It's been an interesting couple of days. After the explosions in London, oil dropped in price by more than $5 intraday. That's a huge drop. Then it bounced right back up again when people realized there's a hurricane headed for the Gulf. Then the price mellowed a bit when it looked like the hurricane would peter out before causing much refinery/oil rig damage. I wonder what all that fluctuation did to the hedge funds. Did it catch them off guard like when GM's bonds were downgraded and then GM was saved by buyout talk? I'm willing to bet that some speculators got taken to the cleaners yesterday but it may be awhile before we get the story.
The other thing that is interesting about oil is the talk about what is driving up the price. The price of oil by the way is at a record hit this morning of $62 a barrel. The talk is that if it is driven by demand, then that's a good thing and price is irrelevant. The logic being that demand means the economy is strong and business will be able to afford higher fuel costs. If the price of oil is high because of supply, then we're in deep doo doo. I'm taking the uneducated guess that it is in fact supply. The reassurances by the Saudis that they can turn the spigot and increase the flow are hogwash. They are at capacity now and their supply is on the downward slope. Nobody knows when we'll reach peak oil. Many I've read believe it will happen between 2003 and 2015. The only clue that we'll have of when we reach is a fluctuating oil market. That's why I think we're there now.
