That is the big question. Think about this - the price of oil spiked just prior to this. Is is possible that entities in the middle east jacked up the price of crude in order to amass a huge sum of money specifically for this purpose? Given Obambi's friendliness towards our adversaries, they could very well have played a major role in this. Iran, Syria, and a few others would stand to gain from having a 'friendly' in the White House.
It's amazing to see how such techniques are so effective.
No-speculators drove up the price of oil-Lehman had a hand in it also. No conspiracy only insatiable greed and high tech gambling by traders.
‘We can obviously discount a demand growth of only 2% per year as the main factor. The weakening USD is a major cause; but what is feeding the balance of oil price growth? No oil buyer has been told to, “Come back next week with your tanker.” If the UN-JODI is to be believed then demand by the top 30 nations declined 1.8% from Feb.2007 to Feb.2008. But over the same time period the price for oil increased 59%. Given that demand is modest to declining, according to the reporting-agencies, and the supply of oil is always available, what can account for this pricing disjuncture? Especially when Carl B.Weinberg [chief economist, High Frequency Economics] notes that, “many analysts are now thinking that fundamentals support a price of $70 to $80 a barrel [“Coming: Cheaper Oil and a Stronger Buck,” Barron’s, Mar.24, 2008].” While the statement [June 6, 2008] by Israeli Transportation Minister Shaul Mofaz, “If Iran continues its nuclear arms program we will attack,” does not calm the oil market, it is a transitory event. The answer lies in the commodities futures, index market.
‘The traditional futures-market participants, commodity buyers and producers, trade oil in order to manage the risks of rising or falling prices in their own businesses. But there is another category of participants in the oil market. It is those who began to view physical oil merely as a financial asset within a portfolio; these are the institutional-investors or index speculators.
Hiding as commercial accounts, thru a Commodity Futures Trading Commission exemption to avoid speculative position limits, these institutional-investors use commodities index-futures to hold positions in oil. But not as traditional buyers of oil would, but as financial speculations. This feeds the demand side, without ever, actually demanding oil. Eighty two percent (82%) of WTI futures [net increase from 01/01/03 to 03/12/08] was purchased by institutional-investors [Testimony of Michael Masters before the Committee on Homeland Security and Governmental Affairs, U.S. Senate, p.3, May 20, 2008].
He further notes that Index Speculators “never sell” their positions but, “roll their positions by buying calendar spreads.” True, their positions are closed but then they are continuously reopened. According to Michael Masters the increase in institutional-investor position’s on WTI futures increased 539% over five and one-quarter years [102% per year on average]. Momentum in price attracts attention and so more and more institutions enter trades, ratcheting the price upward. How can experts claim that such an influx of non-traditional buyers into index-futures, at this magnitude, does not effect spot prices?
Answer: they cannot. The pricing signal that index-speculators are sending to the spot market is a false signal. Their financial demand is only for oil futures, not barrels of oil. For persons to claim it is really the huge demand [2% per year + marginal decline] or supply disruptions [that never happen] is to be otherwise engaged. When oil commodities futures index prices rise the spot price must also increase to avoid contango. The degree of self-interest in this issue is very high; what that will mean for financial reform is left to the cynicism of the reader.’
Funny notes on the movie:
About this title: Alan J. Pakula directs the political thriller Rollover, produced by leading lady Jane Fonda's production company, IPC Films. Featuring a racist plot and negative stereotypes about the Arab world, this film reflected the American fear of the Middle East prevalent in the early '80s.