Oil Prices -- is this capitalism, or something entirely different?

[ZeaLitY]

Ever been to Jordan?

Nope. I'm guessing it's very cheap there too?

Nah, I just know someone who wants to go there. I was reading about it the other day; apparently they really try hard to be at peace with surrounding countries because of the huge chunk of their economy that comes from tourism. Petra would be pretty sweet to see.

[Lord J Esq]

If you want to learn something about oil, read this guy from one bookend to the other.

[FaustWolf]

It is readily apparent that Jerome a Paris has much to say about the producer-supply and consumer-demand aspect of oil's increasing price (which neoliberal economics classes have prepared me to understand), but I'd be particularly interested in any observations he makes regarding the role speculative investors are playing in his "Countdown to $200 a barrel." If anyone comes across articles focusing on that subject particularly, I'd super-appreciate a link. I will do the same, because it's a complicated subject I'm many do not understand besides myself.

Anyone know what happens when an investor "buys" a barrel of oil on the world market? Certainly that barrel of oil isn't set aside and taken out of the supply stream...is it?

[placidchap]

Just reading that prices of Wheat could be driven up by commodity speculators, too.  Nothing link worthy, just semi-related to the topic at hand..

[FaustWolf]

That's important evidence, placidchap. It just boggles my mind that I minored in Economics and not once, in intermediate macro and micro, did I come across the huge role speculators are playing in our economy. I'm going to have to research this topic more if I want a fuller understanding of just how our economy works -- this isn't classic supply-and-demand price determination, although the behavior of speculators seems to prematurely push price levels up to their probable long-run trends, at least in oil's case.

EDIT:
More interesting commentary: http://news.yahoo.com/s/ap/20080521/ap_on_bi_ge/oil_prices

Investors seized on the inventory report to push prices higher Wednesday, but traders interested in pushing prices higher are increasingly picking and choosing which news they wish to pay attention to, analysts say.
...
The dollar, meanwhile, weakened against the euro Wednesday. Investors see hard commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.

Many investors believe the dollar's protracted decline over the past year has been the most significant factor behind oil's rise from about $66 a barrel a year ago to today's highs.

It is as I thought then: like land, oil can be invested in as a value-retaining commodity, though this asset is a little more "liquid" than land. Oh hoh, hoh, just couldn't resist. In any case, an investment in land theoretically drives land prices up because the invested land has been "consumed" in a way, i.e., taken from the market. But I can't believe something as crucial as oil is diverted from consumers when an investor buys a barrel.

EDIT: Here's another potentially insightful article:
http://www.latimes.com/business/la-fi-traders21-2008may21,0,2916861.story