Fwd: Something about Oil..! (Feedbacks or Comments are welcomed)
varpal singh
From: varpal singh <varpa...@gmail.com>
Date: Sat, 15 Aug 2009 12:09:19 +0530
Subject: Something about Oil..!
To: pankhuri sinha <pankhu...@yahoo.co.in>, ashwath narayan
<ashwat...@gmail.com>, khushbo...@gmail.com, archana
<arch...@yahoo.co.in>, Garima <riga...@yahoo.co.in>, Sonam
<sona...@gmail.com>, Moloy <moloy...@gmail.com>, Sivangi mathur
<shivang...@gmail.com>
Cc: midas_touch2010 <midas_t...@yahoogroups.co.in>,
midastouch_2009 <midasto...@yahoogroups.com>
Hello Friends...
I found this is a good one...about Crude Oil..
the link is:
"http://blogs.economictimes.indiatimes.com/folk-theorem/entry/folk-theorem-the-great-oil"
Or read below..!
The Great Oil Price Robbery
Abheek Barman
Tuesday August 04, 2009
Anyone who trades aloo or bhindi in a mandi knows that prices rise
when demand exceeds supply. And when there's a glut of aloo in the
market, prices fall. Not so it seems, in the market for crude oil, the
stuff that powers everything from cars to industrial furnaces.
In the six months between December last year to June, the price of a
barrel of oil has jumped from $39 to $70, that's about 80%. With
scorching growth in prices, you'd assume that demand for fuels is
leaving supply far behind.
You'd be wrong. Over the same six month period, worldwide demand for
oil fell 3%. Supply contracted by less than 2%, so today there's
actually a glut in the oil market. By June 30, suppliers had 84.3
million barrels of oil to sell every day; buyers wanted only 82.7.
Oil prices should have crashed, but they've doggedly headed north.
Who's ramping crude prices? Short answer: financial speculators.
Over the last six years or so, commodity markets have become a
financial casino. In 2003, the amount of speculative cash in the
commodities market was less than $15 billion. Last year at the height
of the commodities boom, more than $315 billion was chasing paper
'based on' commodities.
Analysts like Goldman Sachs' Arjun Murti have built careers on
projecting ever-rising prices of oil. In 2004, when oil sold for
around $40 per barrel, Murti predicted a 'super-spike' that would take
oil over $100.
A lot of people on Wall Street were scandalized by the sheer audacity
of the prediction. But month after month, crude prices leapt every
price hurdle: $70, $80, $90 per barrel. Finally, in January 2008, oil
did hit $100. And kept going up.
By now, many former Murti-sceptics jumped on the bandwagon. After all,
the venerable New York Times ad dubbed Murti the “Oracle of Oil”. The
housing bubble was starting to unravel, equities looked like they were
peaking out, emerging markets were overvalued – so traders, fund
managers and analysts now lusted put everything they had to pump up
oil.
But first, they needed a story. A tale to justify why something as
‘crude’ as oil should trade at over 10 times its cost of production.
(We’ll deal with the production cost debate in another blog.)
So they looked around for stories – myths really – and found several.
One 'factor' was the so-called insatiable thirst of China and India
for fuels. Like all theories scribbled on the backs of napkins, there
was no evidence to support this: in 2008, China used up only 9% of the
world's total oil demand, India's share was a measly 3.5%.
Not working? No problem. Bring on tensions in the Middle East. As if
the Middle East was the model of political calm till 2003, when oil
prices averaged $25 per barrel.
Another explanation for an oil price surge? Why, North Korea’s let off
a firecracker. Not convincing enough? Here’s an obscure US government
paper hinting that oil stocks have dipped.
If nothing worked, there was the old chestnut, Hubbert's Peak, named
after American geophysicist M King Hubbert. In the mid-1950s, Hubbert
predicted, correctly, that the reserves of oil in the US would peak
around 1970.
Then he got excited and said global oil supplies too, would peak and
then start falling sometime. Theoretically, he was correct: there’s
only that much oil under the ground and it’ll run out some day.
But how much is there under the ground, really? Nobody knows, and the
number’s kept going up since Hubbert made his prediction. We're
constantly stumbling on new discoveries: India's own discoveries in
Rajasthan, the Gulf of Cambay and the Bay of Bengal are good examples.
Don’t forget, gigantic sources of oil will open up when politics in
Iran, Kurdistan and Iraq settle down and their supplies return to the
market. So much for "peak oil."
Anyway, with the bubble in full swing, and a lot of people raking in
cash, nobody pointed a finger at Wall Street.
Oil prices went up and up because pieces of paper that were supposed
to represent real barrels of oil were punted repeatedly as if they
were stocks. By the time oil hit its $147 peak, each piece of paper
had been bought and sold nearly 30 times till an actual barrel of oil
changed hands.
And then the bubble popped, last summer, when oil crashed from $147 to
$30 a barrel. A lot of innocent folks – pensioners, university trusts,
insurance buyers – lost their shirts. President Bush, the cheerleader
of unregulated markets got booted from office a little later. The US
went bust spectacularly, dragging Europe down with it. And their
recession became our migraine.
Apart from the sharks on Wall Street and their cronies in Washington,
there was a bunch of people who were happy with the oil mania. That
was the rulers of oil producers in the Middle East, Russia, Latin
America and Africa, where windfall gains helped them consolidate and
retain power.
That game should have got over by the end of last year, with oil
crashing to $30 a barrel. But it hasn't. After taking huge knocks, the
punters are back.
The open interest – the total number of buys and sells on oil trading
paper – on a single contract to deliver benchmark West Texas
Intermediate (WTI) crude this September has jumped to 310,000 now,
close to its July peak of 340,000. That’s a six-fold jump on the
average punters’ interest for this contract, just about 50,000.
The speculators are back and they can destroy India’s growth story.
What do we have in hand? What are we up against?
Varpal Singh
(099580-12784)
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Varpal Singh
(099580-12784)
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