Oil will not retreat till dollar stops collapsing – who is controlling crude prices?
Bill Jones
Jun. 8, 2008

The oil merchants of the world are saying something loud and clear. You cannot lower the real price of oil by making US dollar cheaper. The oil is moving inversely with US dollar and also with the projected US dollar in six months terms.

The correlation between oil price and the US economic data is very clear. The negative correlation is close to -0.86 on an average. What that means is that whenever there is a bad news on US economy, it impacts US Dollar badly. The net result is a jump in oil price. The dollar traded near a one-week low against the yen on speculation an industry report today will show the worst housing slump in a quarter century is weighing on the U.S. economy.

As US economy goes down, so does US Dollar and that is creating upward pressure on the oil price as oil merchants demand more per barrel of their oil.

Who is controlling oil price?

OPEC for sure but they are not the only culprits. India and China continue to subsidize oil for their own native citizens, Russia is not that eager to produce more oil and countries like Saudi Arabia and Iran are enjoying the collapse in free economy all over the oil because of soaring oil prices.

The oil price is controlled by five factors. They are : 1. Strategic reserves that drain free market oil supply. India, China, and America are building their strategic reserves.

2. OPEC is eager to compensate US Dollar weakness with higher oil price.

3. The oil intermediaries are gouging to make sure they can extract the premiums in the futures markets.

4. India and China continues to subsidize oil making demands in their own countries to massive levels.

5. The index funds, private equity funds and hedge funds have created a massive $50 a barrel speculation premium. Regulatory bodies have failed to react appropriately by imposing 100% margin on energy related futures unless they are commercial entities.

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