Wednesday, May 21, 2008

OIL PRICES FOR DUMMIES


The rise in oil prices is very simple to explain. Someone is offering a higher price for the product, in such quantity that it has driven the market price up worldwide. Speculators are the main culprit, but the demand from China, India, and other emerging economies have put the speculators in this position of power. The speculators also play on fears of wider war in the Middle East, to maintain the price of oil.



The US can regulate the amount that speculators can "borrow" to bet on future oil prices. Some say this will curtail the speculators, because they'll have to bet more of their own money. It may even burst the "oil bubble," which by now should be more apparent than either the "housing bubble," or "internet bubble" were, in the past.



Gas prices in Europe have been twice the US price for a long time. This "bubble" hasn't even confronted US consumers with the prices that EU residents have paid for years. I see this as a "test" of the US economy, and an observation of our political system. While Saudi Arabia increased their production by 300,000 barrels per day, it was called a "rebuff" of Pres. Bush's entreaties. The real "rebuff" was from the US Congress, who won't increase domestic production, or refining capacity.

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