Originally Posted by miro
Demand is by definition the ability to obtain a good or service at a price. Now if a group of people collude to offer a fixed amount of product over a period of time then anyone who buys that product will be buying a fixed portion of supply. Therefore you can buy and sell that portion and if more people enter to purchasing equation the price goes up.
I really would have like to tell my fuel supplier that the price was imaginary but that wouldn't have got me anywhere.
And how exactly does this rebut anything I said other than the underlying intent.
I don't think the ME nations deliberately colluded to boost the price. They didn't attempt to restrain it but that's another matter.
AIUI China bought a lot of oil to bulk up its reserves. At the same time the economies in the west went screwy and the commodities funds and speculators piled in .
While this was going on the media and its commentators were assuring themselves that this increase was down to peak oil and anticipated increased sustained demand from the likes of China and India.
One of the nice things about futures is that you can genuinely hedge risk if you are dependent on a commodity.
The problem is that it allows commodities speculators who are not genuine consumers to buy into future supplies and create additional demand. Overconfidence stoked the price and created a massive bubble.
The rise sustained itself for long enough that genuine consumers had to start responding by hedging at higher prices. And so the spiral went up.
Unlike a genuine consumer the speculators end up having to close off their positions and put the commodity back on the market. Meanwhile genuine consumers had started reducing consumption in response to the price and the economy. The bubble burst.