Click on the headline (link) for the full text.
Many more articles are available through the Energy Bulletin homepage
Prices Won’t Be Falling Anytime Soon
Omid Memarian, IPS
Although some policy-makers have blamed producing countries for steadily rising oil prices, many experts say more fundamental factors are a growing demand-supply imbalance, a weak dollar, and market speculation.
“Most members of OPEC are already producing at peak capacity, and Saudi Arabia, which has the greatest spare capacity, has been incrementally increasing its production –with the result that its spare capacity has been plunging to relatively low levels,” Dariush Zahedi, a research fellow at the Institute of International Studies in at UC Berkeley, told IPS.
“Other factors, such as the decline in the value of the dollar, rising demand from emerging economies, existing and potential geopolitical turmoil in oil-producing countries, and market speculation, have contributed more to price rises than OPEC,” he added. “I also think that prices are unlikely to decline in the near term because the factors mentioned above are unlikely to be modified appreciably.”
Saudi Arabia recently agreed to produce an extra 200,000 barrels a day in July on top of a promised 300,000 barrels a day in June. However, the news failed to prevent a further surge in oil prices, to a record-shattering 140 dollars a barrel for the first time in New York and London on Thursday.
“We face imbalances in a growing world economy and energy supply is not adequate for growth safe for the climate,” said Jeffrey Sachs, the U.N. secretary-general’s special advisor on the Millennium Development Goals.
(28 June 2008)
Confusions about speculation
Paul Krugman, Conscience of a Liberal (blog), New York Times
… I’m not asking (at least in the latest entry) whether there’s a bubble; I’m asking whether expectations of a higher future price and/or investment in the futures market by institutional investors are pushing up the current price. If the answer is yes, then we can ask whether there’s a bubble – that is, whether the expected future price is unreasonable.
It’s quite possible to have speculation that isn’t a bubble. As I pointed out, there is in effect rational speculation every winter in the gasoline market, as investors rationally expect that gas prices will rise in the summer driving season, and stockpile gas to meet future demand.
But is speculation, rational or not, driving the price of crude?
Basically, it’s hard to reconcile the view that it is with two facts: for most of the recent runup, inventories were static or declining and the futures market was in backwardation, not contango. (Can the futures market pull up the spot price when the futures price is less than the spot price?)
OK, you can offer excuses. Maybe the oil inventories are being held in the ground; but do we have any evidence that oil producing countries are withholding output? (And for those who blame speculators, are Kuwait and Saudi on the other side of those futures contracts?) Maybe there’s a shifting liquidity premium that mucks up the relationship between spot and future. But this really is starting to sound like epicycles – an attempt to rescue the speculation hypothesis, which originally was supposed to be based on compelling evidence, by saying that there’s actually no evidence that could refute it.
(25 June 2008)
The Speculation Explanation: Framing the Energy Crisis
Matthew S. Miller, AlterNet
The speculation explanation blurs the issues involved in our present energy crisis.
—
The $11 spike in the price of crude oil on Friday, June 6, pasted a great big exclamation point on the sentence, “Something is wrong with oil prices” banging around in the worried minds of America’s happy motoring hoi polloi. With the national average for a gallon of liquid mobility hovering around four bucks, fear, now the only motive for action among the populace of fortress America, inevitably initiated some reflection among them. Such instinctive fear-inspired attention developing around the plug-in of the matrix must be deflected, and so it was: Enter the speculation explanation.
The speculation explanation blurs the issues involved in our present energy crisis by suggesting the wrong semantic frame to truthfully explain high oil prices and the likely consequences of depletion. Oil futures speculation is only tangentially relevant to an honest discussion of the price of oil. In fact, it is harmful because it undermines and replaces a reality-based appraisal of the problem. This meme arose simultaneously from a variety of sources by institutional necessity from within the propaganda apparatus to serve the interests of the military-industrial-congressional-cultural complex. Those interests are “business as usual” at all costs. The story will sound familiar.
… If it is true that oil supply is not being artificially but geologically and politically constricted as I have suggested, then the whole discussion of oil speculation as the cause of high prices must have a different purpose. It does! A quick dose of cognitive science reveals it.
… What sort of frame does the term speculation evoke, especially when paired with the term oil?
First, because of oil futures, speculation is specifically an economic phenomenon; it keeps discussion of oil focused on the economic aspects of the problem. Second, in a more colloquial usage, speculation implies generalized uncertainty about something because to speculate is to reason based on inconclusive evidence. Finally, the speculation frame, understood as criminal market manipulation, provides an action structure to which an explanatory narrative can then be attached. We implicitly understand how frames function in the propaganda system if we understand the difference between collateral damage and dead civilians. They deflect and redirect.
(28 June 2008)
