International Writers Magazine: Oil
Simple Way To Pop The Oil Bubble Speculation
essential commodities are no longer traded in a free market that
relies on supply and demand new legislation is needed to correct
the insanity. When the stock market creates a bubble the only people
who hurt are the speculators and investors who have a choice to
invest or not to invest. In the essential food and energy commodities
markets it is the world populations that suffer when things get
out of sync.
The answer to the
current oil and food market commodity wild speculations is a simple
one and yet overlooked at this moment in time. Before we explore the
answer that can solve the problem, let's investigate the causes of the
Most speculators will tell you they only trade oil futures for one reason
and that is to make money. It is their money and they will trade the
easiest way to make a fast buck with the minimal risk. It seems they
have a one way bet at the moment. The commodity markets were devised
to trade and hedge oil companies production and find a market for the
oil they extracted from the ground. It was a place where buyer and sellers
met and a fair price was struck by the laws of supply and demand.
Today supply and demand has little influence on the price of a barrel
of oil and speculation rules the day. Therefore, the oil futures market
is no longer a free market. Rather, it is a speculators market that
can control prices by intellectual rhetoric consisting of opinionated
experts and propaganda from the president of Iran. The price of oil
has risen from $12.00 a barrel in 1999 to $135.00 this week. The two
main factors that aid and abet the speculators are;
Firstly, the Iranian government is hell bent on constructing a nuclear
reactor and repeatedly states it craves to destroy the state of Israel.
This propaganda accounts for 50% of the price rise in oil and puts a
floor under any falls. Whenever prices weaken a little the president
of Iran communicates his repulsive propaganda to a media hungry for
Secondly, expert opinion states China and India are booming and although
there is no shortage at the moment, in five years time there will be.
Even though most Indians and Chinaness ride bikes or walk. There
has been an increase in oil demand in these counties, but nothing to
spike prices to ridiculously high levels. What the so called oil experts
do not take into account is economies do not boom forever and recession
or inflation will come along and dampen the growth substantially. Also,
many new discoveries of oil will emerge in the next five years that
will add to the already enormous amounts of oil still in the ground.
By the experts logic and reasoning we could declare that apples may
be in short supply in five years due to prophesies of a famine in the
orchards, so put the price of one apple up to $50.00 an apple now. Therefore,
there is no true reason why oil is trading at $135.00 other than the
fact speculation is controlling a market that is no longer free to trade
solely on supply and demand.
What is the simple answer to end the craziness?
The USA government should pass a law that states every oil contact bought
on the mercantile exchanges must be delivered to the buyer and held
in storage no longer that 6 months. It cannot be traded back onto the
exchanges and its end use must be in an oil related business. Likewise,
all sell contacts have to originate straight from companies that extract
oil from the ground and they cannot trade contacts that have been purchased
on the exchanges.
This act will restore the exchanges back to the standing they were intended
to be and a fair market price will be established for all essential
commodities. The other commodities such as gold and silver can still
be the plaything of the speculators in the same way as the stock market.
The fear of enacting the law will be enough to drive the speculators
away from the oil market in double quick time.. Once again the open
road will become the delight of the people that is an intrinsical part
of the American way of life. The family can enjoy a car ride out in
the countryside or beach without watching in dread as the fuel gauge
International talk show host Michael Levy, is the author of eight
books, a mystical poet, inspirational philosopher and wellness/healthy
living speaker. His latest books are "The Joys of Live Alchemy"
and "Worry Causes Wrinkles" which can help a person change
dark negative situations into beautiful, colorful, positive actions,
that bring de-lights on the darkest of days.
© Michael Levy. May 22nd 2008
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