posted on Sep, 5 2007 @ 05:35 AM
Originally posted by JacKatMtn
I know alot of people hate Fox news channel, but in the business block today they were discussing the possibility of $100 a barrel on the basis of the
forecast that there will be 6 more major hurricane type storms in the gulf coast this season, threatening (the loop I guess), this is the first time I
have heard of this, raising barrel prices on a prediction?
Looks like maybe FOX was over-sensationalizing the news in this
. Since oil is
sold in the futures market as a means of avoiding potential loses, some seasonal risk premium is expected. Companies selling oil contracts for October
delivery, will lose money if the market price in October is higher than the contract price. So major sellers are sensitive to any events that could
disrupt future supply and put upward pressure on prices. With respect to oil, it's usually an act of God (weather), or geopolitical instability such
as rising tensions, terrorist attacks, insurgent attacks on oil infrastructure, or outright acts of war.
Everyone expects oil to react when tropical storms achieve hurricane status and head for the Gulf. If production is flat compared to demand, the surge
should even be stronger...but an excessive risk premium based only on the threat
of phantom hurricanes would be hard to rationalize. Besides,
from current price levels...wouldn't it take a major incident in the Middle East, and
massive downstream damage from a CAT-Katrina hurricane
to justify a $25-bbl jump in the price of oil
In any event, thanks for pointing this out...anytime pro-administration FOX spotlights anything
to do with higher consumer prices...it bears paying attention.