$80 Oil
Oil up 31% this year
ReutersAnd we're not even talking about the problem of national banks moving their investments from dollars to euros, and Iran trying to accept oil payment in euros instead of dollars. Which is a large part of why the United States is really planning an attack -- to maintain U.S. control of the world's reserve currency instead of allowing the Proposed Iranian Oil Bourse to succeed. More on this in another post another day.
Oil hit an all-time high over $80 a barrel on Thursday after Hurricane Humberto forced the closure of some U.S. Gulf refiners, stoking concerns of fuel supply shortfalls.
U.S. crude traded up 9 cents to $80.00 a barrel by 2:15 p.m. EDT, after hitting a record $80.20 earlier. London Brent crude gave up 23 cents to $77.45 a barrel.
U.S. gasoline futures soared in early activity after Hurricane Humberto shut oil shipping channels and three refineries as it slammed onshore in Texas, before being downgraded to a tropical storm.
"We have a storm working its way to American facilities. We have an economic crisis, so many things are affecting ... prices," said Hasan Qabazard, director of OPEC's research division.
Though quadruple the levels of 2002, the price of oil when adjusted for inflation is below the $90-a-barrel peaks of the Iranian Revolution in 1979 and the start of the Iran-Iraq War the following year.
Strong fundamentals and the recent price surge has lured more investors into oil markets, their enthusiasm growing thanks to a market structure that encourages favorable returns.
"Modest demand growth combined with no significant supply increases has caused oil inventories to decline sharply, creating backwardation in the oil forward curve, which is a very bullish signal," said Jeffrey Currie of Goldman Sachs.
In a backwardated market, oil for delivery in the near term is more expensive than for later shipment. Investors make money by selling the more costly prompt oil futures contract and buying cheaper crude contracts for later delivery.
The market shifted into backwardation in part because some analysts and consumers believe OPEC will not pump enough oil to satisfy demand for fuel this winter. [jwe: emphasis added]
To try to soothe consumers, OPEC agreed a small supply increase on Tuesday. But analysts said OPEC's deal to raise output by 500,000 barrels per day (bpd) from November 1 was not enough to reverse a rally that has lifted prices by 31 percent this year.
In the meantime, the weakness of the dollar continues to cause oil producers to not want to cut either production or prices. Consequently when we see prices rise to new records due to shortfalls in the market, it becomes clear prices really are this high naturally. No one is holding back to jack up prices. Everyone is already at or near capacity because they're already being hurt by the low dollar.
Oil.
Another edition of Short Answers to Foolish Questions:
1. What kind of company gave the most to GWB's election?
2. What industry did Bush & Cheney spend their life in?
3. What is the principle product of Iraq?
4. Of Iran? Saudi Arabia? Hell, the whole middle east?
5. During war, which prices always go up, up, up?
6. In which industry does Cheney have his "blind trust" invested?
7. Which industry has had the biggest (record) profits since Iraq?
8. What prices would hit $150-300 a barrel if we invade Iran?
9. Saudi Arabia has the world's largest supply of ____?
10. Poor people die fighting each other over ____,
making rich people much richer who control all the ____.
Bonus: The Bush Administration denies its war is about?
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