Oil over $130; Gas at $4.

I was reading this yesterday - cuz that’s how weird I am, I read stuff like that – and I realized what an absolute whine it was: OPEC isn’t pumping enough oil out of the ground! What he’s saying is if Saudi Arabia pumped more oil out of the ground, what they call “production”, then the increased supply would bring the price down. If the price of oil was subject to supply and demand “laws” then maybe, but Stephen Hadley, the National Security Advisor, said, “Saudi Arabia does not have customers that are making requests for oil that they are not able to satisfy.” In other words, today’s price of oil is not related to a lack of supply driving the price up.

The related article referenced is particularly interesting. It’s from the Congressional Record by Byron Dorgan, a senator from South Dakota. Although Dorgan tries to say that Saudi Arabia cutting back production and the President continuing to put oil in the Strategic Reserve is pushing up price, he gets to what really is doing it:

“But there is something else happening with the price of oil. An orgy of speculation is occurring in the futures market for oil and gas. This didn't used to happen. The futures market is necessary. It is necessary to hedge. It is necessary to provide liquidity. I understand all that. [Really?] But the futures market has become something unbelievably speculative. We have hedge funds neck deep in the futures market. Do they want oil? They don't want any oil. They just want to bet on oil. They want to gamble on oil. These are people who want to buy something they will never get from people who never had it and make money on both sides of the transaction in a futures market. We have hedge funds making big bets on oil in the futures market. We have investment banks making big bets on oil. Investment banks didn't used to be engaged in the futures market, but they are now.

In addition to that, in addition to the investment banks working in the futures market, we have investment banks that are actually buying oil storage for the purpose of taking oil off the market and putting it in storage until oil is more valuable later.

That is what is happening. We have not previously had that occur. So we have this binge of speculation in the futures market that has nothing at all to do with the supply and demand of oil. Why is this happening? At least in part it is happening because in the stock market. If you want to buy stock on margins, you have to pay 50 percent of the margin. You have to come up with half the money. If you want to buy stock on the margin, come up with half the money. If you want to buy oil on margin in the futures market, all you need to come up with is 5 to 7 percent. If you want to control 100 million dollars' worth of oil contracts, $5,000 to $7,000 will do it for you. [Ed. Note: I think he meant $5,000,000 to $7,000,000, millions not thousands, five to seven percent of a hundred million is in the millions, not thousands.]”

It is a speculative bubble that is pushing up the price of oil. It’s not enough they trashed the computer industry, then the housing market with speculative bubbles. Now they are going after oil and other commodities (such as food) pushing the price up. These people think that speculation accounts for sixty percent of the price of oil.

In other words, rich people are bidding up the prices of commodities looking where they can make a killing. They have so much money it doesn’t affect them much, but it wreaks havoc on about eighty percent of us. That doesn’t matter to them. Their greed has overtaken and consumed them and no good can come from it.
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Peak Oil

If you don't know about Peak Oil, please take some time to check it out.

It's probably the most important event of the twenty-first century.

When? My guess is that it already has.
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