05-06-2011, 06:50 AM
mattkime wrote:
i'd still like one person to explain how speculation drives up prices.
I heard a guy on a radio show talk about it, can't remember exactly which one: dang it.
The gist I remember is that there is too much credit/money out there. Typical citizens are buying less and paying down credit, so they don't need any of the excess credit/money supply. The banks aren't lending it to small business, banks and investors are looking to make money on commodities. The extra money above and beyond the usual commodities investors drives the price up, whatever the commodity might be. (I can't even explain what hedges do to prices since they can "bet" against markets too)
He said his sources tell him that there is excess oil on the market right now. In spite of increased demand from India and China, US demand is down significantly. He said the Saudis were willing to up their output by 800,000 barrels per day, no one was buying.
His conclusion was that when prices move counter to supply, speculation is the likely culprit. A lot of folks got sold on scarcity due to middle east conflict while there has been no shortage...
He felt that the Fed was keeping a high money supply to let the banks make some profits somewhere, there is a large amount of the housing market still waiting to be foreclosed upon and the banks have never really taken their lumps in the market collapse. Something like 13% of the houses in the US sit empty... I may have misheard but was stunned by the double digit percentage.
Wish I could remember the show, his explanation was quite eloquent.
In California, we usually have a spring refinery fire which tends to lower gasoline supply.
=wr=