“Speculators” at work
NASDAQ news from a month ago, in which “market speculators” were blamed for rising oil prices:
The Organization of Petroleum Exporting Countries believes current record oil prices are too high, but has no plans to boost oil production beyond what it has already agreed to increase starting in November, OPEC Secretary General Abdalla Salem el-Badri said Tuesday. El-Bari, who took over earlier this year in his post, said crude prices - which touched a nominal record of $87.97 a barrel hit earlier Tuesday - were being driven by market speculators and didn’t reflect supply and demand fundamentals.
“While the organization does not favor oil prices at this level, it strongly believes that fundamentals are not supporting current high prices and that the market is very well supplied,” El-Badri said in a statement. The 12-nation producer group, whose output meets about 40% of the 86 million barrels consumed globally each day, will continue to monitor world oil markets and respond to any supply disruption, he said.
More of the same blaming of “speculators” today, via WSJ, as the leaders of the OPEC countries prepare to meet for only their third time in OPEC’s history:
basically all of the OPEC countries are in rare agreement that they are not to blame for the recent price spike, which has seen the per-barrel price of the high-end U.S. benchmark crude rocket to nearly $100 from just under $50 in early January. OPEC supplies around 40% of world oil demand, which now stands at around 85 million barrels a day. When they last met in September, OPEC oil ministers agreed to boost output by 500,000 barrels a day starting Nov. 1. And look what happened — oil continued to head skyward.
The issue, OPEC argues, is not too little oil on the market. It’s speculators, the falling dollar, and logistical bottlenecks in the supply chain that are jacking up the price. So the group insists it will address other things while in Riyadh: energy conservation, the environment, preserving a balanced oil supply. The summit’s slogan is nothing if not alliterative: “Providing Petroleum, Promoting Prosperity and Protecting the Planet.”
One question would appear to be this, if the OPEC statements are true: given the significant problems in the mortgage and credit markets, as well as the current account deficits in the US, what steps can the Fed and its allies take to punish the “speculators” in an environment so accommodating to bear raids on stocks and the dollar? Lowering rates feeds the speculators, raising rates could kill the economy. What’s the solution?
November 11th, 2007 at 2:08 pm
Maybe the dollar and mortgage securities are dropping because of incompetence and fraud by politicians and business executives?
Nah. That’s the kind of self-serving rationalization that a speculators makes. (/sarc)
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What’s the solution?
Formulating the right questions would take us a good way toward the answers. Unfortunately the right questions are not easy to formulate. Unfortunately a diverse cast of the usual suspects is disinclined to have the right questions be posed.
November 11th, 2007 at 8:39 pm
I don’t suppose that the creation of tremendous amounts of dollars to “pay for”, without taxation, the war, nearly free housing loans, welfare, and indigent medical care has anything to do with it.
Naaah- no way the increase of the currency supply by 20% increases the amount of currency required to buy something by 20%. That can’t possibly be the explanation. Has to be speculators. Not the first time, either-
“In August 1971, when President Richard Nixon announced that the dollar no longer would be convertible to gold, he blamed speculators for “waging an all?out war on the dollar.” In breaking the back of Bretton Woods he could more honestly have blamed the foreign governments — the French, in particular — that refused to hold increasingly inflated dollars. More honestly still, Nixon could have blamed his own inflationary fiscal and monetary policies. ”
http://www.foreignaffairs.org/19950301fareviewessay5030/michael-lewis/for-love-of-money-why-central-bankers-and-speculators-need-each-other.html