Very Bad News For Republicans

Amazed · #**101** (**permalink**) 06-10-2008, 03:59 PM

Quote:

Originally Posted by cat's meow

You mentioned Capitalism, I didn't.

I gave the evidence about speculation, I did not avoid anything...don't get your panties in a wad.

No wad at all....I have shown where you were wrong, as well as where you were right. You keep shifting your focus in an attempt to prove yourself.

cat's meow · #**102** (**permalink**) 06-10-2008, 05:15 PM

Quote:

Originally Posted by Amazed

No wad at all....I have shown where you were wrong, as well as where you were right. You keep shifting your focus in an attempt to prove yourself.

Let me explain it this way.

Commodities such as oil, gold, or silver have an 'attached' cost which sits in speculation and futures. This cost is far more than the norm we see with other futures right now.

Quote:

Financial Speculation

In May 2008, Uwe Beckmeyer, transport chief for Germany's Social Democrats, said a recent 25 percent rise in the price of oil to $135 a barrel had nothing to do with underlying supply and demand; “It’s pure speculation,” he said.

Also in May 2008, hedge fund manager Michael Masters testified to a US Senate committee about his belief that "What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets: Institutional Investors... In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China. According to the DOE, annual Chinese demand for petroleum has increased over the last five years from 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels. Over the same five-year period, Index Speculatorsʼ demand for petroleum futures has increased by 848 million barrels. The increase in demand from Index Speculators is almost equal to the increase in demand from China!"

In June 2008, OPEC's Secretary General Abdullah al-Badri provided statistics supporting rampant speculation in the oil-related financial markets. According to Badri, current world consumption of oil at 87 million bpd is far exceeded by the "paper market" for oil, which equals about 1.36 billion bpd, or more than 15 times the actual market demand.

Effect of US dollar value on oil prices
The price of oil is closely tied to the value of the US dollar because oil is traded in dollars. This has led to concern among some economists that the principal earned from the sale of oil may lose value in the long run if the US dollar loses real value.

In discussing the effect of the changing value of the US dollar on the real price of oil, however, it is important to include a calculation of effective exchange rates of the currencies in question, to separate the real and nominal values of those currencies. This method accounts for the amount that a dollar can buy (of electronics or food for example) compared to the amount another currency, such as a Euro or Pound sterling, can purchase. While the US Dollar has lost nominal value to other major currencies from 2001 to 2007, its change in real value has not differed significantly from other currencies.

In addition, by comparing the price of oil in various currencies to the fluctuations in the exchange rates of those currencies it is clear that oil price is no more significantly correlated to the value of the dollar than to any other currency. This also holds true in a comparison of oil price to gold price. Similarly, since the early 1970s, the price of oil has been negatively correlated to the value of the dollar, suggesting that the price of oil has more of an effect on the value of the dollar than vice versa. As developed economies depend heavily on oil for transportation, petrochemical feedstock, and industrial agriculture, this correlation would affect most currency values