Friday, October 06, 2006

Theories Abound as Oil Prices Fluctuate

This is only one of the theories broached in the article
Treasury Secretary Henry M. Paulson Jr. has asked his former partners at Goldman Sachs to dump gasoline futures to drive down pump prices and boost GOP prospects in November.

Goldman runs the most important commodity index, which serves as the basis for about $60 billion in investment funds. And the firm has been selling gasoline holdings. "Goldman has been liquidating its gasoline position, and that's put a lot of pressure on prices," said Citigroup Inc. oil analyst Doug Leggate. "It's a very large part of why gasoline has fallen."
Other theories include the debts that the Saudis owe the Bush family, but not mentioned in my quick galnce over is the fact that the US govt has not been buying stores for its winter oil subsidies for the poor and elderly, which it usually does at this time, for cost-savings reasons. This can have a huge impact in a commodity market where the price is defined by the price of the last barrel of oil currently in demand.

In a market system, all prices are pegged the same, so the first sold costs as much as the last, so if the last exceeds supplies all the prices rise precipitously. Hence the influence a relatively small amount of oil demand can have on a market system. Of course, as any economist knows... you must pay the piper in the end, but as far as the Bush crime family is concerned, better you pay them (more) after November than before.