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301 Comments
- evodevo1, on 01/12/2009, -9/+221All those Digg articles that were posted during the summer to fall of 2008 were spot on! The price of crude oil was due to speculation!!! Wow, is this vindication for us or what?
If you watch this video you will see that JP Morgan's Lawrence Eagles went before Congress and testified that "high energy prices are fundamentally a result of supply and demand". The same day he testified, an email from JP Morgan went out to their clients say that "and enormous amount of speculation ran up the price" and that "$140 in July 2008 was ridiculous".
These people are complete crooks who are able to lie straight-faced and all with impunity! To think also that we are giving them $700 billion!!! ***** these crooks. They should all be thrown in prison, given ***** mean sandwiches by Big Bob and all their family fortunes given back to the US treasury! - NoLibertarians, on 01/12/2009, -24/+111Remember all the crazies on Digg yelling we were going to have $10 gallon gas and shortages, and no food or water causing riots, and Bush was going to cancel the elections, and martial law was going to be declared and China was going to demand we repay all our debt, and, and, and, and, and, and, and, and, and, and. Anyone have an aspirin!
- Berkana, on 01/12/2009, -19/+97It gets worse; the speculative markets where financial instruments are traded contain almost a hundred times more value on paper than the value of all the goods and services in the world. When that bubble pops, there will be hell to pay:
http://www.youtube.com/watch?v=h9-tBGxVU6o
The combined assets of the entire earth is estimated to be about $100 trillion, but the financial derivatives market, in which much of our invested money is tied up, is (over)valued to be about $1 quadrillion. In other words, a lot of people have a hell of a lot of money to lose when it is realized these financial instruments are worthless. - kinerry, on 01/12/2009, -7/+54It's called a cartel, this is why they are illegal in the US.
Supply and demand doesn't work when cartels can do whatever they want. - pintomp3, on 01/12/2009, -8/+53Meanwhile people like you were chanting "Drill, baby, drill"
- thoughtsonthis, on 01/12/2009, -1/+43I just hope the prices stay low. This is a heck of a time to pay $4.00 a gallon again.
- BESTenemy, on 01/12/2009, -1/+42 Saying that the consumers got a break through lowering of the oil price is putting the cart before the horse. The gas prices went down because of demand destruction - because the consumer went broke and was unable to afford it at the inflated price rate. Speculators got wiped out in the downwards move because the speculative market cannot exist without a real participant who's actually consuming and not speculating, constantly throwing new money into the pot. Consumers didn't get a break - they went broke. Only then the price went lower, searching for the new base of affordability. As the price is a lagging indicator, the benefit of the relief at the pump gets crushed at the macroeconomic level, as fewer people still can get gas.
We've been sustaining the artifficially inflated standard of living by substituting savings with debt. Everyone in the world chased the same goose, mesmirized by the "American Dream" better known as the "Free Lunch Theory". Many nations went broke by expanding their debts markets.
Peak oil? What about Peak Credit that was advancing the demand for resources? The demand for everything, apparently was inflated.
Oil went down. It's a good thing, but the reason for the price decline is nothing to get excited about. It's the bankruptcy of the consumer. The issue is not that the people can now buy more oil, because the price is low, but that the price had to go down, because very few could buy. - pintomp3, on 01/12/2009, -2/+42Close the Enron loophole:
http://en.wikipedia.org/wiki/Enron_loophole
http://www.stopoilspeculators.com/ - MistrBrownstone, on 01/12/2009, -1/+32I saw this last night...I think the figure that stuck with me the most was that 27 barrels of oil were traded on paper for every 1 barrel of oil actually consumed.
- WafflePirate, on 01/12/2009, -4/+34I guess oil dropping by over half its original price per barrel is a good thing, even if it is the only economic break of the year.
- Jlaugh, on 01/12/2009, -3/+26Ah capitalism, how we used to love you, to bad you where replaced by a ponzi scheme. I see no practical difference between centralization run by banks and centralization run by the state.
- refisawanker, on 01/13/2009, -1/+23People clearly don't understand the derivatives market.
We do this every single day. Betting on the Super Bowl (or any sporting event) exceeds the actual value of the Super Bowl by a factor of at least ten. It doesn't matter, because no matter the outcome of the Superbowl, they players on the field aren't responsible for settling any bets.
When you get into trouble is when a counterparty can no longer pay off their bets.
"In other words, a lot of people have a hell of a lot of money to lose when it is realized these financial instruments are worthless."
You clearly have no idea what you are talking about. 80% of all derivatives expire worthless every single expiration date.
This Friday, Jan 16, 2009, 80% of all options that expire that day will be worth ZERO.
Where banks and institutions got into trouble, was they were the counterparty on transactions that they had no capacity to pay. - oldhick, on 01/12/2009, -3/+24I hope you are ineligible to vote. Elections ARE popularity contests by definition.
- Jlaugh, on 01/12/2009, -1/+20No ***** cartels are not capitalistic thats my point. I finished my liberal arts degree btw, you business school drop out. Epic fail at reading comprehension.
- kingofinternet, on 01/12/2009, -3/+21drill baby drill?
- inactive, on 01/12/2009, -6/+24***** GUY WAS RIGHT!
- winterus, on 01/12/2009, -2/+191. In the last month, the oil has risen from a low of 35 USD and topped at 48 USD a week ago.
2. What do you want the "authorities" to do? Impose price fixing? - jhbarr, on 01/12/2009, -1/+16Bush doesn't want it. He looks like a beaten and tired old man now. Cheney on the other hand....
- chanop, on 01/12/2009, -10/+25It was nice of your husband to put a computer in the kitchen....
- keltin, on 01/12/2009, -7/+22Locally, the gasoline price has gone up fifty-cents in the past month, from a low of about 1.49 to right around two dollars a gallon now. This is without any rise in oil costs, just fluctuations around 40-45 USD per barrel. There have been complaints made, but the authorities do nothing.
- BESTenemy, on 01/12/2009, -2/+16Rest assured, the prices will stay low. Mini-rallies are all going to get crushed, for as long as the economic activity declines. People are losing their jobs, their incomes, their savings, their mortgaged properties, their leased cars. Work hours and wages are getting reduced. Industrial demand for raw materials and energy is dropping. Those are all deflationary events. While we are in a deflation, oil cannot go up, as there are no fundamentals to support the price growth. The market sets the price. If you artifficially increase it by, let's say, cutting production, then at the new level fewer will be able to afford it. The demand will go down and once again, the market will force a downward correction.
Look at the retraction of the oil price. It's like a broken ladder. Every attempt to revive the inflation of the price fails.
This is going to continue for as long as the markets are deflating.
People that are broke consume less. Oil is the blood of every industrial society. With the industrial activity decreasing, the need for resources of all kinds reduces. Oil goes as low as it needs to go, before the new consumption equillibrium is reached. We're still far away from the bottom, and nobody knows where it actually it... only that we're not there yet. - Rantus, on 06/11/2009, -5/+19ELECTRIC CARS NOW.
I bought my house back in the summer of 2007 and I made sure that it was 2 minutes from my wife's work and 7 minutes from mine. My kid gets picked up by the bus 3 houses down. The only way to insulate ourselves from this ***** in the future is to stop buying oil. I rewired my house for efficiency (put in all new breakers, fully grounded outlets and switches and florescent bulbs) and I saw a significant drop in my electric bill. I'm still getting screwed on natural gas but I'm waiting for that to crash too (why isn't it, by the way?).
Efficiency is the answer. The main export of the US is electrical equipment. If we retool this country for electrical efficiency and make all the equipment ourselves then scumbag suits will never be able to pull ***** like this again.
And why the hell are we still using Enron's illegal trading practices? Oh yeah, because they made Bush and his lowlife friends tons of money. These guys couldn't be honest if their life depended on it. - TheUngod, on 01/12/2009, -2/+15I'm willing to bet the service industry is not included in that. I'm not sure about other countries, but in the US 80% of our jobs are service oriented. Those contain plenty of value.
- MasterPain, on 01/12/2009, -2/+15Ya I am glad all the people on digg who claimed it was supply & demand can see they were horribly wrong. I don't care if you took an economics class in college.
- wolfing, on 01/12/2009, -2/+15Exactly, the government's solution was stupid "let's give them more spaces to drill" without even thinking about the real cause of the problem. The oil price was totally unreasonable, there was plenty of offer and no real demand (just like the housing bubble), the oil execs knew it but obviously wouldn't say it.
- Spirckle, on 01/12/2009, -0/+13You cannot look at the price of oil as just the supply and demand for the market for oil. There is also the supply and demand of money to account for.
Take your money out of mortgage backed securities (like every smart investor was doing in 2007, then decide where to put it... you put it where it will make money... what's making money then? Well, oil prices are going up due to high demand by India and China and rumors of peak oil, so that's where you put your oversupply of money.
Then oops, credit markets tanked and supply dropped because people had less money to do stuff with oil, so guess where oil demand went followed by oil prices. Down. - Grumps, on 01/12/2009, -9/+21We were paying $100 more per barrel because of Wall Street yet again. These ***** should eat my *****!
- gbudavid, on 01/12/2009, -23/+34O'reilly was Right
- inactive, on 01/12/2009, -5/+16Nobody wants to explain why it went up to $150 in the first place. Rich people got rich and the rest of us got screwed. Now we're happy that it's back to $40?
- mrswirl, on 01/12/2009, -1/+12Let's not forget that the Democratic controlled Congress resisted the "Drill baby, drill" mantra for a long while until pressure from the public was finally too much and they caved on letting the ban expire for exploration on the outer continental shelf.
If the public were clued in on the reality that oil prices were high due to artificial market manipulation and not supply/demand then Congress would have more than likely extended the ban without political repercussions.
Where was 60 Minutes with this report 6 months ago??!! - muckemuck, on 01/12/2009, -2/+13Only if people have money to pay for those services..
- 0crabby0, on 01/12/2009, -2/+12I'll trade you some tulip bulbs for oil...
http://en.wikipedia.org/wiki/Tulip_bulb_mania - Arkons24, on 01/12/2009, -5/+14That youtube video is a laugh. The stuff on the fed and inflation has been well established as truth however the nonsense about derivatives is complete fantasy in the typical diggeral/conspiracy theory tradition.
- Hetman, on 01/12/2009, -3/+12Hey give diggers credit. We still have 7 more days for a false flag attack and then for GWB to stop the elections and declare himself king of America
- ChayesFSS, on 01/12/2009, -1/+10it's a good thing the traders can't call up the local drilling station and ask them to have an outage for few hours
- mareln72, on 01/12/2009, -7/+15Follow the money. I have always told my husband follow the money . It doesn't always lead back to oil companies . Just greedy speculators. Pre-Fixed rated futures. If a drop-out could see it why not the powers that be?
- bman1984, on 01/12/2009, -0/+8Judging by that sentence, I would say his tone was appropriate for you.
- ammundsen, on 01/12/2009, -2/+10Yeah, this piece is simplistic as usual. At the same time oil spiked the US was going through the most dramatic financial system transformation since the Great Depression. The US started nationalizing large companies, providing billion dollar guarantees to failed institutions, and the FED was or about to (I forget the timeline) start its voodoo TARP programs.
Since dropping gold the US Dollar is backed by the oil standard. Basically to purchase oil you must have dollars. There are nations that try to sell oil in non USD but they find themselves quickly labeled terrorist threats to the worlds existence.
If the USD is threatened it is not surprising to find oil being used as a safe haven.
A rough guess but I'd say that the price of oil will greatly exceed the recent peak price within two years in both nominal and real terms. As soon as there is any economic recovery oil demand will increase in a world filled with twice as many dollars sitting in bank reserves. - jhbarr, on 01/12/2009, -2/+10How about bringing back some of the regulations they eliminated according to the video.
- geoboy, on 01/12/2009, -0/+8The markets need regulation. The government has put itself in the position of regulating the markets whether we like it or not. So if it's going to regulate, then it needs to regulate well.
I say this as a Ron Paul supporter. I don't believe it's the government's job to regulate and manipulate markets. But because of the government's overbearing presence in the market, the markets aren't able to have their own regulation. They rely on the government to do the job. So until this fundamental element changes, we're stuck with the government doing it. And I'd rather see them do a decent job of it.
Repeal Sarbanes-Oxely, close the Enron-Loophole further (it's still open to speculators of oil), and crack down on those who don't follow the regulation. - Arkons24, on 01/12/2009, -1/+9It's a shame I can only digg once. People like you give me hope for the future. Maybe I don't need to move to Hong Kong or Singapore to live in a free society.
- jayll, on 01/12/2009, -0/+7...also looks like a beaten and tired old man.
- anonymiau, on 01/12/2009, -3/+10Cartels illegal in the US?
LOL. The US is run by a cartel. They own the money supply, they own the state. - Arkons24, on 01/12/2009, -0/+7Yea, you're right sorry. i'm an ass. I get a little too annoyed sometimes in threads like these and then make snap assumptions about people's opinions.
- cheezintern, on 01/13/2009, -0/+7nice comment. I might add it's very common for stock traders to buy put options as insurance. If their stocks drop in value, the loss they suffer is offset by the increase in value of their options.
- Jethris, on 01/12/2009, -0/+7Problem: Futures markets aren't just for speculation.
Take for example UPS. What they want more than anything is to know how much it is going to cost to run their trucks for the year. So, they buy contracts to buy diesel fuel for the coming year at a set price, say the equivalent of $85/barrel, when it's going for $65 now. Sure, they're paying a premium, but they know exactly how much it will cost to drive freight. They can accurately assign prices based on that number.
Now, it's not just companies that buy contracts to buy oil in the future. If I buy contracts for $85/barrel, and the prices shoots to $140/barrel, I can make a killing off selling the rights to buy fuel at $85.
Also, say UPS buys 1 million gallons of diesel fuel to be bought over the next year. They only actually buy 500K barrels. They could sell the right to the other 500K to FedEx.
How do you determine who is buying fuel in the future, as opposed to speculators? - rowlodge, on 01/12/2009, -1/+8we worship the stock market, thats why.
- and303, on 01/12/2009, -2/+9The auto industry destroyed itself by choosing to meet the demands of its investors instead of its customers.
- MasterPain, on 01/12/2009, -1/+8So the demand foil oil dropped over 60 % in 6 months? I don't think so.
- and303, on 01/12/2009, -1/+8New Yorker's thought the price of wheat/bread/food plummeting was a good thing just before great depression.
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