The Organization of Petroleum Exporting Countries should be cited in every oil pricing story because its declared trading range, which is between $80 to $90 a barrel, is far more influential on prices than the relationship between supply and demand in a global free market.
Because there is no global free market, except for cheap labor. Oil is a manipulated market and OPEC has control of the spigot.
Speculators represent the other driving force in prices. Sadly, most oil pricing stories fail to distinguish between true demand by oil consumers and demand from speculators, which has been so intense that it has outstripped the capacity of existing storage facilities.
That’s why the recent announcement that President Obama and other world leaders were working with Saudi Arabia to release 60 million barrels of oil into the world marketplace is so unusual. It’s the best proof yet that the rising oil prices which undermined the nascent global economic recovery are a product of speculation. Not demand.
The amount being released is actually tiny on a relative basis, with the world consuming about 73 million barrels daily. However, it’s impact cannot be under-estimated on the speculators who have turned oil prices into a Ponzi scheme by pouring money into them.
Many speculators lost money because of this announcement and may have to start looking for a more secure investment vehicle. That’s the real news here.