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Just a few days ago the main powerhouses behind the EU met to discuss a joint effort to bolster the European economy and pull the EU from the brink of financial collapse. They all shook hands,...
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Friday 30th May 2008
Over the last few months we have seen the price of oil go through the roof, we have seen airlines reduce their flight numbers and more and more companies experiencing severe financial pressure, but who is actually buying all of the oil on the market? Who is sitting on the reserves which are definitely there?
While the newspapers are full of stories about oil shortages and the current and future impact this will have on the price of oil, the truth is that there is not a shortage of the ‘black gold’. The world has a healthy surplus of oil at the moment and new fields are opening up on a regular basis. Those market observers who have dug a little deeper into the rise in the price have found evidence of massive investment by the hedge funds – those market speculators who gamble on price rises – and energy companies taking out options to cover themselves.
This all means that oil is being held by many for investment purposes and against the energy company options to cover further rises, should they decide to take up their options. In essence, oil supplies are being monopolised by institutions which often have no viable use for them, something which is assisting with the current squeeze on demand. There is enough oil in the market, but not enough is going to the companies that need it. |
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