Jul
18
Supply, Demand, and Offshore Drilling
Filed Under Markets, Oil, Politics | 3 Comments
The oil markets have seen drastic rises in prices over the last few months, as short-term trading volume has seemingly trumped fundamental pricing based on the expectations of supply and demand. At least that is one opinion.
The Wall Street Journal today published an editorial written by the Senate minority leader, Mitch McConnell, claiming that this is truly a market driven by ailing supply. He goes on to put his, and his party’s support behind a bill proposing to cut down on both supply constraints and consumption, as well as tackle the issues in the futures market which have lead to such volatile price swings.
Ah, but if this is really an issue of supply and demand, then why attack the traders? It seems illogical to propose both of these mandates. First, go after the traders who are punishing the American public through the increase in gas prices (remember, he claims it is simple supply and demand economics). Second, legalize offshore drilling to alleviate supply constraints, accomplishing the same ends, but from a completely different viewpoint. In all fairness, shouldn’t the answer be just one or the other? Read more
Jul
11
Crude Bulls Skip Sleep; Fannie/Freddie Testing The Extent Of Their Solvency
Filed Under Markets, Oil, Real Estate | Leave a Comment
After a late day rally in the crude futures markets on Thursday, the bulls pumped the price of oil up nearly another $5 overnight, to $146.xx.
Fannie Mae and Freddie Mac are down nearly 50% overnight, valuing the equity in the firms near $5B on TRILLIONS of dollars of assets. The implicit guarantee from the American taxpayer may soon turn explicit, as capital injections will become necessary in the near future. There is no doubt about it; the American taxpayer and the Dollar’s strength are on the hook.
And the trading day is only beginning…