ZACK U asked:


Oil is increasing because as you get closer to supply overload, perhaps the oil price starts becoming asymptotic.

The economist said speculators couldn’t drive up the price of oil because they are simply trading ‘paper barrels’. However, all this demand for contracts has to increase demand somewhere; They buy oil, then they sell it before ‘delivery,’ but in the process they are increasing demand.

It would seem that oil price could come down fairly easily. There is 1 million barrel discrepancy between supply and demand. With people’s lifestyle changing a little bit, you could easily take out 4 million barrels of demand and then the price could really plummet to 30’s or 20’s.

Nevertheless, this would mean a constant constraint on world growth, as every time the global belly would swell a price shock would ensue; demand growth is faster than supply growth.

It will be interesting to see where it goes. Please leave your insightful comments below.
Eventually high prices make alternatives attractive.

Did you know that hydrogen is cost efficient at 150 a barrel? you can use coal or nuclear to turn water into hydrogen, at an energy loss, but cost is what matters in the end.

Oil will not stay at thsi price but the constraints on growth will… This will mean people will notice another oil shock after it goes down again fairly quickly. This is why alternatives become viable.

The best outcome will be a combination of all the alternatives. And….nuclear power.
Mrs. bugsme…

I think your right about that…it will take a few years before this starts happening though, perhaps two decades…In the transition period, oil nations will have a ball.
in other words..its going to crash and oil nations will not like the outcome (its not their fault or anything that oil has gone up though)…but then perhaps it will go up again a year later, so, its up for grabs.

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BizAnswers asked:


In the short term, I think it is clear that speculation affects oil prices, but over the long term, I am less than convinced. Specifically, with all derivatives, there is someone on the other side of the deal; it is a zero-sum game unless someone takes delivery. If speculation drove the long-term price of oil, it seems to me that the speculators would be required to take delivery of the oil at some point in hopes of selling it at a higher price. If the speculators are not taking delivery, supply and demand must dictate the price of oil as the long-derivative speculator simply offsets the position of the short-derivative speculator until the contracts settle or expire. Since speculators who do not take delivery are not affecting supply and demand, how could speculation cause a long term increase in the price? News commentators continue to bang the drum of speculation causing the price rises, but I remain unconvinced. Now is your chance to convince me where my analysis falls short.

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incognito asked:


What is the cause of the escalation in oil prices. I have heard it is a supply and demand issue. So is it that demand from emerging markets has increased that much to cause such an increase?

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mbchelsea asked:


Apparently one of the key reasons (except of course the fundamentals of supply and demand) for the increase in oil prices has been speculation. Firstly, how does speculation effect prices, and secondly, has the Iraq war led to more speculation, thus further perpetuating the price rise? Please explain clearly and give sources/references.

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LG asked:


I’ve read articles that say supply and demand are NOT the major drivers for today’s high oil price. It’s oil futures trading on unregulated markets and massive speculation in these markets.

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