I was not going to respond to the letter of Lester Saft in the June 12 issue of The Malibu Times attacking my position that much of the run-up in crude oil prices over the past year or so has been due to rampant speculation on the oil futures market. However, I decided to take a look at the increase in crude oil prices over this period as it relates to political tensions and natural disasters over the past few years. Following is a list.
1973 Yom Kippur War: $42
1978-1980 Iranian
Revolution and
Iran/Iraq war: $70
1990-1991 Persian
Gulf War: $30
9/11/01: $24.90
1/11/02: $19.08
6/7/02: $22.31
3/21/03 Iraq Invaded:
$27.18
1/2/04: $28
10/1/04 Gulf Hurricane
Ivan Hit: 41.62
1/7/05: $35.16
9/2/05 Gulf Hurricane
Katrina Hit: 60.75
1/6/06: $55.12
1/5/07: $54.63
6/1/07: $65.37
9/7/07: $71.42
11/2/07: $86.02
1/4/08: $92.93
4/4/08: $98.39
5/2/08: $110.21
5/30/08: $126.06
6/6/08: $138.54
So a year ago, the price of a barrel of crude oil was $65.37, and in the past year it has more than doubled, and is currently bouncing around in the $130s. What major events or political tensions have occurred over the past year which could have led to this increase? Tensions in Venezuela, Nigeria, and Israel versus Iran, demand in India and China? None of these are much different now than they were a year ago, and can’t justify a 100% increase in crude oil prices. World crude oil supply has increased more than enough to meet any increased demand in the past year. The weakness of the dollar? It was worth $1.25 Euro a year ago, and now is worth about $1.55 Euro, about a 38% decline. But this also does not support that 100% increase in crude oil prices. It might support an increase to about $90 a barrel, but that still leaves about $40 a barrel due to pure speculation.
Mr. Saft, do you really want crude oil traders to “initiate trades beyond CFTC jurisdiction” to avoid increased costs when many are having difficulty getting to work and dealing with rising food prices? Push the world’s governments too hard, Mr. Crude Oil Trader, and you will be gone, at least in a post-Bush world. You have seven months left to rip us off.
Ted Vaill