More thoughts on high oil prices
Ed Wallace in Business Week once again continues on his theme of high oil prices having been caused by speculation:
let’s add up all of the excess oil on the market, resulting either from cutbacks in demand, as in the U.S., Asia, or Korea, or from surplus production from oil producers such as Saudi Arabia and in the Gulf of Mexico. Just in the articles I cited, it comes to 1,989,000 barrels of oil a day. That does not include the upcoming Saudi Khursaniyah field that will open in August with another 500,000 barrels per day in production. Some shortage, huh?
And that’s just one week of articles. And, to be fair to the oil market and the spirit of this column, the world did lose some production out of Mexico, more out of Nigeria; Russian production is down slightly; and the Thunder Horse platform in the Gulf of Mexico, three years late thanks to hurricanes, is not fully operational as of this writing. But, then again, the surplus 1,989,000 barrels of oil per day we counted did not include what’s potentially in those 15 oil supertankers leased by Iran and parked in the Persian Gulf. Now is also a good time to note that on June 20, Saudi Arabia announced that its Khurais oil field would be online by this time next year, and that would contribute another 1.2 million barrels of oil per day to the world market…
e-mail came from Chris Cook, a former director of the London Petroleum Exchange—now ICE Futures Europe. Cook wrote: “I am convinced there has been manipulation of the Brent Complex [the term that defines North Sea Brent crude prices] by ICE members for the last 10 years at least. I think it is quite likely that the Brent forward price is being kept artificially high—which does require deep pockets and accounts for the continuing barrage of Goldman [Sachs] forecasts and much of the other oil market hype that passes for news.”
Also in the news today: (a) prices continued to soar to $143 a barrel; and (b) Iraq is letting contracts to increase its oil production from 2.5 to 4.5 million bpd in the next four years. No doubt more announcements of future supply will be greeted by even higher prices.
July 1st, 2008 at 4:11 pm
so ‘somebody’ buys oil at more than its worth and stores it…..increasing demand and up goes the price. but surely when that oil is released…the price will fall unless demand really does catch up…by which time the oil is only worth what was paid for it?
the only outcome achieved is output is ‘falsely’ increased/accelerated…. and thus ultimately oil prices will fall?? or just level off due to eastern demand…… all a gamble but who would want oil prices to ultimately fall, and who would stockpile vaste amounts of oil to cause a short term uplift in oil prices (at quite a high cost no matter how its stored) only advantaging the oil companies and opec and other oil producers short term, when income is currently vaste anyway……or did i miss the point?????