Happy National Pancake/Leap Year/Week before Super Tuesday Day, all. It has been a turbulent past few months and not just in the oil market. I will get into why very shortly but, for now, let’s just say that after a long and dark winter, I am once again available for dancing in the streets. Without any further cryptic remarks, I’d like to share an interview I just did with The Global Journal, based in Geneva, which rang me up to discuss ‘The Asylum’ and what the future holds for the energy market and gas prices during this, our illustrious Election Year.
(Q portions courtesy of Janine Huguenin-Virchaux, the magazine’s books and culture editor.)
Your book mentions that “the market is no longer reflecting supply and demand.” What is the use of a market that does not reflect the true price of oil? Do we need new hijackers?
That’s a great question – do we need new hijackers? If we could get some hijackers that could take back the market so that it does reflect supply and demand more clearly, then I would say yes, we do! However, I would also say that there is a serious debate going on about the extent to which price does reflect supply and demand. I think there is very good reason to believe that the price does not reflect it anymore. There is also a very technical reason for what has been going on that has not really been acknowledged or understood by many people. And that is the relationship between speculation and price discovery. A lot of the information that I get is from people who read the book and then they come to me and bring me stuff that nobody seems to really know about.
A lot of these guys are just regular traders who trade physical oil and feel that supply and demand is not reflected in the price correctly anymore. Whereas their entire lives – some of these men and women have been trading oil for thirty years or more – they feel the price did reflect it. So they believe there’s a huge difference in what they are seeing today in terms of the market fundamentals versus the price. And what they used to do was see price and fundamentals fit together better. They see a lot of distortion happening now. A lot of these people are concerned with that. I want to say, it’s not all about making money for these people: some of them look at this and say “Oh my God, it’s not acting the way it used to anymore and it doesn’t look like it’s headed anywhere good.” And that is aside from the fact that trading has become so ferocious that it is more about preserving a global casino than about supplying oil to people who need it.
That’s the problem. The casino aspect overshadows everything. Most of the people who play this game don’t want oil. They just want to play the game.
What is the alternative? I mean, these are the people who are speculating on the price of oil. Is there anything that can change to make it different? To make it less casino-like?
Yes, I think so. I am considering writing about this much more, the nature of speculation… Continue reading Q&A With The Global Journal: Oil Trading And The Casino Syndrome