Sure, the plunging price for crude petroleum is getting lots
of headlines, but one simple fact isn’t getting any play in the media or with
the talking heads on cable TV news.
The worldwide price of oil has dropped about 60% since
mid-summer 2013, but not because of “supply and demand,” that is, not because
of textbook economic “market forces” at work.
Speculators and powerful investors with lots of bucks drove
the price of oil up in the past couple years, and they’re driving it down now.
Last summer crude was priced at about $115 a barrel, and right now it's going for about $46 a barrel….a mind-bending change.
These are crude metrics and they’re also rough metrics, but
there’s another crude truth here.
The supply of oil and gas worldwide hasn’t changed much in
the past six months. If anything, it’s up a bit.
Demand has dropped in some parts of the world, and increased
in other parts—the real net economic demand hasn’t changed enough, not by a
long shot, to force the price down 60%.
The commentators and the talking heads should be sounding
off about the obvious: the folks who buy and sell oil and oil futures—not the
folks who pump it and refine it and burn it—are controlling the price.
Just like they were last year, and the year before….
Let’s just ignore any blather about “the free market
determines the price,” and understand that classical supply-and-demand isn’t
the only factor that’s driving our commerce and our finance and the cost of
living.
People who are trying to make lots of money by twiddling
with the price of oil futures are mostly in control of the price you’re going
to pay at the pump next time you fill ‘er up.
They’re not doing it because they want to help you out.
And of course, remember that the twiddling works both ways.
Copyright © Richard Carl Subber 2015
No comments:
Post a Comment