Wednesday, April 27, 2011

Why a commission to investigate speculation in the oil/gasoline markets will not be productive---We are missing the REAL story---See why in one easy to read graph...

We can appoint 100 commissions to investigate the role of speculators (read that Hedge Funds investing in oil futures) in the rising price of oil, but I would prefer to look at one underlying fundamental that will remain long after these commissions issue their reports (with vague findings, after spending lots of money to do so---mark my words). 

The graphic below speaks volumes and starkly illustrates what I don't think most Americans are aware of, or want to be aware of---there are major emerging economy's with large populations and they are consuming more oil based energy every day. 

Speculation in the oil markets happens (see, I said it!). No reasonable person denies that.  However, it will not be the long term cause of higher oil prices, hence gas prices.  THIS WILL:

Source: WSJ

""The U.S. Energy Department on Wednesday reported a 1.6% decline in a closely watched gauge of gasoline consumption, compared with a year ago. In the past, when U.S. drivers cut back, that has dented global demand for oil and depressed prices. After a lag, the lower prices would help the economy regain its footing—or at least remove a substantial headwind.


But many oil experts believe that scenario won't play out this time, because U.S. drivers are no longer calling the shots. The rapidly industrializing economies of China, India, Brazil and even Saudi Arabia are. A possible result: an extended period of sluggish U.S. growth amid high oil prices.


"It's a new world," said oil economist James D. Hamilton, a professor at the University of California, San Diego. "The growth in newly industrialized countries is the key factor driving oil prices."""
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