Cialis Cost Low
Philip Verleger has taken it upon himself to try and rebut our report The Accidental Hunt Brothers – Act 2.
Click HERE for his rebuttal.
Several people have asked us for our response. Well what can you say? Other than calling us names he really just gives an alternative view for why crude oil prices have shot up and then plummeted.
So this is what I will say:
(1) We believe that the price of WTI crude oil futures contracts is determined by the supply and demand of WTI crude oil futures contracts – it’s that simple.
There is a huge new source of demand from institutional investors who want to buy crude oil futures contracts and that affects the price as much as demand from any other source.
(2) Spot prices for physical oil are based off of the WTI crude oil futures price, so ceteris paribus a $1 increase in the “paper barrel” price will result in a $1 increase in the physical barrel price.
(3) Both the suppy and demand for crude oil are highly inelastic especially in the short run. When crude oil prices rise by $10 or $20 or $30 per barrel then the world is stuck paying that higher price until eventually they can sell their SUV (which just plummetted in value) and buy a Prius (which are in short supply).
(4) We don’t see much if any inventory growth because inventory is held in the ground. If crude oil starts piling up then the producers can simply pump less. They have no incentive to grow inventories and see crude prices drop as a result.
We’ll just have to leave it up to our readers to decide for themselves which they believe is the more plausible explanation.
Our report “Act 2″ was really meant to be read in conjunction with the larger and more comprehensive report “The Accidental Hunt Brothers.” I just gave 4 quick bullet points in this blog post so if you want greater detail then I would encourage you to read the big report – cialis cost low.
If you want more information regarding your point in #2 (reflexivity of spot and futures prices), check out here and here.
Oh, and futures contracts dated 6 months and beyond should be banned according to this study. The premise being, long-dated futures contracts have a higher correlation to spot prices than they do with actual supply and demand variables. The only way that can happen is via manipulation.