Rising right into yet another speculative bubble.
From the Indian Ocean to the South Atlantic to the Gulf of Mexico, giant supertankers brimming with oil are resting at anchor or slowly tracing racetrack patterns through the sea, heading nowhere.
The ships are marking time, serving as floating oil-storage tanks. The companies and countries leasing them for that purpose have made a simple calculation: the price of oil has fallen so far that it is due for a rise.
Some producing countries are trying to force that rise by using the tankers to withhold oil from the market, while traders are trying to profit by buying cheap oil now to store and sell at a higher price later. Oil storage has become so popular that onshore tank capacity is becoming scarce.
I wonder what will happen when these speculators, sorry, investors panic and dump all this stored oil.
The long-term effects of all this speculation aren’t all that hard to figure out:
The slowdown in oil investment is so rapid that some analysts say they believe it is a matter of time before shortages appear that will push oil prices to new heights and damage the economy.
That’s the story I should turn into a macro: Lazy speculators attempt to make a quick buck, using leverage and market manipulation. Long-term investment and problem solving are damaged in the process. Billions, if not trillions, of dollars are lost. The vast majority of us are left a bit more cold and unclothed, a bit more hungry and unfed, a bit worse off in almost every imaginable way.
It’s a conspiracy by urbanists to keep TRUAMMURICANS from driving.
Unless storing oil becomes more expensive. Demand only the FRESHEST oil! STALE oil sucks!
Keep consumption down and they will eat that oil.
So long as they don’t refine it, it doesn’t show up as a finished product, so they can claim there’s a shortage and jack up the delivery price.
@3: In Seattle? Ha.
you are an idiot.
don’t write about things you don’t understand.
BUY BUY BUY!! Whatever you do BUY!!!!! Buy stocks, buy bonds just buy!!
In a more primitive, less polite era, these speculators would be killed by angry mobs.
So what can we do about it? Only 2 things I can think of.
1) Force them to deliver. This requires the military and is extremely unlikely.
2) Stop using the shit. If we reduce consumption price goes down. If they see the price is going down instead of up they’ll deliver before the price goes down even further. That will drop prices even more.
Really, it’s amazing how many of the worlds problems get solved by just getting off the crude.
DRILL, BABY, DRILL!!!!!!!!!!
We need to go back to national energy and utility regulation. The widescale deregulations of the Reagan era added to by the Clinton plan left us without many safegaurds which used to keep speculation under control.
Oil producing nations are facing an asset bubble crash in many of the same areas everyone else is. Imagine how lopsided our economy got and how we’re scrambling to find ways to replace lost economic activity here.
Now imagine you’ve let your economy’s main support be oil revenues, and you’ve budgeted government outlays for years based on that.
Faced with demand destruction and the prospect of surly citizens calling for your head, what do you do? If you are Mexico, Libya, Venezuela, Nigeria, Canada, Saudi Arabia, Dubai, Kuwait?
Anything, absolutely anything you can. The banks and corporations buying into stockpiling right now are aware of this, and are placing their own bets accordingly.
Look, a lot of the oil price bubble was due to two things:
1. refineries being taken offline during peak demand for “scheduled maintenance” (and if you believe that, you’re probably a Bush voter …)
2. speculation primarily by hedge funds, a form of legalized and mostly untaxed gambling we have in our system.
The actual supply and demand constraints didn’t have that much to do with the actual cost at the pump of course.
You’re a hyperbolic wimp Jonathan. You don’t have a clue about anything financial, economic, and write about such things based on what you feel.
@6 and @14,
If you two are such geniuses, let’s hear how and why Golob is wrong, with examples, please. Otherwise, I’m just going to assume you’re head-in-the-sand nitwits so scared of even the possibility that things may go to hell that you’re just lashing out.
Golob is a transparent fraud. He knows as much about banking, economics, and finance as he does about climate change.
Jackass Jonathon is a public nuisance.
I believe everything Golob says, so you’re only breeding more idiots by not explaining why he’s wrong, anonymous haters.
I don’t understand the difference between an speculator and an investor. Is it only the length of time that they plan to hold on to what they buy? Is it something special deep down, in their heart?
@19: Speculators wear those Dickensian frock coats. Also spats. You can always tell by the spats.
Oil is cheap, if you have no scruples, buy a bunch and make a mint. Otherwise, do what’s right and invest in alternative energy and make a mint.