Fund buying adds $8 premium to oil price-- experts

[UpInArms]

http://www.forbes.com/business/energy/newswire/2004/03/18/rtr1304215.html

NEW YORK, March 18 (Reuters) - Red hot crude oil prices have surged as much as $8 per barrel above their fair market value due to an influx of money from speculative hedge funds, energy experts said on Thursday.

"The fundamentals are bullish but it is hard to justify $38.00 (oil prices)," said Bill O'Grady, director of futures research at brokerage A.G. Edwards in St. Louis. "I see the fair value at $30 to $31."

The speculative surge has come in the midst of increasing pressure from U.S. lawmakers for the Bush Administration to help rein in high energy costs, which have been spreading pain to domestic consumers and industries such as transportation.

The fund money bet on a further rise, fueled partly by fears that fresh attacks by militants could disrupt already thin supplies. That has pushed oil within reach of $40 a barrel -- a level widely seen as damaging to the economies of energy consumer nations.

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this just pisses me off :nuke:

[salin]

1. Interesting...

[54anickel]

2. Great, whatelse are we overpaying for due to speculative hedge funds?

Is this why wheat went up 10 bucks in a day? Seems they've perfected the transfer of wealth up the ladder. Everything we need to survive seems to be going up, up, up - but there's no inflation. Gas, heating fuel, electricity, houses and food all up, and just who's getting rich on this Ponzi scheme?

[Aussie_Hillbilly]

3. Speculation

If they are speculating on the prospect of real-world events causing a shortage, like Peak Oil or the occupation's troubles in Iraq, then that is a good thing in the long run. Realistic pricing, what a concept.

If they are just gambling (as I suspect they are) the regulators need to step in. George Soros's idea of a waiting period for currency and futures transactions is a good idea too. Smooth out the bumps.

The funny thing is I bet most of the hedge fund operators vote Republican, yet they are sabotaging the Bush economy at the worst(best?) possible time. They just couldn't resist. LOL.

[54anickel]

4. Sometimes greed can do wonderful things.

[54anickel]

5. WHAT?!? What happened to opening the SPR spigot, or slowing down

the hoarding? This is the first I've seen of that not happening.

Rising energy costs have led Congress to propose the White House slow its buying of crude oil for the Strategic Petroleum Reserve to leave more barrels for the open market, though the Department of Energy has since said it plans no such slowdown in buying for the stockpile.

:wtf:

[Merlin]

6. They'll open that spigot in the Fall. Guaranteed. n/t

.

[snippy]

7. This guy is just guessing about the hedge funds driving up the oil prices.

I will guess that he has advised his clients to short oil. If he was correct about the price of oil, how does he explain the surge in all commodity prices? The demand by end users for all commodities, including oil, has increased and continues to do so. That, together with the declining dollar (since most commoditiies are priced in dollars), explains the high prices.

No one has any idea what the "fair value" of a commodity would be if some buyers were not buying. However, the consumption of a commodity can be estimated fairly accurately and oil consumption is surging world wide, especially in China which is now second to only the US in oil consumption.