Word: oiling
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...Minister Nouri al-Maliki recently called for amendments to Iraq's constitution to strengthen the central government's power at the expense of the country's 18 provinces. This week, Maliki's rivals in the southern Shi'ite bastion of Basra submitted a petition demanding a referendum in the oil-soaked province aimed to turning it into a semi-autonomous federal region akin to Kurdistan...
...SIIC's political relations department. He would not be drawn on why his party is not supporting al-Fadel's initiative, and few other senior members of the Supreme Council would offer public comment. The Supreme Council holds very little sway in Basra, and would fear seeing its vast oil riches, key to the economic viability of their own "super region" project, falling under the control of a separate entity...
Translation: the banks were long on oil and probably helped effect high oil prices. But with these banks failing, and prices already declining, they too closed out those long positions and helped bring prices lower. Oil prices may have risen on panic, and fear may have played a role in their recent fall. The mechanism of the fall, however, was a massive liquidation...
...might you ask, does demand and supply of the commodity come into play? Maybe in an economics textbook somewhere. Perhaps the credit crisis will slow demand somewhat, but certainly not enough to split the price in half. True, recession may be upon us, and that might help justify lower oil prices, but that fear is not the real story behind the fall. Remember: it was not great prosperity that doubled the price...
This is not the story of oil as a commodity but instead the story of traders who transact in the future price of oil. These are the same traders who previously brought this price to record highs. The price of oil went up tremendously; the price of oil crashed. Unfortunately for consumers, the story is not over yet, and we're just along for the ride...