This completely insane run up of crude oil and natural gas prices is, at least

[WCGreen]

to me, nothing more than speculation run rampant.

The investment class, those people parked in front of a computer thinking themselves this centuries J. P. Getty in waiting, are following the money, just as they did in the 1990's euphoric dot.com market mania.

Since these are the people searching high and low for the return of that ever elusive capitalistic climax; the next double digit return, they will follow the "tips" whenever and wherever they occur.

So what happens?

The people who are essentially the gate keepers, the brokerage house that are now, it seems, operating under de facto protection from the Bernake Fed, are always releasing predictions of where Crude Oil and Natural Gas and other commodities prices will be in the future. By setting what are really targets for the market to hit, the brokerage house send the speculating investors into a frenzy to get in the market before the opportunity burns off.

The same thing happened in the 90's with stock and the early 2000's with real estate.

And these markets, the commodity markets, aren't nearly as regulated as other more traditional investment areas.

They would have us believe that the forces of capitalism are at play, that people are just now becoming aware of "peak" oil. That what is happening is just capitalism setting the real price for a commodity.

And the oil companies are remaining mum. Why not. The longer they remain silent the more likely it is that the US government, facing irate consumers when gas hits $5.00 and beyond, will succumb to the oil giants wishes, drilling in protected wilderness areas and heavy subsidization of building or refitting refineries.

This isn't the invisible hand that Adam Smith talked about when he was defining economic and human behavior back in his Wealth of Nations tome. No this is manipulative speculation disguised as purely market forces at work.

Fool me once, shame on you.

Fool me twice, shame on me.

[no_hypocrisy]

1. The real change IMO is the mentality of investing for a few with the ability to play these games.

Used to be that investing meant picking a secure stock and keeping it for a while, waiting for the investment to grow and allowing the investor to make a nice, modest profit. What I'm perceiving is the rush for bigger profits immediately and an impatience not to wait for it. That's what's fueling the speculation. It reminds of heroin addiction. Gotta have more and fast!

[cosmik debris]

2. Another part of Adam Smith's treatise

said that prices will rise to the highest level that the market will bear. He was right. We're not there yet.

[nradisic]

3. You nailed it...

Just to preface, that I do some stock trading on the side and have actually done well in the down market, mainly because I do not subscribe to the herd mentality and trade as a contrarian and I follow technical and chart analysis. Last night I thought about comparing the charts of the Nasdaq in 1999-2000, real estate prices in the US in 2005-2006 and oil prices in 2007-2008. Bingo! The charts are almost identical and we all know where the Nasdaq and real estate prices are today.....so I predict $80 barrel of oil wayyyy before $150. It is not demand from China, but speculation being driven by commodity hedge funds and the birth of commodity ETF's. What goes up that fast, will come down faster...

Just my 2 cents

[Sal Minella]

4. I would guess price per barrel in U.S. dollars is rising faster than any other currency because of

the decreasing value of the dollar? Don't know how to research this.

[WCGreen]

6. Well that is part of it...

But the increase in price is far outpacing the devaulation of the dollar.

[shain from kane]

5. Fool me twice, I won't get fooled again.

[CaliforniaPeggy]

7. Well said...

K&R

[aint_no_life_nowhere]

8. The dot.com bubble, the housing bubble, and now oil

I don't know if there's going to be an oil bubble because OPEC controls the supply and they're not expanding it. Too bad a Chimp got rid of Saddam, whose presence could still intimidate the Saudis and Kuwaitis into having to listen to an American President who would protect them. With Saddam gone, the Saudis, Kuwaitis and the rest of the Gulf oil producing states feel no need to play ball and cooperate with an American President's requests.

We're being hit from many sides here. OPEC isn't cooperating and is strangling the world's economies. Speculators are killing us. And the shrinking dollar is making it even worse. I think at least there should be some commodities such as oil and corn that are deemed so valuable to the national interest, that any speculator must be required by law to take physical possession of that commodity when they buy it. In other words, you have to take delivery of that barrel of oil or that bushel of corn if you buy it and you can't just play with paper contracts and money that you borrow.

[BigDaddy44]

9. The difference between the dot.com, real estate and oil bubbles

Is that no one is going to be crying when the oil bubble pops

[apnu]

10. There are more factors than this

Purely blaming the brokerage houses isn't addressing even half of the problem. There's a lot more going on here.

1) Electronic trading. Thousands of thousands of people now are trading at home and trading the commodities markets like the stock market. This introduces increased volume and buying power collectively. These are the same rubes that fell for the housing marking in 2000, and dot-bombs as you cited. They've just moved on to the next big thing that will, eventually, burn them. In short, these people don't know what they are doing, and trading commodities out of ignorance is very dangerous considering contracts sizes and values.

2) "Long-only" mutual funds. Mutual funds are rushing to diversify into commodities (be it corn or oil -- doesn't matter) And they have strict rules about what they can "buy" and "sell" They can only be "long", plus when they go "long" they do so for thousands of people at the same time. Causing sudden jumps (up or down) in price. The stock market has lived with this for some time, but its new for commodities. When a sudden change is introduced because of a massive order everybody has to follow or die. Considering the sizes and values of the contracts in commodities, sudden changes like this are even more dangerous if you consider the ignorance factor in #1.

3) Oil-producing countries. These guys are just as guilty as the oil corporations. If you think Exxon-Mobile is cleaning up, Saudi Arabia is making even more. They win no matter what, so long they have oil to sell and there is demand. They control production and can expand or contract at any time, and they will do so in their own best interests.

4) The relationship of food and fuel. Instability in one, affects the other. Food costs go up, gas goes up. Gas goes up, food costs go up.

5) As a result of some of these things, and others the commodities markets are changing. they are moving from the, low change, high yield markets into a wild west shoot-out just like stocks. Many commodities traders (and farmers -- don't forget the hedgers) are having a hard time dealing with this sudden evolution, this introduces more instability, volatility and plain chaos that just makes everything even more messy.

Sure commodity traders are milking it. This is their job after all, to sell things. Car salesmen are milking it, the Corn Growers Association of America is milking Ethanol, what else is new? What is really galling are the people willing to be milked for all this bullshit. People are bitching here in America, but doing not one damn thing. The tools are there to do something: carpooling, cycling, public transportation, lots of things -- be creative. But we're still buying shitty cars that get shitty gas milage and driving them at every damn opportunity.

Check this out: John Pucher, PhD of Rutgers University noted in his paper Promoting Safe Walking and Cycling to Improve Public Health: Lessons From The Netherlands and Germany that in urban areas of the US “...41% of all trips in 2001 were shorter than 2 miles, and 28% were shorter than one mile... Yet Americans use their cars for 66% of all trips up to a mile long and for 89% of all trips between 1 and 2 miles long.” 89% of our trips are less than two miles? Ride a bike to the grocery store people! Driving unnecessary is just plain stupid. Yet, we're doing it, and showing no signs of stopping.

None of this will stop until the consumer quits putting up with it. Complaining about gas when driving a 20MPG car is putting up with it. Complaining about brokers fleecing you is putting up with it. Besides you have zero control over the brokers anyway (and they're mostly Republicans, so they're doubly evil). Change what you can and save your wallet. I'll change what I can and save my wallet. Enough of us doing this will take back all this crap.

For my part these are some of the things I do: I bought a hybrid car and use it only when necessary. Yeah I've got $30,000 (new) sitting in my garage that gets used maybe once a week and special occasions. I ride my bike to work (15 miles a day) when its dry, and ride the bus when its wet. Plus I bike for errands, I even got special grocery bag panniers for runs to the supermarket. I turn down the heat (and cooling) in my house. This winter I never raised the thermostat over 68 degrees, and installed extra insulation on my windows and other areas of my home. Yeah it was cool, so I put on a sweater. As a result, I've saved thousands of dollars. I don't put up with it. Will you?

[WCGreen]

16. Thanks for expanding on my OP...

Electronic trading, for some part and mutual funds, for the most part, are under control of the big brokerage firms or are one of the big brokerage firms.

I think the main point was that the Comm markets are not as regulated and the people who are controlling access to those markets are talking up the price. Just listen to SNBC for a few days and you are bound to hear more than a few "predictions" by an investment house as to where they think Oil prices will go. This just feeds the frenzy.

[unblock]

11. there are many causes; speculation is only one of them

- war in iraq, keeping the 2nd largest oil producer offline is probably the biggest factor.
- the decline in the dollar is also a big factor.
- too few refineries is a popular right-wing excuse, but there is some truth to it.
- huge demand from booming countries such as india and china (booming in part because of the previously strong dollar, leading to major offshoring and huge importing).
- opec deliberately limiting supply.
- alternative investments suck because of recession and inflation concerns, so money is pouring into commodities as that's just about the only thing going up these days.

i'm actually not sure the staggering price of $132/bbl is completely unreasonable given everything that's going on. that said, it's absolutely despicable that we don't have a president interested in doing anything to being oil prices down. in fact, until very recently, he was BUYING oil to fill the strategic reserve, driving the price up even more!

eventually some of the many legs under the stool will give out, and prices will come back down somewhat, though $30/bbl is clearly a thing of the past.

thank you, georgie-boy!

[WCGreen]

17. Oil is just the investment vehicle de jour right now.

We were in Iraq for all those years and yet the price sky rockets now.

Cheney was talking up "our" investment in refineries, meaning the taxpayers would pay for the refineries and the oil companies would get to make more money on our dime, all the way back in 1999.

[unblock]

19. yes; one of my "reasons" was that alternative investments suck

this has almost as much to do with the housing crisis as anything else. where else to park your money?

for treasuries were the first place to park funds when the credit crisis hit, making yields ridiculously low. in search of a place to make money, they all hit on commodities.

[WCGreen]

20. Bingo...

Having three all business networks also feed the drama.

It's something we are, I am afraid, going to have to get use to; the Bubble de jour.

[unblock]

21. yup. a sypmtom of too much capital and not enough good investments.

[Rosie1223]

12. The same is true of other commodities

A 10% increase in corn going to ethanol should not triple the market price. There's plenty of supply.

[WCGreen]

18. It's all because the investor class is searching for that

orgasmic trade...

[hunter]

13. The collapse of the housing bubble was not without consequence.

We'll be cleaning up after it for a long time.

If this oil market is a bubble the mess will be much worse. We're in for a lot of pain whatever comes of this, and claiming it is a bubble is not cause for any sort of optimism.

[spinbaby]

14. Last chance to loot

Gotta loot before the guard changes.

[JCMach1]

15. Daytraders and shortermers are getting heavily in now

I spotted those trading patterns today in some of my oil stocks.