But there are several reasons why oil won't drop.
1. Quantitative Easing: All that money has to go somewhere. Correlations between asset classes are pushing towards 1.
2. The growth of the futures market: There has been a tremendous growth in prop trading, managed futures accounts, ETFs that track commodities, mutual funds that focus on commodities and real estate in a "real return" strategy. Oil futures need to have their trading curbed immediately (not eliminated, position limits, limitations on the type of players that can buy the contracts, etc). It's ridiculous that such a vital commodity can be pushed around by people with no interest in the underlying commodity.
3. Global commodity. We are not the only country that uses a lot of oil.
4. Refining capacity: The oil companies (at least domestically) have been strategic about their capacity for refining. They have abused regulations in an attempt to blame the lack of capacity on EPA regs so they can eliminate current regs. When they were buying up all the small refiners they could, there should have been FTC inquiries. The only refiners that I'm aware of currently are all captive of the big oil companies.
The diameter of your knowledge is the circumference of your actions. Ras Kass
Originally Posted by Iowanian
I'm just a little pussy from Iowa