OIl Prices

Well,

Oil has dropped significantly at the same time credit has dried up.

It makes me wonder if speculation did drive the price of oil up to record levels. The inference being that oil was high when futures trading was high. Credit has dried up which makes it harder to engage in massively leveraged futures deals. Oil prices drop.

Entirely circumstantial, and does not look at other variables, but it makes you wonder...

Global Oil Flows

The Financial Times has a nifty flash presentation on global oil here (you can register for free).

One of the neat features is that it shows rough global oil flows. A bit of quick addition shows the following:

• U.S. oil from Middle East--2.276 million barrels per day (bpd)
• U.S. oil from elsewhere--9.748 million bpd
• Rest of the world's oil from Middle East--10.796 million bpd

This begs the question of how "strategic" U.S. interest is in the Middle East actually is, especially in comparison to the "strategic interest" of the rest of the world.

Who's to blame for high oil prices, take two

There is a new candidate for who to blame for high oil (and other commodity) prices--institutional investors.

As reported in the FT, George Soros is expected to tell Congress that:

rising oil prices are the result of a number of fundamental changes and factors in the market, but that the relatively recent ability of investment institutions to invest in the futures market through index funds is exaggerating price rises and creating an oil market bubble.

Gas prices....who's to blame?

Yesterday was filled with stories about how gas and oil prices are reflecting supply and demand, as opposed to being driven up by speculation, and that the "windfall" profits go to the oil producers and not traders on Wall Street.

Bloomberg reported a different angle in this story that:

Oil's rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange.

The House hearings have tried to investigate the effect of speculation on the commodity pricing of oil.

So who is to blame? Consumers who allow oil and gas to exist in an inelastic market? Producers who (supposedly) fail to increase refinery production? The Fed and the Bush Administration for a weak dollar? Wall Street for driving up futures through speculation? In the end, it is, as always, a combination of all these, and the only power left to consumers is to consume less.