Current data has linked recent indications of global economic slowdown to outsized petroleum spikes and indirectly speculation. Over 70% of all market participation in the oil futures market is speculative. There have been no shortages, but to the contrary. Now, actual demand/consumption has been sliding down. The push of prices up has been linked to speculation on increased demand down the road - at least 3 to 5 years - particularly for China, India and other developing economies.(This anticipated hike in demand though does not particularly take into consideration higher efficiencies, alternatives and reductions in gasoline subsidies in places like China, Indonesia etc). It is speculation upon speculation. Rather than the fundamentals of demand, major players in the market as Goldman Sachs have been making futures projections on basis of the financial markets demand. In effect oil and petroleum products are traded more like stocks in corporations and less like items that are to be consumed in order for value to be realized by producers. Shocking the Speculators? The IEA, International Energy Agency, today helped coordinate a sudden release of strategic oil reserves. The amount was not particularly high, only a few days of global consumption, at least as can be seen now. However, it was a way to show that “we can,” a way to surprise and break the speculators’ confidence that prices generally would only go up. Saudi Arabia Seeking to Regain Controls over Brakes/Gas Pedal at OPEC? This probably also has been coordinated with Saudi Arabia which has also been concerned regarding the impact of untenable prices upon its huge reserves for decades to come. Counter to the Saudi position, countries as Iran, Venezuela and Russia are more inclined toward immediately higher prices for both monetary gain and to enhance their global political leverage on various issues. The Saudi Oil Minister was upset by defeat he suffered a couple of weeks earlier at hands of OPEC hardliners as Iran and Venezuela in his efforts to increase OPEC’s official production quota. Part of today’s coordinated IEA action is to show “who is boss” within OPEC, and I believe Saudi Arabia has been fully engaged. Behind the scenes, Saudi Arabia has committed to refill the draw downs in the “strategic petroleum stockpiles” of countries like the US (which announced a 30 million barrel drawdown). Will This Translate to Lower Prices to Public? Several strange considerations though in all this. As there is now no consumption demand and thus no real need for all this additional release of petroleum supplies, where, how and even will it actually be converted into refined petroleum products. In the US and most other free economies, the refining is performed by private firms: Will they actually purchase and/or take delivery to refine, and will this translate into lower prices for the public, or will it become mostly higher profit margins for the refiners? The Saudi’s also are not acting as a charity by pushing to stem higher prices. They understand the real risk for their huge reserves if petroleum alternatives become dominant and more immediately higher oil prices plunge the globe back into another recession, or perhaps even worse, deliver an extended period of stagflation – low/no growth but higher inflation. That hurts Saudi Arabia at the level of potential dampening demand for petroleum over an extended period and undermining the huge investments sovereign funds and others have made in North America, Europe and rapidly developing Asia. From today’s IEA action, it appears that there is a shared view that spiking oil prices were as much responsible, the trigger, for the 2008 tumble into recession as housing bubbles. The contagion or cascading or domino effect (select your metaphor) once started is difficult to stop. Housing, especially in the US, has not recovered yet and does not pose another “bubble” problem for the moment, but to the contrary. However, the Greek and “PIGS” economic crisis stands as a new risk that could mutate with spiking energy prices into another recession and/or loss of confidence and banking/financial crisis. Prudence regarding petroleum prices and speculation was another reason for a more activist, even preventive measures. US Federal Reserve Chair Ben Bernanke made the link also between higher energy costs and lowered US economic growth forecasts perhaps signaling this counter to speculation and spiked prices. "Predatory" Market Behavior: What if this coordinated action does not sustain over time? Is there already further consideration of direct measures aimed at speculators themselves (rather than speculation)? The free markets have themselves mutated or come to favor over the last decade more bold and predatory behavior by hedge funds and other participants. LAST ARTICLE- “Is there Oil Price Manipulation or Speculation?” - diplomaticallyincorrect.org/films/blog_post/is-there-oil-price-manipulation-or-speculation-by-ambassador-mo/27510 By Ambassador Muhamed Sacirbey Facebook Become a Fan at “Diplomatically Incorrect” Twitter – Follow US at DiplomaticallyX Go to our “INTERNATIONAL FINANCIAL CRISIS” channel at: diplomaticallyincorrect.org/c/international-financial-crisis