Back to the drawing board, the simple demand and supply theory is easily to be understood by all but in real world how to justify the right price, it is always not an easy game to play. What we can see the veggie sold on the super market or the equity shares listed in the stock market are just reflecting of the fair prices rather than the right prices. Same concept can be applied to the oil prices. There are always price distortions created by asymmetrical information that can be obtained in a fair and transparent way. The speculators are using the missing gap to make their nice profit.
Last week, Jim Roger, the king of commodities, said the oil price could go up to 150 to 200 towards end of this year. Also, Alexei Miller, the CEO of Russian oil company Gazprom told reporters at an event in France yesterday that he expects the price to rise to $250 a barrel by 2009. Based on their stunning predictions, do you want join the bandwagon. If you say yes, I will advise you to bring along your safety belt. I cannot rule out of any outcome, but to reach 250, it is a very remote possibility. We might see 150 a barrel later on but to sustain above this level is not easy. I would say the recent price behavior is just resulting from speculation rather than genuine demand pull.
As some of you may aware, inflation has already caused social unrest in certain countries, oil prices are no longer simply entertainment shots on the TV screen rather they are topics high in the agenda of respective Governments. If the recent reports that there are no substantial shift of real supply of demand of oil is right, the gradual stronger dollar could soon let the fair prices of oil settled around 100 to 120 level for not too long from now unless dollar are unable to find their way to move northwards.
Subscribe to:
Posts (Atom)