Contango
The oil-world seems quiet and predictable at the moment: demand or expected growth is going down, prices seem to stay consistently low, many projects are being cancelled or delayed and whilst no-one seems to know where this is all heading, the expectation is that it will stay like this for the coming time.
As the global economy takes ever more beating and the “correction” is now turning out to become a global economic crisis of which, according to some analysts, we have only seen the beginning, and trillions of dollars are spent to try to prevent a complete melt-down, there is one “inconsistency” that keeps amazing me.
It can be seen in the numerous “investment”-newsletters, it can be seen in the storing of oil due to the discrepancy between the current oil-price and the expected oil-price later this year (the contango), and it can be seen in the regular attempts to move up or down the oil-price for silly reasons: speculation.
Whilst trillions of dollars are “created” to be invested in an economy in downward spiral, investment-letters are advising how to profit from the crisis. In another country the banks are “betting” against their own country and currency, because it is easy to make profit. Short-sellers are still active in pushing down markets to make a profit. And so there are many more examples.
How long can this still go on?
Isn”t it that in many ways “the Market” has grown over the last decades from an original market-stimulant into a gigantic usurping society of profiteers and parasites, becoming a danger to the stability of the world and the world-economy? It is as if “the Market”, which was part of the world-trade-system, and meant to facilitate trade as a service-industry, has grown like a cancer and ballooned itself, with metastases everywhere, taking over, and gradually suffocating, their host, and reason for existence.
And as a small group of people has become very proficient in “guiding” this “monster” (as former IMF-director and now President of Germany Mr. Horst Koehler called it), we have landed in a situation in which whole countries and numerous companies are dangling at the mercy of the industry that is meant to serve them. And the “mercy” is determined by politics or greed or profit-seeking, all in extremis. This is one road to disaster.
The proposal from Mr. Sarkozy to come to agreed prices for oil and many other commodities was therefore very interesting, as it would not only constitute a novelty in the sense that there would be an agreement between producers and consumers, but it would cut out huge amount of speculation-opportunity and therefore volatility. This again would allow for development of projections for investment as stability and predictability would reign again. And this would bring also stability in prices, development-possibilities, and, if there would be agreement for fair prices for commodities of which the profit is now mainly one-sided, social development and cultural and social stability and probably even peace.
But of course this would mean that a very large group of people that have made it their way of life to extract as
much profit as possible no matter the costs to others would become redundant.
Which is probably the reason why we haven”t heard much of the idea anymore, although it would have immense
benefits to the rest of the world.
The question is however, how much longer we can afford the current “out-of-balance” system.
Stay tuned,
Alexander
