Wednesday, July 02, 2008

Oil, The Blame Game

Its now an official game of blame. Who is responsible for the current price of oil at US140 per barrel.

Big Oil Companies (when doing their PR in their home countries):
They will blame speculators for driving up oil prices. As they are spreading propaganda to the general public, they have to divert attention from themselves. The big oil companies fear that their own government will whack them with big windfall tax on their earnings.

Big Oil Companies (at major international conferences):
When they are away from their home ground, they will blame the situation on inadequate supply. They will blame it on countries with supposed oil reserves. The big oil companies want the international spotlight on these countries so that these countries will be pressured to open up their locations to allow more joint ventures with big oil companies.

They do not want to be pressured to pump more oil. Their blame game is back on the speculators. They also rather focus the increase in demand side, and would state that their supply growth is steady. Just because demand is rising faster than OPEC's supply, that is not OPEC's fault. They would try to deflect criticism on the demand side, including China and other emerging markets.

Countries Cutting Oil Subsidy:
They would have to blame it on speculators or something external so that the decision would seem to be forced upon them, when it was bad planning to start with. Many of these countries should have been weaned off subsidies long before the proverbial stuff hit the fan.

Well, they would want to be regarded as investors now, now that they are taking along their profits on such a good thing. Careers and fortunes have been made by just going long on oil for the past 3 years. They claim that since they have been going long, taking profit, and going long some more, they should be classified as investors - even though they now account for the majority of futures trade in oil, and have no bloody intention to consume.

Oil & Gas Companies: They provide the equipment and physical asets to allow for more drilling, they don't care who is to be blamed for the oil price surge. The higher the price, the greater the number of jobs as more difficult wells become viable and more complex technologies are employed.

Political Pundits:
Mostly arguing that oil had been kept artificially low by US interests for far too long, and now thanks to the debilitating economic conditions in the US (hence USD) and a more liberal global political landscape, oil is finding its true mean.

Traditional Economists:
Its a simple demand and supply equation. Not so much that supply is unable to match demand, but rather that the low hanging fruits, the easy oil has all been harvested and identified. The higher price of oil basically means the market is forcing players to spend more, invest more to find the more difficult oil.

Libya, Cuba, North Korea: Its another American conspiracy.

p/s photo: Aum Patcharapa Chaichua


peaceminded said...

Sorry dali, I will keep using yr blog to attack samghost . if you want to ban me from posting, please go ahead, dont forget, by doing that, you are also blocking others from posting, because of one small tiny tree , you willing to let go the whole forest ?

You are smart guy, you should know which is good for you.

pls consider that.

Thank for allowing me to do posting. fuck the asshole samghost.

--- On Mon, 6/30/08, dali wrote:

From: dali
Subject: sam
Date: Monday, June 30, 2008, 11:14 AM


I have asked you repeatedly to stop posting the bio on samgang. Pls respect my wishes, I don't wish to ban you. Thank you.


swifz said...

Where r the speculators:

swifz said...

Link too long, one more time:


Jackie Lee said...

For me much of these game had to blame on speculators and the opec members. But what had happen in recently meeting in Jeddah was obvious. Some of these producing country are against the plan of increasing output.

They stay and feel comfortable at these current level of prices....what to do. USD 140 per barrel !

solomon said...


I guess we should blame ourselves for the high energy consumption which allow the opportunists (like hedge fund / speculators) to take advantage of the situation because of wastage. On the hindsight, even though these groups of people are profitting now, if they do not know when to back off, they will get burn. They are helping to restore the equilibrium.

However, mind you the media also play a role in pushing the price up. This is because everyday we can see the circulation political tension and rebels attack.

So, you shd include us as well.

Encik Wan said...

Welcome to the world of investing/speculation where doing the thing right is more important than doing the right thing :) You can complain/argue. In the end, it is those who play along the 'rules' that will gain.

Bleeding said...

Hey Dili Dali
Just to wish to point out that Petronas is normally very punctual with their annual accounts - but NOT this year!

The public is a bit distracted at the moment but that is no excuse.

Anonymous said...

“Speculation is increasingly affecting the price, which has a parabolic shape, which is characteristic of bubbles,”


Anonymous said...

It is interesting to note Paul Krugman's comments in his column that point to iron ore prices being NEGOTIATED, not traded and yet shows an increase of almost 90%yoy, as a signal of real demand vs supply, against that of oil, which is rising on par. - second half.

Salvatore_Dali said...

thanks for the heads up on krugman's article... very enlightening...

Soo Beng said...

Hi Dali

I am not one to normally indulge in financial articles, yet your writing and insight makes for (dare I say) enjoyable reading.

Keep up the good work!


Anonymous said...

US invade Iraq for the oil to pay their high borrowing debts and oil price must be inflate and keep to the highest at all time. All commodities bubble are created by FED to inflate their economy out from recession .

Asset Class Returns In The USA

The brilliant snapshot of asset class returns compiled by Blackrock makes for interesting analysis. See if you can deduce any pointers from...