July 2008 Vol. 6 No. 7
Oil Bubble on Brink of Major Bust
Te oil bubble is about to bust.Financial Intelligence Report has long argued that the present bubble in oilis not driven by skyrocketing demand and shrinking supply, as many pundits would have you believe, but by speculators driving up the price o oil to linetheir own pockets.Our view is gaining more and more currency among the experts. FIR rst warned o this market manipulation nearly three years ago ollowing HurricaneKatrina, when the run-up in crude oil prices hit $70 a barrel at the time.Back in 2004, when FIR was just launching, we alerted investors that oil —then selling at $29 per barrel — was about to spike. We predicted that oil wouldhit $60 to $70 per barrel within 18 months. It did just that. At the time, we did not link the oil price spike to speculators. We noted thatreal ination — not reported by the U.S. government — was accelerating. Suchhidden ination was weakening the dollar. As the dollar collapsed, we posited,oil, which is traded in dollars, would skyrocket. Bingo, it did!But the price jumps we have seen over the past 15 months, where oil hasdoubled rom that $70 a barrel to almost $140 a barrel, has little to do withination and much more to do with a mania o speculation. A back-o-the-envelope calculation shows us that, as the dollar has collapsedby 40 percent over the past seven years, oil prices could reasonably double.But oil has increased by almost 400 percent in the past ew years — and itis up almost 700 percent over the past decade. Ination can account or just araction o that price increase.Now, with prices nudging $140 a barrel recently, the commodities marketregulators, such as the Commodities Futures rading Commission (CFC),have done nothing to stop these market manipulators.Tere have been many cases o manipulation in the commodities marketsin the annals o time. Perhaps the Hunt brothers’ manipulation o the silvermarkets in the 1970s and early 1980s is the most inamous example.Troughout the 1970s, the Hunts gradually acquired control o over one-third o the entire world’s supply o silver. In their attempts to manipulate theprice o silver utures contracts and bullion, silver rom September 1979 to
Key Points
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How speculation — not realdemand — has pushed up oil
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Why OPEC and the Saudisare right on supply
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Te role o the dollar in highoil prices
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Axel Merk on the comingination inerno
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Hans Parisis reveals the South American giant every smartinvestor should consider
PLUS:
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Our portolio review andactions to take now
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Tis month’spassword is: oil
(Please remember to uselower-case letters.)
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