Why are oil prices rising so fast? (3)

It’s all about demand, right?

“A major factor behind the steady price rise, virtually everyone agrees, is that energy consumption is surging in high-growth countries, and oil supplies are not growing fast enough to keep up. But what confounds many experts is that the price of oil seems to be changing much faster than the world is changing. For example, it took five years, from 2002 to 2007, for oil to go up by $60 a barrel. In just the last year, it galloped another $60 higher. For the first time since oil drilling began in the 1850s, the price has climbed for seven consecutive years.”

In my first blog posting on this subject, I argued that fear and speculation must be playing a major role in driving up prices so much faster than the market fundamentals would require or suggest. Others agree that speculation is at work:

“there is broad disagreement about the role of speculators in oil markets — particularly a new breed of financial investors, including pension funds and hedge funds, who view oil and other commodities as just another way to make money, like stocks, bonds and real estate.The evidence of their impact is mixed, but consumers and lawmakers nevertheless are furious, saying these new financial traders are driving up prices. “

“Some experts who see today’s oil market as a bubble point to the record-setting stake that institutional investors have taken in the commodity markets in the last several years, variously estimated at $140 billion to $250 billion. A growing portion of that stake reflects rising commodity prices, not new money flowing in.”

Extracts from an article in the “New York Times”.
This is a bubble which will burst – but let’s hope that it’s soon.

One Comment


    Sorry, i’m french
    my english is not perfect.
    I’m old friend of james Peixato. We shared a house in grimsby in 1999
    Could you give me his mail
    Thanks a lot