Thursday, June 15, 2006

Who's Fixing the Price Of Oil?

Nowadays, it's hard for a day to go by without someone commenting on who's behind the high gas prices - price gouging by the gas stations (never mind they actually make less money when prices are high), the Saudis and OPEC, Big Oil, George Bush (who evidently is behind everything bad in the world for some people!), China and India consuming too much ... the list is endless. Well, blogger Dimitris Hatzopoulos in Greece argues that in reality, prices are set in a derivatives market that has nothing to do with the physical reality of oil production. He cites numerous examples to support his thesis that trade in "paper barrels", i.e. oil futures, determines the price of "wet barrels", real oil, while still being disconnected from true supply-demand considerations. Do read the link titled 'Oil Markets and Prices' for a better understanding of the subject.

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