The Price of Crude

The price of crude, and Bambi love by the media, these are the two things that just now interest me, and the price of crude interests me most.

Dropping again today, about four dollars when I last looked. The explanation given is that Dolly has been down graded --and some other trivial thing as well.

I do believe that lifetime professional analysts of the oil markets are genetically stupid. They have to be. I've been interested in this matter about a month now, and have read no more than two dozen articles, yet even I know that Dolly don't matter; the price of crude is not dropping because of any economic event anywhere, it's dropping because the American people want more exploration --and a change in public attitude is long term!-- and if they want more oil it's possible it might happen. This frightens the sacred cow --otherwise known as "speculator"-- and despite the religious stupidity of my conservative brethren who have no redemptive belief beyond the mindless mantra --Supply & Demand-- in fact the great changes that may occur (on the basis of the tiniest suggestion that there may eventually be a change in supply), is because current sacrosanct "speculators" are not speculators in the historical sense, men willing to take risk, but are in fact manipulators, men who have used vast sums to inflate prices, at no risk! simply because great sums can control markets; and they never expected any increase in supply.

These are pension fund investors, who's investment was 13 billion in 2003 and is 260 billion now. That's enough to set whatever price they want.

They do have a problem though. It's not their money. It's not their business to take risks. They're charged with maintaining the security of the funds they've been given. Those funds are secure as long as they can control prices. Lose that control, and they're no longer fund managers but true risk takers. If things collapse, they've been criminal. They have reason to be worried. Worried men make mistakes.

Since the price right now is so far outside of the rational --it should be somewhere around the price for the production of the last barrel of oil, around sixty bucks-- if the price ever does tend back toward the rational, they'll be wiped out. Couldn't happen to a nicer group of guys.

I think right now they're merely nervous, some are trying to back up a little. But anytime you start to back up there's always the chance you'll turn and run. Panic happens, and an orderly retreat is far harder than an orderly advance. Collapse could happen. As I've said, that will be good. Hopefully then all money managers will be shot.

Of course, this is speculation of my own and only as a recent interest and based on very little information. But a couple of things are clear:

--No man is more piously stupid about oil markets than a conservative in obeisance to the great god Free Market. They can not countenance the outrage of questioning the perfection of the great Saint, Speculator.

--There is no longer any such thing as a free market in oil, because so much oil is produced by Muslim and leftist countries who, since 9/11, don't much like us. This being now true, they can now collude, either attitudinally or in fact, and effectively always keep supply below demand, no matter how much we produce. They're quite willing to do it because at $140 per barrel they do have an income stream.

--They only way that collusion can be broken is if the price spike can be broken. If it is broken, if the price moves again towards production cost, oil drops in value by half; the income stream is broken and collusion is broken; and more oil is then released, not less, and the price drops further. But the only way that spike can be broken (short term) is if the institutional investors panic, and tip the present house in a matter of days.

So, will it happen? Might. Sure would be fun if it did.

Conclusion: The free market in reference to oil is a dead concept. There can be no free market as long as Islam is united against the West. Some new thinking will have to occur, some new market structure developed. Oil is no longer a commodity, it is a weapon. (The new Star Wars we need is new energy policy --nuclear and oil shale).

Note: Supposedly some new regulations concerning oil shale production are to be proposed today? That's a nice little additional impetus towards uneasiness in the markets.

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Futures closed down $3.09, I don't know what market.

Should give credit where credit is due. There's a good chance the Democrat move to curb "speculation in oil markets", just by the virtue of its being undertaken, is having a positive downward effect:

"The demand for 'paper barrels' ... has begun to swamp the price signals that are generated by the more traditional hedgers and the large producers and the consumers of petroleum products in tune to the real time dynamics of supply and demand," said Energy Committee Chairman Jeff Bingaman, D-N.M.
Republicans said the bill would have little if any effect and said Congress should instead lift a ban on offshore drilling along the Atlantic and Pacific coasts and the eastern Gulf of Mexico.

It's painful to me that my party is the dumb party in this matter, but at least they do want more drilling. But as I've said, drilling won't do it, because unless the price spike is broken OPEC can always keep supply below demand, no matter how much we drill. Failing breaking the price, the only thing we can really do is go nuclear --nuclear and shale.