This is a great article on why oil is so high...

http://www.foxnews.com/story/0,2933,166038,00.html

 

I agree that speculation is approximately 30% of the price of oil right now, maybe higher. The sad reality of it is we are stuck with the inflated prices until the "bubble" pops. We can expedite that pop by consuming less and putting down pressure on the price, even more than is already happening. That would get the hedge funds in faster and their short positions will cause it to tumble down. This bubble is hurting "main street" people just as the housing bubble did. My wife and I can't justify $500K+ on an 1800 square foot house in the mountains where we would like to live. The speculators and cheap money drove the price to those levels. Now the bubble popped, we may get a deal yet. In some areas of California the prices of houses has dropped 50%. They are actually coming down to levels real people with real incomes can afford. I do not wish ill on anyone, but I will be madder than a hornet if the government bails people out of financial obligations they signed and supports inflated housing prices.

I will be equally angry if the government tries to bail out any more investment houses which facilitate these speculative bubbles, or worse yet, instigates them.

We need to hold fast and try to individually put downward market pressure on energy prices. Then our collective efforts may pop this bubble quickly and we can all get back some sense of security, jobwise and personally.

Good luck folks! Let's get it done!

 

Wow! that's one of the most common sense posts I've ever heard. I've never thought of the parallel between housing and oil but I see where you're going. The only reason I don't completely agree with you is that oil is a more global commodity and the price rises and falls with the demand on a much larger scale. Of Course, housing is a global commodity too, but, the price or availability of a house in Thailand doesn't affect the United States. On the other hand, with China growing at a staggering 10%/year, we (American Public) only make up a very small fraction of the global demand for oil. Until the entire world lightens the demand for oil, the price will keep going up. Don't think I'm saying, "We can't do anything about it anyway, so "f" it" I think we should still do all we can to reduce our consumption and find alternative energy sources.

 

The charts on internet stocks in 99, real estate in 05/06, and commodities lately all have similar patterns. In each case, the bulls screamed "its a different market, and nowhere to go but up...."

Well...with gas 3.66 a gallon, are YOU driving as much? I have held off repairing my remaining jetski, drive less in town, and don't burn nearly as much avgas with my plane. Are YOU making similar changes? I'm sure the demand curve is coming come down--at least in the states.

 

I've read where our cuts in consumption (nearly 2% at this point) are just about canceling out China's increased consumption. Contrary to popular belief, oil is not a supply/demand commodity. It should be supply/demand, but due to the rampant "speculation" in the market, by hedge funds, it only takes a Kenyan farting in the Sahara to give reason to run up the price...based on, you guessed it, speculation.

 

Most people who are trying to understand the reason that oil prices are so high, are missing a key piece of the puzzle. The fact of the matter is that all commodities have risen significantly over the last 5 years or so. While some of this is due to speculation, a greater amount of this has to do with the huge devaluation of the U.S. dollar. Gold prices have surged along with oil, not because of pure speculation, but because the dollar simply does not go as far in the worl markets any longer. While the powers that be (i.e. The Fed) seem to think that devaluing the dollar is not necessarily a bad, thing because American goods are now cheaper in overseas markets, the fact of the matter is it is straining many businesses.
The bottom line is that the price of oil will not go down until the value of the $ will go up.

The following is an exerpt from a financial new site, that is an eye opener.

"Oil prices have increased sharply in dollar terms especially from 2003, going up by nearly 2.5 times between 2003 and 2007. This has obviously contributed very significantly to the wealth of oil exporters, and allowed them to generate balance of payments surpluses and build foreign exchange reserves, which have then been invested dominantly in dollar assets in US markets. However, this is also the period that the US dollar has been depreciating, especially with respect to some of the other major currencies such as the euro and the Japanese yen. As a result, the change in oil prices has been less striking in terms of these currencies than in terms of the dollar. In the two years between January 2006 and January 2008, dollar oil prices rose by 46 per cent but in euro terms they increased by only 17 per cent."

 

But ask yourself, are the Chinese paying less than we are for oil and how long can they afford to purchase and use as much as they are?

 

must be nice to have a jetski & an airplane.......................

 

Didn't you just spend like 6K to muscle up your S2000? You gotta a good deal brotha, you're marrying into money. Live it up.

 

Yes,
My wife and I couldn't decide on the Lexus or Mercedes SUV so we bought both. It's a shame, because my two son's 4x4s had to be put in the fourth garage bay (the farthest walk to the house) since I'm not moving the ski boat.
We're all coping as best to be expected in these times....