If supply is solid and demand is solid, how can it be that oil prices are skyrocketing?
President Obama offered his thought recently, explaining that “we [speculators] think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we're going to bet that oil is going to go up real high. And that spikes up prices significantly." He even announced a special “commission” to investigate and root out oil speculators.
Is Obama right about speculators being the cause of high gas prices, and that supply and demand are balanced (as he also stated)? Let’s take a closer look:
The above two charts from the International Energy Agency’s latest report show quite clearly that world oil demand is currently outstripping world oil supply. And it will get worse over the near term.
If countries cannot get oil at good prices, their economies begin to suffer. Prices of everything go up. With Fed Chairman Ben Bernanke’s loose money Quantitative Easing policy, printing endless dollars, and the dollar declining rapidly against a basket of global currencies, this hits us right in the pocketbook. The official currency of OPEC is the US Dollar. Since we currently import 70% of our oil (not long ago we only imported 39%) , we must pay for the bulk of it with dollars that have been artificially debased, further increasing the cost.
Speculators have “some” effect on oil prices, but it is mainly to exacerbate price swings in either direction. Without a fundamental supply-demand dynamic, speculators have nothing to do. The fact should not be lost, either, that speculators are NOT buying physical oil - only commodity futures for later delivery.
So as you drive your gas-guzzling SUV to the pump this summer to fill up with $6.00 / gal gasoline, remember to thank President Obama, who has put a virtual hold on domestic drilling, and Mr. Bernanke, whose Keynesian money policies have debased our currency to the point where we cannot even affford to import the oil we no longer produce at home.