CJwirth

you say >>The problem is that production is below demand and always will be...... because production is flat and going down and can't be raised, regardless of the price"

You are not right about that. Firstly whilst production may not be able to be increased, the bottom isn't going to drop out of the market either. Oil that is not economically viable to bring up at $128 a barrel can become highly profitable at $200 a barrel. Also, as with the oil shock of the 70's, as prices go up peoples consumption habit will change. That is a standard factor in every market place.

So we will have more expensive oil. But we will also begin to use less of it. To some extent this will settle the market.

I could not read your report beyond the introduction. As soon as you started predicting mass reduction of our species you lost me. You have to produce evidence to come up with that kind of monumental postulation. You're not even close to being able to do that.

For starters mass transit sytems don't need petrol. They can be run quite effectively on bio diesel or electricity. In fact most modern railways are run using electricity.Most large internal combustion engines are run on diesel type fuels which can be replaced by bio diesel.

I'm afraid that your approach smacks a little too much of the chicken little school of public broadcasting.

Seems like a highly plausible argument to me.

What if it is true?

Perhaps then the enemies of all us are the hedge fund and futures manipulators who can quite literally destroy the livelihoods of millions of people over night via a few strokes on a computer keyboard.

Such activities carried to their hubristic "logical" conclusion could even trigger regional wars---even global wars.

Perhaps these smarties are a greater threat to everyones well-being than the threat of global terrorism.

I would call them terrorists.

At the very least such smarties are "living" proof of what Gandhi called the seven sins.

1. http://www.beezone.com/seven_sins.htm

The essay is published by a highly professional research organisation that researchs the effects of globalisation.

And researchs and assesses the research done by others.
Stuff you wont find discussed or even mentioned in the usual "aint globalisation grand" propaganda outfits.

Perhaps some discussion of how oil futures trading actually works would be helpful.

When a trader buys a futures contract, they're actually making an advance purchase on real, physical barrels of oil. If they went "short" then they're betting that when the contract expires the price of oil will be less. If "long" they think it will go up. When the contract expires they either collect money (if they're right) or pay it if they're wrong. They also need to either on-sell the contract to someone who wants the oil, or take delivery of the oil themselves.

Alternately they can sell the contract before it expires, and usually this will either be profit-taking or cutting losses.

Ok so lets say the evil speculators are all going "long", betting that the price will go up. What happens if the real price of oil, the "spot" price, is way less than their predictions when the contracts expire? The speculators make a loss, and if they keep doing it month after month they lose their shirt.

The futures market tries to predict what the real market is going to do, no more. It can push the price up short term, but not over a year or more of sustained dramatic increases like we've seen. It does not determine the real price, which is the result of fundamentals - supply & demand and production costs. To just blame speculators is a nice juicy conspiracy theory. Hey I'm sure someone out there's robbing us, and they're as good a target as any!

Look at the fundamentals. Study the volumes of oil produced and critically) exported globally, and their trends. Then you may begin to understand what's really driving the prices and where they're likely to go long term.

The conclusion the writer puts forward is troulbling - put your trust into the criminal politicians! The writer naively forgets 'big oil' has put its creatures into government to serve their ends such as Bush, Cheney, Rice etc., The very same creatures who came out of or have very direct ties to the Texas oil/petrol industry. Anyone who would put forard that 'big oil' are somehow passive and do not daily intervene to demand their 'right' would be very naive.
Firstly the high prices at the petrol bowser is a direct reflection of the criminal and illegal invasion into Iraq. Which the public have to pay for through taxes. The US government faciliate the handing over the crude oil stolen from Iraq to the petrol/oil cartels (most based in Texas) then sold back to the public at very high prices at the garage bowser. So far some millions of barrels of crude have disappeared over the years without any paperwork or paper trail. None of it possible without the complicit mass media. I thought this quote from an article on Former White House press secretary Scott McClellan’s new book indicting the Bush administration for employing a “political propaganda campaign” and deception to drag the US into an “unnecessary war” in Iraq insightful.

"More fundamental than political cowardice in this process are social interests. The mass media is owned almost entirely by massive capitalist conglomerates. Viacom Inc.’s CBS, Walt Disney Co.’s ABC, AOL Time Warner’s CNN, General Electric Co.’s NBC and Fox, owned by Rupert Murdoch’s News Corp., did not merely bow to pressure from the White House and the right, they actively promoted the war, which was seen as furthering the profit interests of corporate owners and major shareholders whose holdings also extend to other sectors of the economy, including oil, arms and finance capital."
http://www.wsws.org/articles/2008/may2008/bush-m30.shtml

@ Commuter — excellent summary of futures trading, thanks.

The myths implied in this very dangerous piece:

Myth 1. "China's growth in consumption is not an issue — nor is any growth, because the market will find a way to supply."

Instead of talking about what might happen THIS year with China's growth in consumption, I thought the discussion was meant to be focussing on how the price got this high in the first place. We need to go back and look at consumption growth over the past 4 years where demand has increased but — as others have repeatedly pointed out — supply has stayed flat.

So go back and look at China — and indeed, the world's demand before $60 a barrel, and then map out supply and demand since then.

Indeed, Guy Caruso of the USA DOE is a "late peak optimist" but even he stated on ABC's 4 Corners that there was already a very fine line between supply and demand — and that was 2 years ago.
http://www.abc.net.au/4corners/special_eds/20060710/

Myth 2. "Saudi Arabia can supply all our needs".
Rubbish, the same 4 Corners interviewed the former head of Saudi Aramco's exploration division Sadad al-Husseini. He clearly stated that demand is just too high for even Saudi Arabia to sustain. In an explosive interview with the NYT, he also stated that 15 mbd was probably going to be Saudi Arabia's peak. When asked about 20 mbd (because Guy Caruso seems optimistic that this is where all the oil is going to come from) he simply said "No!"
http://tinyurl.com/5xrppz

Given most experts accept that after 2010 the world will need an extra 1 mbd each year to satisfy growing demand, do the math. We don't have long, and it's time to get past propaganda pieces like this one and start the real debate: how the heck are we going to live without oil?

trade 215 made some good points, yes indeed buy some oil companies for the share portfolio/super and stop whining! For anyone who drives a car, takes plane trips, whatever.. you can hedge your exposure. And since so many of you seem to have such firm views on where it is headed, why not open up a futures or CFD account yourself and take advantage of this rare market insight that you have?!?

As for the conspiracy theorists on commodities, there has been a mob agitating for years about how central bank and investment bank sales have depressed the gold price, they even went as far as filing an anitrust lawsuit:
http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=21673

Yawn.

Markets go where they are going to go, speculators get burnt as much as everyone else.. when they get it wrong.