As Wall Street collapsed, it became apparent to all involved that the investment houses trading in commodities had been manipulating prices. The huge drop in prices on oil and other commodities had very little to do with demand, and everything to do with speculation. These criminal trading houses like Merrill Lynch, Lehman Brothers and Bear Stearns had been lying to us for years about oil supply and demand among other distortions to drive up the value of their trading positions.
At nearly $150 a barrel, oil peaked and collapsed. Immediately prior to the collapse, experts at all these fraudulent houses predicted $200 oil or higher. The bottom fell out because these houses funding the rise with speculation went bust. They had to liquidate positions, driving the price of the commodities they were manipulating back down.
As we entered 2009, there were some glimmers of hope, especially in the Spring, that we may, ever so slightly, emerge from this crushing recession. During that time, oil has risen, which is somewhat understandable. But gasoline has risen percentage-wise much more. And these commodities have no increased demand. In fact, demand is flat. Exxon’s CEO in May said that demand was stagnant and that the only reason for any rise in oil prices was because of an anticipation of a recovery.
Many had made the faulty claim that demand from China was driving the price when oil spiked to astronomical levels. Well, if China is driving the current price move, it isn’t showing in any increased demand.
Evidence of how flat demand really is for oil, natural gas is near an all time low around $4.00/MMbtu. Natural Gas is selling at a small fraction of the cost of oil per unit of energy it generates. There is no explanation for the disparity other than oil is the darling of speculation houses and hedge funds and NG has much less sex appeal because of its vast domestic availability in the US, making it much easier to track real, not speculation fabricated, supply and demand.
Some lame attempts have been made to try and correlate the price of oil to a weak dollar, but that doesn’t fly. The dollar’s weakness is no where near justification for a hike in gasoline prices of 40% from 1.60 to 2.60 with absolutely no real increase in demand.
The same criminals like Bernard Madoff that made off with billions in investor;s money are being allowed to once again manipulate the markets and artificially drive prices of gasoline and oil higher just as we may be seeing some recovery from a dire economic malaise. Their greed is the key and the manipulation is a lie, just like everything these investment houses have been telling us for years.
Fact is, there is absolutely no increase in oil demand. There is absolutely no justification for the rise in oil or gas prices other than speculation. The same speculation that destroyed our real estate markets and created vast pockets of risk that resulted in a dire collapse of the world economy.
Speculators, many from investment houses that were bailed out by our government, are creating another oil and gas price bubble even though it is evident there is no increased demand, and there is no sign that the oil supply is dwindling. It is being created on the premise that any recovery will send prices soaring, but the fact is, we have already priced in a massive recovery and the speculators are most likely shifting positions out of oil, while they use the media to tell you oil is going higher. This is a lie and criminally driven in the same way it was when oil was kissing $150 a barrel and every lightning storm in Florida was a reason to spike the price.
This is not being driven by economics, but speconomics, which always leads to eventual collapse. We are predicting a much earlier collapse this time in the price of oil and gas, possibly within the next month, primarily because these trading houses have nowhere near the power to manipulate the markets that they had at the peak of the economy. Many of them are badly hindered financially and are shadows of the fraudulent manipulation hedge funds of yore. Supply and demand will catch up with them much faster in this environment.
Interestingly, just as gold neared $1000, many were saying the weak dollar and other factors would drive it to double that. It has been flat ever since. When every expert is telling you it is time to buy, it never is. But this time, it is even more evident, the speculators have no clothes.