TV Magazine 60 Minutes thinks they have the goods. They are sure oil prices defied the law of supply and deman so that evil investment banks could profiteer. Steve Kroft is clueless as usual. Supply and demand does not mean everything is always in balance depending on what that balance is. Maybe at certain points markets reflect an oversupply of stupidity.
Never ascribe to malice that which is adequately explained by incompetence
The Bonaparte quote is overused and I’m late to the game with it. Still, we can employ it to start. The big boys at the Morgan and Goldman Deutsche Bank thought they knew everything about everything as did all the hotshots throughout the financial world. They took positions in a commodity that few can do without. Were they trying to go all Nelson Bunker Hunt on the world. Beats me, but the results were the same.
How much of their activities caused the run up in oil prices, I would guess a lot. It’s as if someone in the office came in on a Monday and said, “Hey, I read this great book last weekend called “The Long Emergency” and there’s almost no oil left. If we can get it all, we can, “Dare I say it, rule the world.”*
Actually, they started their quest in 2004 before Kunstler published his book. In May of 2008, well before prices collapsed, someone noticed. The blog Peak Oil Debunked (PO) posted about how Morgan, Goldman and others were putting the stuff by to make a killing. He wrote when prices were $130 and were poised up ever up until $147 and then the Masters of the Universe had us all in the palm of their hands.
Er, no. We have seen what has happened to the price those stone geniuses were betting on. They must have lost big. I just wonder how much of the bailout, if any of it, was to cover stupid bets that if there Hahvud Economics Doctorates or (across the Charles) the B School MBAs should have figured out was bound to happen.
On commenter on the PO site mentioned a 15 May 2008 Reuters article,
"JPMorgan to start physical oil trade, eyes $200 oil"
As they say on the Guinness commercial, Brilliant.
Our family only gets gas stingy cars and so my mantra became is this trip necessary. Other folks sold the SUV and boom, demand collapsed enough to kill the game. Supply and demand came back into balance, not. The geniuses still can’t get rid of the stuff.
That still doesn’t stop Kunstler from being a doomer, but I don’t feel all that well about the economy either.
I should mention as an aside, back in May, when PO posted, some commentters called him an idiot. In the words of Brenda Lee, "Who's sorry now?"
*Apologies to Victor Spinetti and the Beatles movie, Help!.