Well, despite the catchy title, it is very realistic.
The prompt to write this was based on Oil Prices.
Why oil?
Never in 80 years before has there been so much oil in storage tanks in the U.S.
Demand for oil has not changed much if any and yet even at lower production levels, we produce more oil than can be sold, hence higher storage usage.
Yet the price of a WTI barrel has been going up as of late on the expectation that something is going to change like demand is going to go up 5% for the next year.
Well something is going to change !
The cost of storage is going to burn a whole in the pocket of investors. Think how long this oil in storage costs every month to keep and until there is lower production levels and some time to burn off all that is in storage, it will be some time, perhaps years, before all the excesses are used up. Meanwhile, a bunch of folks are going to loose there shirt storing it. (good news for the storage tank renter).
They are putting this in storage tanks anywhere they can find it and oil is traveling on rail to places it never traveled before. Those that have the surplus do not want those inventories to show up at the Cushing, OK storage facility as that would spook the trading price much lower because it is a benchmark for the storage capacity in the futures market.
Wall Street to the rescue… Yes the investment banks have a answer to that. They want to make storage a trade-able commodity. The investment banks own a lot of storage terminals.
The longer this goes on, the harder the crash will be. That is not good for jobs when companies go completely belly-up. Survival of the fittest yes, but who do you think will buy all the assets when they do. It won’t be Santa, but the folks who tell you that Santa is coming tomorrow.
I’m sure that the investment banks that actually are the largest oil traders in the world and also control the speculative news for outlook in the futures market will make some extra money offloading the huge inventories that they have at higher prices, spoofing their own investors. I do wonder if anyone tells them that the oil they are investing in is owned by the bank that suggests it as a good investment.
Yet just one more self generated “contango” the investment banks are good at.
All fine and dandy unless you are one of the investors.
So you believe in supply and demand. The tooth fairy will leave you the money you loose under your pillow tonight. Santa will have to haul it as it is to heavy for the fairy. Wait for it, it’s coming.
There is a large disconnect between real supply and demand and the virtual one that exists with the banks.
It does surprise me that people can be fooled over and over again.
I guess if you don’t learn your lesson after the second time, your not going to. But there is a huge conflict of interest of the investment banks, who control the speculative news and the investor they sell commodities to that they (investment banks) own.
If your going to play poker, don’t play strip poker if you don’t look good naked.
The investment banks would jack the price of reindeer nuggets if it thought they could sell them to you.
It is all about a legal market manipulation in the end. Remember ENRON. Remember those lobbyist who give large amounts of money to Congressmen and Senators and only expect a few little word changes in the legislation they pass. What a bargain. Who do you think hired all those smart folks that worked for Enron after they went belly-up.
Addendum 5/28/15
In a effort to hide WTI inventories from the futures market, oil is now being pushed to Canada for storage. While it is not against the current export ban to sell to or move it to Canada, I do wonder who is watching it from there that it is not sold to international markets.
Since 30 million barrels have been moved there in just a few months and the price spread between WTI and Brent Oil has narrowed, I do wonder?
I can only guess that it will not be long and there simply will not be anywhere to hide the oil in just a few months (Aug-2015).
Can you say “$30 oil” ? I’m not sure even that could burn off all in storage? With current efficiencies in autos, we will not see a large spike in demand like the past. When storage runs even shorter, it will cost even more to keep it stored and for how long?
It would be in the investment banks interest that no deal is signed on Iran Nuclear issue. I’m sure they are lobbying for it that way because that’s what they do. That keeps the Iranian oil off the market or we could see $25 oil very soon.