“Greed, for lack of a better word, is Good”. An often quoted line of Michael Douglas from his Oscar winning role of Gordon Gekko in the Movie: Wall Street. Sad for us, that in the world of futures trading, the Gordon Gekko’s of the world are the one’s driving up the cost of oil ($128/barrel as of the moment). An article at CNN right now casts light onto the influence of the Oil speculators on the ever increasing price of Oil.
According to the report a lot of new investors are to be blamed for the price hikes in the commodities market. This new breed of speculators, suckled by news reports of political and environmental threats to the world’s oil supply, bid aggressively high.
Some are saying also that the price of oil right now could be so ridiculously high that the Oil Market is a bubble that is just about ready to pop. Those who speak in defense of the high price however are saying that the price is high because supply is not growing fast enough to meet demand. Could this then be further proof that we have reached peak oil and that the World’s Oil wells are drying out?
Another angle into the increase in Oil price is as a result of the US Federal reserve cutting interest rates in order to save the credit industry caused by the Sub prime debacle. With the drop in interest rate, investors go to the commodities market in order to prevent the value of their money from devaluing. I’m just wondering? Wasn’t the drop in the interest rate supposed to have helped the stock market? So technically the stock market should have been booming along with the commodities market?
This line of reasoning is hard to fathom. I’m more convinced with the line that speculators are driving the price up to astronomical levels. I’m just hoping that the prediction of the Oil Market being a bubble come true so that the price of oil will come crashing down and all those speculators left holding the bag will get their just desserts.
The US Congress meanwhile is planning to pass legislation to make investing in the futures market more difficult. The ease with which money can be invested in the futures market means anybody with just $100k can begin investing. Compared this to the $500k needed in the US Stock Market. The downside of this is that the money intended for Oil speculation will just move to other Oil trading markets where the requirements aren’t that strict.
The richest one percent of this country owns half our country’s wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It’s bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. [Gordon Gekko]
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Category: Oil, Oil Price
