MightyFunk

I’ve been fol­low­ing the stock mar­kets closely for the past month and a half — in par­tic­u­lar the oil indus­try as that’s where all my stocks are placed. As much as I hate oil and love the envi­ron­ment, I would be fool­ish oth­er­wise to place my invest­ments else­where as other indus­tries are con­sis­tently los­ing money. There’s a lot of finger-pointing as to why these oil prices are record high, but I can tell you.

Some peo­ple blame sup­ply and demand — is there enough?

Oth­ers blame spec­u­la­tion — the com­modi­ties mar­ket and stock own­ers for arti­fi­cially inflat­ing the price of oil.

It also doesn’t help when news reports that some­thing bad related to energy and pol­i­tics is hap­pen­ing across the world, that the price of a bar­rel skyrockets.

I’ll tell you what it is. Most assuredly, sup­plies have shrunk and demand has increased. But, you can’t con­vince me that between the win­ter and sum­mer of 2008, that auto­mo­bile and scooter fac­to­ries have sold a record amount of vehi­cles. In fact, vehi­cle sales have fallen dras­ti­cally over the past year due to the high oil prices. So while sup­ply has decreased to a degree, it can­not account for more these record high oil prices. Sure, we as a world are con­sum­ing more — but not by the amount which prices of oil has out­stripped the sales of transportation.

Some peo­ple will blame the OPEC pro­duc­ing nations such as the Saudis.

The Saudis can pro­duce oil con­sis­tently, they’ve even offered up increas­ing sup­ply in July — how­ever, the price of oil con­tin­ued to increase. So they announce they will increase out­put but yet the price still increases. All along, the OPEC nations have said it’s spec­u­la­tors, and I’m begin­ning to believe it’s the truth.

Brazil can even pro­duce oil (and their own fuel is ethanol), and yet we still see record high prices.

Rus­sia has treme­dous reserves yet to even be tapped, yet we still see record high prices.

The U.S. announced yes­ter­day that they found a huge amount of extra reserves avail­able for the coun­try. Oil dropped. Then we waited for the Fed­eral Reserve meet­ing (FOMC) to announce what they were going to do with inter­est rates. Oil con­tin­ued to drop because spec­u­la­tors were con­cerned that an increase in inter­est to com­bat infla­tion would stem the price of oil.

As soon as the FOMC announced they were going to leave rates unchanged, the price of oil went back up to the half-way point. The oil mar­ket breathed a sigh of relief as we could make more money off of our invest­ments. Come Thurs­day 6/26/08, crude oil prices hit an all-time high of $140/barrel. The rest of the non-energy mar­ket took a major tum­ble. Was this a sup­ply related issue? NO. It was just a mat­ter of words that drove energy down from $130 up to $140.

The fed on the other hand has said that spec­u­la­tion is to blame for the rise in oil prices a few weeks back — and they have been cor­rect all along. I believe the fed has taken the cor­rect actions. Aside from the record high price of oil, our econ­omy would be turn­ing around oth­er­wise. The fed is not respon­si­ble for the high price of oil — the prob­lem lies with the fact that the Fed does not have any con­trol over the price of oil as it has run away due to spec­u­la­tion. If they raise infla­tion, they would be hurt­ing other por­tions of the econ­omy which would be work­ing fine if this one major prob­lem wasn’t present.

What really needs to hap­pen here is dras­tic and imme­di­ate gov­ern­ment inter­ven­tion (as well as the SEC) into the com­modi­ties and stock mar­ket spec­u­la­tion to curb the over­whelm­ing price of energy. This is our one and oil solu­tion. While drilling and fur­ther trad­ing with OPEC nations will help to a very small degree, it will not stem the curve of infla­tion unless the US Gov­ern­ment and Con­gress steps in to limit spec­u­la­tors. This is our one and only solu­tion for the time being.

As much as I like to see myself profit, I also don’t like the mis­for­tune of others.

I know what is hap­pen­ing here because I am a spec­u­la­tor and investor. I watch the news and news feeds from sec­ond to sec­ond. All the indi­ca­tors point to spec­u­la­tion as the major cause of our cur­rent eco­nomic problems.