9-3-09 by dugan
If an oil giant finds a "giant" oil discovery, do oil prices respond with a sharp drop? Nope, because oil prices aren’t following anything except the stock market. BP trumpeted a big find in the Gulf of Mexico this week, and oil markets responded by staying about as flat as the Dow Jones index.
Granted, oil from BP’s new deep-water find won’t hit the market for a few years, but at worst it will keep the company’s oil production level as old oilfields decline, even if the company doesn’t find more oil somewhere else. Oil futures markets are supposed to be looking at the future. And any firm indication that world supplies of oil are growing, and at least aren’t shrinking, should push prices down.
It’s this detachment from supply and demand that is pushing calls for stronger regulation. The message is reaching deeper into the mainstream–for instance, yesterday the Bangor, Maine Daily News issued a call for tougher energy market regulation, with an eye on rising heating oil prices in a place where winters are snowshoe-frigid. As the editorial said in its conclusion,
[W]hen crude oil goes from $147 a barrel to $30 and then to $70 in a 12-month period, something is not right.
Yep, no fancy language. Just Yankee truth, seeping deeper into public consciousness.