Abstract
Why? Just a couple of years ago, the WTI oil price was around $10 per barrel. Much of the annual world statistical data looks fairly normal, but the crude oil price tripled. Our answer is that the petroleum industry has invited in the financial community to help set the future energy price. In the late eighties and early nineties, many “points” were established where a trader could conveniently make paper (financial) energy trades. The Industry has created futures markets, WTI at Cushing, Oklahoma, Brent at Rotterdam, Natural Gas at the Henry Hub in Louisiana. Fuel Oil and Gasoline in New York harbor. Even Electricity is traded at select points in the U.S. These crude oil futures pricing signals are mostly based on the industrialized nation’s current oil inventories, and on market psychology— but certainly not long-term supply and demand trends. Today’s paper energy traders have zero vested interests in the long-term energy future.
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