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Re: Did Speculation Fuel Oil Price Swings?, 60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand - CBS News
From: David Farber <dave () farber net>
Date: Tue, 13 Jan 2009 04:50:54 -0500
Begin forwarded message: From: "Ed Gerck, Ph.D." <egerck () nma com> Date: January 12, 2009 8:57:39 PM EST To: dave () farber net Cc: ip <ip () v2 listbox com>Subject: Re: [IP] Did Speculation Fuel Oil Price Swings?, 60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand - CBS News
When access to cash was easy, companies in the sector were able to generate cash flow by continuously /borrowing/ and /repaying/ money with a cost (interest rate) that was lower than the return from the relentless price increase that was /created/ by controlling and reducing the fuel supply. When credit dried up, the companies were forced to sell fuel in order to meet their obligations, when price started to drop not because demand dropped but because cash was needed by the seller.
But not just with oil companies. The financial sector of many companies was also able to generate more cash than the production sector. The present crash was mostly a "reset" to a saner model, but not for all actors. This perverse inversion, where sales is not as important as the financial schemes that are created to exploit the moment, has been the major factor sustaining insurance companies for years.
Best regards, Ed Gerck -- <www.gerck.com> ------------------------------------------- Archives: https://www.listbox.com/member/archive/247/=now RSS Feed: https://www.listbox.com/member/archive/rss/247/ Powered by Listbox: http://www.listbox.com
Current thread:
- Did Speculation Fuel Oil Price Swings?, 60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand - CBS News David Farber (Jan 12)
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- Re: Did Speculation Fuel Oil Price Swings?, 60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand - CBS News David Farber (Jan 13)