|
Imagine you are an airline
burning $25,000 worth of av-gas per minute (Continental/United). And you think that there could be supply disruptions and the price of oil might go up significantly. Don't you think you'd want to buy a contract that would fix your price for future delivery of a large portion of your expected needs as a hedge against the worst happening. And when everyone does that, then the price of the futures contract goes up. And of course financial speculators, loving a volatile market, will speculate exacerbating the rise in prices.
Add in the fact that oil companies have been selling off refineries over the last few years so now refineries are having to buy and so they are hedging too.
And when the contracts are exercised and it comes time to pay for delivery, the price of the thing that is produced using that gas goes up.
And the BRICs are adding how many cars a day to the world demand for oil.
Its the natural supply and demand free-market thing.
And no president would ever want gas to go up as that is one of those things that gets presidents to be one term presidents. Some of you are too young to remember the Carter-era gas lines.
|