Reply #6: The market keeps testing new thresholds [View All]

[plasticsundance]

Then continues to go up. Last July, after the July fourth holiday, business pundits on CNBC and other financial channels were claiming that within a couple of months the prices would recede to $34 a barrel. We all know now how un-prescient that turned out to be.

The drive toward higher oil prices began during the downfall of the stock market at the beginning of the Bush reign. Many investors saw the speculative and hedging of the futures market a smarter investment than buying securities straight up.

Therefore, although I agree that the speculative market manipulates the price of oil to some degree, the real issues of supply and demand are real and quite ominously foreboding.

China's demands are really quite dramatic exponentially, even as recently as 2001 to present. That is why I found this little caveat from the above article rather interesting:

Saudi Arabia told customers in Asia that it would boost supplies next month, attempting to keep a lid on still high prices.

Emphasis mine. Just last week the business pundits were trying to calm the oil market by stating that demand was slowing China. However, the caveat I quoted from the article appears to show otherwise. I believe it is obvious that at least Saudi Arabia is trying to assuage the Asians, in particular in response to China's hot growth in demand.

In addition, the Bush Administration and Greenspan do not necessarily see the quick rise in oil prices as conducive to their agenda, as corrupt as that may be. The spike in oil prices will place an untimely inflationary pressure on the economy, and force them to make decisions they'd rather would not want to decide at this particular time.