. As to DonaldD's comments though, you never gave credit on the OTHER points made that had nothing to do with partisan politics. It's you - sheesh, I've already forgotten your nick. nm

July 2, 2008 at 3:47 pm

Andy

You can control 1000 barrels of oil in todays market for roughly $7000 - $10,000. You need $70,000 to equal the same $140,000 in the stock market. When the big funds bring billions into the commodities market and can control twenty times their investment, it's quite obvious they can push the price. Either force them to invest 50% of their money to trade on margin, or force them to take possesion of the product when the contract is up.

July 2, 2008 at 3:31 pm

jeronne

Donaldd gave me a good chuckle when he tried to blame all the country's ills on Bush and the Republican Congress.. Maybe he hasn't checked lately, but the Democrats have been in legislative majority for a year and a half.. When they took office there was a lot bragging about their "mandate" to stop the war, stabilize gas prices, and straighten out Bush.. -- Well, the democrats keep voting to continue funding the war, gas has gone from $2.10 to $4.40/gal, and when Kucinich filed his 35 Articles of Impeachment last month he could not get even one democrat to second ANY of them.. -- The President has no legislative or funding powers of his own. All he can do is ask for them.. It is the Congress that has the power to legislate, fund, and over-ride vetoes.. Democrats have done NOTHING to help the people they say they represent.. There is plenty of blame to go around for both parties, but the dem's are in the driver's seat right now ...

July 2, 2008 at 3:08 pm

Ted

Wer're back at it . OK i just visited another site with some irrifutable proof that there is no shortage of oil. The info comes straight from IEA data and it's a graph they published called "EVEN MATCH" The graph clearly shows that the supply demand curve are evenly matched and have been for years. That says it all. NO OIL SHORTAGE. You can see for yourself if you don't belive me. Here is the URL http://www.usatoday.com/money/industries/energy/2008-07-01-iea-oil-report_N.htm

July 2, 2008 at 3:02 pm

mike

Thanks!... and that's totally irrelevant of the cheese doodle comment, which would otherwise warrant an additional half dozen exclamation points. I'm very glad that some people have gotten their brains working, trying to root out cause & effect rather than calculating, defending political talking points and accusations. Those of us more concerned with our own dwindling cash reserves than any political jousting, are about ready to go grab our own pitchforks, targeting those who are paid to not only fix, but should have at least minimally prevented this mess - instead they were/are padding their bank acct.s, egos, &/or political resumes.

July 2, 2008 at 3:01 pm

Gregg

Let me see if I understand this. It's not speculators, it's supply and demand. I guess we are to think that China and India are using so much MORE oil in the last two months that the cost of gas has risen $2 per gallon. Let's just pump our own. Too many people are having to suffer.

July 2, 2008 at 2:57 pm

Greg

E-mac talking the smack with fact. Dellusions and confusion can abound. The market is full of truths which sometimes are hard to be found. Rigid supply and rigid demand; a significant change in either the price gets out of hand. Great article, Greg

July 2, 2008 at 2:45 pm

Zoidy

from comments: Comment by Paul 2008-07-02 13:08:59 The dollar is part of the problem, but impact is relatively easy to quantify. If the increase in the price of oil was really just a weak dollar issue, the price of oil would be stable in terms of other currencies (Euros for example). This is not the case. July 1 of 2007 crude oil was trading at 71.40 dollars per barrel. The Euro was trading at 1.36 dollars per Euro, hence the price of oil was 52.50(71.40/1.36) Euros per barrel. Today crude oil is 142.50 dollars per barrel, and the Euro is trading at 1.59 dollars per Euro. This puts the current price of crude oil at 89.60 (142.5/1.59) Euros per barrel. The simple conclusion is that in the last year the price of oil has doubled in terms of dollars, and is up 70% in terms of Euros. Hence, 30% of the incease in the price of oil is due to the weak dollar. The rest is due to other market factors. Heya Paul I was thinking about this line of reasoning myself - I think you sorted it out there. I did NOT review the price of oil in other currencies, and that IS needed - I think you brought forward the first sensible fraction of what is due to the dollar @ 30%. Agreed. I thought the same thing, that I need to check the price of a barrel in other currencies and compare to see. You did leave out the Yuan, but I wonder how that affects the 30%, that is US to Yuan. Might be best to take an average of all the currencies, against the US. I think you're def. on the right track.

July 2, 2008 at 2:41 pm

mparks

Open your eyes not all of us can see their navel from the inside

July 2, 2008 at 2:09 pm

JoeB

Follow the money and it will take you where you need to be. The Companies/Speculators, etc that are making huge amounts of profits are the source of the problems. Tax/regulate the companies and remove the billions and billions of tax dollars they get as subsidies. These companies are thought to be using some of these record profits to do things like maintain their equipment, etc so there will be no mechanical problems (BP's problems in Alaska prove this is not true). I think if politicians conduct an "ENRON" type investigation of big oil, they will find a relationship exist between the Oil companies and the Speculators. An "Unholy Alligence, if you will. Politicians are unwilling to look to closely for fear an investigation would reveal their relationship with Big Oil AND the Speculators. In the mean time, consumer's get screwed - prices rise - taxes rise - Politicians complain and do nothing else and Big Oil and Speculators make obscene amounts of money.

July 2, 2008 at 2:02 pm

John Arant

Wrong word....over and over with all media, and all politians. Speculation...the hope of a return Manipulation...known return what we're looking for are market manipulators.. speculators are just you & me, hoping our 401k's survive.... invalid word will provide invalid search, will provide invalid results...

July 2, 2008 at 1:54 pm

RR

I check out the show when I'm not working.I liked your wit on the hedge fund manager /fugitive although he's not a very good fugitive. He should have immediately chartered a flight out of the country to a non extraditon country from a small airport like Teterboro in NJ. Instead of schlepping around in an RV for a month to only get a couple hundred miles away. I guess that will be his last RV vacation for a while. Anyway I also grew up in Rockville Centre it was along time ago. I used to live across the street from Plaza school where I also attended. I think we might have been neighbors. I used to hang out with two neighborhood kids on my street granted I was like 5. If you lived next door to another girl about your age who you hung around with. Your last name is the same as this neighbors. My take on the market is wait it out I own a lot of great companies like AB,XOM,GS among others. What kind of crazy things do you and Cheryl get into when your not reporting on the world of business. Have fun and be safe RR

July 2, 2008 at 1:53 pm

about this blog

  • Elizabeth MacDonald is the stocks editor for Fox Business Network. She is recognized as one of the top prize-winning business journalists in the country, and has received 14 awards, including the top prize in business journalism, the Gerald Loeb Award for Distinguished Business Journalism, and the Newswomen's Club of New York Front Page Award for Excellence in Investigative Journalism.

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