Analysis: Gasoline Price Rise is due to Dollar Decline and Wall Street Speculators

There is a story out in Taipai Times, Taiwan, that has linked the rise of the oil price in the international makes to a similar decline in the value of US dollar.

The rapid rise in the price of oil and the sharp depreciation of the dollar are two of the most noteworthy developments of the past year. The price of oil has increased by 85 percent over the past 12 months, from US$65 a barrel to US$120. During the same period, the dollar fell by 15 percent relative to the euro and 12 percent against the yen. To many observers, the combination of a falling dollar and a rise in oil prices appears to be more than a coincidence.

There is another article in FrontLineThoughts.com which has analyzed the problem to many speculators on the Wall Street. There was a shortfall in the supply of oil as well, as no country was ready to accept the Iranian oil.

While a large part of this week’s rise in oil was short covering (you can tell that from open positions), the supply of oil was down 7% from last year, even with demand beginning to fall.

The supply from Iran was hampered, as Iran is storing Oil in rented Oil Tankers.

For a few weeks now, observers have noticed that Iran is leasing tankers and storing oil in them. At about $140,000 a week or so, that is expensive storage. They have a problem selling their oil. Their oil is not very high-quality, and there are only a few places that can take it and refine it. India, China, and the US are among the countries with refineries that can take Iranian oil.

There was another problem with the speculative boom on the Wall Street that has caused the reduction in the supply of Oil. George Friedman of Stratfor says

“Today we started checking on how many tankers Iran had, and soon discovered that there is a serious tanker shortage. Lease prices have soared in the past few weeks. It is clear there are a lot of speculators betting that oil is going to rise to $150 or so and are willing to pay very high prices for keeping the oil on the seas waiting for higher prices. It is a speculative boom.”

Now isn’t that a disturbing sign. These speculators and hedge funds should be lined up and shot for trying to profiteer from poor, wary consumers.

Whats in store for the Future?

In the long run, the price of oil is invariably going to increase according to experts @ InvestorInsight.com

David Galland points out that Mexico, which supplies 14% of US oil, is likely to be a net importer of oil by the middle of the next decade, as their internal demand increases and production decreases. Iran will be a net importer within six years for the same reasons. Russia’s oil exports are down this year, as are Mexico’s. Energy costs are going to rise in the next decade, and maybe much sooner.

This problem is huge, and I am certain that greedy corporations are trying to hide new oil discoveries in order to increase their profits at the expense of the consumers. There are hard times coming out way…