Rising Oil Prices: Wall Street Is To Blame
Continually rising oil prices are causing analysts to worry about the global economic recovery.
Today, President Obama is to unveil his plan to open oil and natural gas drilling off the Atlantic Coast and Gulf of Mexico. The purpose of the plan is to reduce America's dependence on foreign oil consequently helping in keeping prices down for US consumers.
The main cause of worry is the reason behind the rise in price more than the price rise itself. It is being reported that the rise is not based on market supply and demand but it is caused by Wall Street investors.
At the pump the prices have continually risen from $1.84 in January 2009 to $2.67 by year end.
In a recent report, Barclays Capital said, "Overall, U.S. oil demand is definitely improving, laying the foundations for a broad-based recovery ... notwithstanding the weakness in Europe,". Further it says, "We continue to see oil prices consolidating in its current $75 to $85 range and on course to gradually move higher to $80 to $90."
If there is less usage of oil by global economy and supplies are at a good level, then why the high oil price at $80 a barrel?
Oil analysts say, it is because of the investors not the people using it.
msnbc.com quotes oil analyst Peter Beutel at Cameron Hanover, "The sovereign wealth funds, college foundations, union pension plans — all this big vested money has been sold on the idea that your investment portfolio is not complete without 10 percent in commodities,” .
He further said, "People are using oil as a store of value rather than as a commodity,”adding, “It’s the investors who are buying.”
Wall Street has been advising investors to grab oil as oil is being looked at as a hedge against dollar losses in future.
