It appears that the oil markets have no sense of common logic. I was just reading an article about the OPEC decision to not raise production quotas and the following statement was made:
"Badri said there was no reason for oil to reach $100, as it almost did last week, and continued to blame refinery bottlenecks, geopolitical issues and the weak U.S. dollar for oil's ascent from below $70 a barrel in mid-August."
-- http://news.yahoo.com/s/nm/20071114/bs_nm/opec_badri_dc_1
This statement makes absolutely no sense to me. A bottleneck at the refining step is causing the price of crude oil, the product that supplies refineries, to go up. That is like saying that because the temperatures outside have been higher is the reason that natural gas prices have gone up.
From an economic perspective, it is reversed logic. It seems to me that bottlenecks in the refineries would cause there to be a larger crude oil supply because they are not processing it as quickly. This would cause supply surplus. Laws of economics say surpluses cause prices to fall not rise.
Is it possible that the all the players in the oil game have learned from politicians that if you just find something to blame people will buy it?
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