Explanations which do not please

The Commodity prices begin to grind into Manufacturing activity around the World, hallowing out the foundations of Business. Back towards my Youth (don’t ask, but Long Ago and Far Away), CEOs and CFOs talked of Commodity Price increases in terms of months of Corporate Profits lost per year. This was great for Economists, but bad publicity for Investment bankers, so the Practice was dropped from the Business lexicon. The vicious and black plague nature of the Oil markets may bring back the reportage, as Economists really need the information to construct a visible model for evaluation, and one which they can take to the Public. It is still bad publicity, though it might become the only drain of Speculator Cash from the Oil markets, as they realize they potentially will lose that Cash if not withdrawn relatively rapidly. It will be at that Point when We can determine if the massive influx of Speculation Cash in the Oil markets had actually fixed the Prices for Oil, as I suspect.

This article highlights the level of increase in Speculation since 2003, with a rise of Investment Cash from $15bn to $260bn. The International Energy Agency disagrees with my viewpoint on the impact of Speculation on the Oil markets, but has yet to show there has been an equal appreciable rise in Recovery and Refining capacity; understand that there must be a measurable rise in Present or Future capacities of relatively like amount to justify the spread of Oil Profits across an increased base of $245 bn, else there is actual real Inflation in Oil price. The difference between the Cash and actual Investment establishes the real degree of Inflation in Dollar terms. It isn’t that simple! Yes, it is!!

Here is a Piece which purports to show that Speculation is having no impact on Oil prices, but actually shows the Opposite. OPEC is pumping at Record levels, and Emerging Markets are beginning to show evidence of slowing in the face of the higher Oil prices. Iran cannot threaten the Oil Supply in real terms, without Iran losing most of the Good Will they have garnered from both the Western industrialized nations and the Emerging Markets. It would be suicidal for Iranian leadership to actually impede Oil Deliveries, the Gulf War reworked but with Iran the center of attention. Our Argument, though, remains: rising Capacity coupled with dropping Demand will not normally bring increased Oil pricing without Inflation. Is it the weakening Dollar?–Doubt it! The Dollar, if anything, is hardening in Value. Is it the spread of Profits across a vastly increased Paper Investment base?–Of course!!! lgl