It looks obvious

When I read this news report back in April I knew I have to keep it:

Campaigning for his wife in North Carolina, former President Bill Clinton said Wednesday that he’d be “very surprised if oil goes below a hundred dollars a barrel again in my lifetime.”

One this for sure - Mr. Clinton should be very happy that his lifespan is not depended on the public’s memory. It is also telling us something about the quality of market predictions and economy assessment done on the campaign trail, but today we will only enjoy the gotcha feeling

I must provide another short note about Oil prices, with at least the same quality of Clinton’s prediction. Oil price reached its peak the day before I left my job - since than it drop about $50 (about 34%) in a pretty short period. The demand didn’t really changed, the supply is basically the same and dollar is still very weak. The only significant change is the fact that I’m unemployed. Therefore, and since it is important for strong global economy I need to be paid to remain unemployed at all cost!  

I used to hate it when the Sergeant use to say “That that doesn’t kill you make you tougher”. It wasn’t comforting and didn’t make much sense - because if it does kill you what good is it for you?. I didn’t like it then, and I’m surely don’t like it now.

One approach to look at the soaring price of Oil is to blame it on speculators. Following the footsteps of Lenin both McCain and Obama using very harsh language toward the “speculators”. The reality, as usual, is slightly different:

To a large extent, this theory, if it is anything more than just populist capitalism-bashing, is a result of extreme ignorance. There are an incredible number of people involved in the oil markets every day in numerous countries with numerous different incentives, such a large number that it is impossible to imagine a conspiracy. There have been a couple of cases of proven petroleum commodity price manipulation in these trading markets - most of these have involved manipulation of prices at the end of the day on certain futures expiration and/or Platt’s pricing windows. The time frame for these manipulations have been on the order of 1-2 minutes.

But here is the best argument against this manipulation for higher prices, and it is amazing to me that no one ever thinks of it. Sure, there are a bunch of really savvy people in the commodity trading business who are long on oil and want the price to be higher. But for every seller, there is a buyer on the other side, someone who is at least as savvy and is desireous of lower prices. Yes, I know it is a complicated concept, but for every trader selling there is one buying. If there is an extended conspiracy to push up oil prices by speculators, do you really think the buyers are just going to sit on their hands and take it? And do you really think the exchanges are going to be happy with this behavior, threatening the integrity of their trading system (really their only asset)? Just ask the Hunt family, which attempted to corner the market and drive prices up in silver, only to have major buyers and the exchanges stop them cold, driving the Hunts in the process into bankrupcy.

Obviously this populistic rhetoric is being used largely because of the election, however it is being fed on existing notions and is feeding unfavor public opinion. It is convenient to blame the bankers (it used to be even more convinient when the “bankers” was code name for jews) - it distract the attention from the real issues, it provides common enemy and a great excuse to add more power for those who will “protect” us. Will it solve the problem? of course not, but who cares we can always blame the evil corporations.

I do not question the need of a country to prepare military options for different scenarios. However, I question the wisdom behind publishing the latest Israeli air-force maneuver. Knowing the effect on the global oil market of every statement suggesting attack on Iran, mostly after the Israeli transportation minister cause a price increase because of his political aspirations, such preparations should be considered very carefully. The price for this method of communication is very high, and I don’t think that Israel will enjoy the support of the Americans who start loosing their jobs if it continue with it much longer.