Disconnect

Thursday, September 20, 2007
Has anyone else noticed that pump prices aren't tracking the futures prices? Usually, pump prices move up in matched lockstep (down, for some reason, has a little lag). I found this explanation:
But the real drive behind the rally, many analysts said, is an influx of speculative "nontraditional" capital into energy commodities. And that inflow increases when the dollar falls.
rather unpersuasive. Commodity futures have transaction costs and uncertainty levels that make them unlikely havens for those who frighten easily. Unless I match it to this rant, which includes this illustrative paragraph:
In the Boston Tea Party, patriots dumped tea into the ocean rather than pay the taxes imposed by a distant king. On the NYMEX, they dumped 117M barrels that were scheduled to be delivered to the American people - BARRELS YOU ALREADY PAID FOR AT THE PUMP - in order to create a bogus shortage so you can pay record high oil prices to a distant sheik.

This isn’t just criminal behavior - it’s TREASONOUS!


Perhaps it's a rigged game that "everyone" has just discovered? I could admit to the possibility that someone frightened by a falling dollar might flee to the safety of a game which he presumes to be rigged. In which case there will be some very sad faces when the music stops, as it inevitably will, leaving a rather significant shortage of seats for those whose ears are not attuned to the abrupt cessation.

Another alternative involves wide knowledge that the Israeli raid on Syria was actually just a test of the new Russian provided air defense system. The one that is supposedly identical to that which the mullahs have emplaced as a ward against the US doing site preparation work for major reconstruction projects all over Iran.

I'm sure there are other, more reasonable scenarios, but the thought of major site preparation work in Iran remains a fond hope.

2 comments:

MeaninglessHotAir said...

I saw that rant and discounted it.

I take it as a given that all the big markets are "rigged" in the sense that the flow of information available to, say, a market-maker standing on the floor of the NYSE is significantly superior to that available to me sitting in my living room. We all like to pretend that it's a "level playing field" but that's mainly a ruse to get Jim and Jane investor to bring in their money to the big casinos.

Whether, on the other hand, this particular "rigging" is all that credible, is anybody's guess. My belief is that in the longer run, it is virtually impossible to manipulate markets away from their true market value. Clearly it's getting harder to extract oil while there is no abatement in demand whatsoever. That has to lead to higher prices. The recent growth in price seems to be occurring within a regular up channel, so it's hard to take this rant too seriously.

Rick Ballard said...

MHA,

It's just rolling contracts forward on the "oil crisis" bet. An economic downturn would be the end of the music for that particular item.

So, on one hand, the "housing crisis" is going to drive the country into a recession or the "oil crisis" is going to run oil to $150 per barrel in nuthin' flat.

We're doomed, I tell ya, doomed.

Or not.

We should still bomb the hell out of Iran. Those Air Force guys aren't earnin' their keep.