free html hit counter Peak Oil Debunked: 34. OIL IS THE "NEW NASDAQ"

Saturday, August 20, 2005

34. OIL IS THE "NEW NASDAQ"

QUESTION: If oil production isn't peaking, then why are prices so high?
ANSWER: Speculators. The same people who pumped the NASDAQ to absurd levels during the dotcom bubble have migrated to the oil market.

Goldman Sachs is talking up the market, predicting an oil super spike of $105 a barrel -- much like the "New Era" bulls were pumping DOW 20,000 in the late 1990s:
Oil markets have entered a "super-spike'' period that could see 1970's-style price surges as high as $105 a barrel, investment bank Goldman Sachs said in a research report.Source


Meanwhile, they are hoarding oil:
Goldman Sachs recently bought 10m barrels of oil. A senior oil company executive said: "Even within this firm, the mechanics of the market are not widely understood. When oil prices go up, everyone talks about fundamentals and geopolitics, but the role of speculators and banks is now very significant."Source


Oil is the "new NASDAQ":
A large warehouse in Amsterdam may seem an unusual place to attract the City's top traders and hedge funds. But, in the past few months, Morgan Stanley has been accumulating warehouse space in the Netherlands to store its hottest new property — oil.

This and the tankers that have been hired by the investment bank illustrate just how important oil is now becoming in the City of London and Wall Street. Morgan Stanley may be among the most advanced of the new breed of oil speculators, but, over the past year, many banks and hedge funds have joined the “black gold rush”. With the stock market proving lacklustre, the oil market has been a godsend for the banks,which describe it as the "new Nasdaq" (same source as above)


For more on this phenomenon, see #12.

5 Comments:

At Sunday, August 21, 2005 at 2:51:00 PM PDT, Blogger James said...

I know the speculators are scaring up the price of oil, but having huge oil storage tanks where they'll just sit there? That's just Macavellian!!

:-0

 
At Monday, August 22, 2005 at 6:51:00 PM PDT, Anonymous Anonymous said...

Suppose this is going on for 2 year now,
and that it takes an extra 1% over market
demand to drive up the price, the
speculators must be sitting on at least
600 miljon barrels of oil now.

This is about the size of the US
strategic oil reserve. How likely is
this?
rrb

 
At Tuesday, August 23, 2005 at 6:26:00 AM PDT, Blogger James said...

Yeah, in likelihood, it probably wouldn't have a huge overall effect (the storage tanks in Amsterdam). But the clout of a Morgan Stanley and Goldman Sachs bidding up the price of oil to enrich themselves (in the absence of a supply shock) leads other investors to do the same thing, driving up the cost of living for ordinary people.

On the other hand, the artificial price hike will probably lead to a decrease in consumption and spur alternative energy initatives, so one day we might be thanking them!

 
At Monday, June 18, 2007 at 11:39:00 AM PDT, Blogger Caseygrl said...

Interesting point, James. I agree that maybe if investors like Goldman Sachs does continue buying oil, it will do as you say, lead to a decrease in consumption and lead to the increase of alternative fuels. To help, I saw an article that said the demand last winter (06-07) grew at 2.5% where it decreased to 1.5% this spring and summer. Something is happening to explain the decrease in demand.

 
At Friday, April 4, 2008 at 2:51:00 PM PDT, Anonymous Anonymous said...

Guess what, oil *is* $105 today.

 

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