Thursday, June 12, 2008

IMF Boss saying the speculators might be responsible for the price hike!

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn, seen April 12, tight demand and supply conditions were the key reason for soaring oil prices, which are up fivefold since 2003, but added that may not be thought to explain all the surge.. First Picture

Second Picture
Idris Jala former executive of Shell and now our airline Managing Director

I have been bombarded by negative statement about the risen oil price increase. Most are ludicrous and sadly shows the stupidity of the Malays as the emotional response from them shows their inability to comprehend and lacking the innate ability to deduce the knowledge available. True, the government could have staggered the price increase and this should have been done a long time ago. I am not please with the government for that but that does not give me the right to say what was done was wrong, the manner it was done perhaps was wrong but nevertheless those in the know knew that we need to increase our price.

The trouble with the PM is, he lacks vision nor does he did his homework so that when the time comes whereas he could make a decision that can be his, he relied instead to his advisers. About the oil price, the price is perhaps has been overblown too much. It is perhaps because the characteristic of the modern economy where we allowed people to buy in the future. Futures trading or forward buying's or options are a bane of the new world. A product of the monetarist policy especially Friedman where wealth can be control by the velocity of money produce MV = PT result in business transaction which result in a bubble effect on the economy. Unlike traditional Kensyian theory where inflation can be control by monetary and fiscal policy, Friedman says it can be control by the volume of the transaction process. When you allow forward buying or options you allow people to gamble on the future in these case commodities i.e. oil. This is wrong, it allowed speculators to "play" with unbridled energy. It allows capitalist greed uncontrollable ability to make 'wrong' money. Unlike 1997 when these speculators play with vigor in destroying Asian Countries in speculating their currency, resulting in countries like Thailand and Indonesia seeking financial Aid from IMF and the world Bank, which resulted in the disintegration of companies align to the governments as a protection against and for the native participation in the economic field and made these countries turn back the clock ten years! Indonesia is still suffering of the effect of these crisis and nearly disintegrate as a nation.

These speculators need to be ban and someone need to control them. In Malaysia when it hit us, we control our currency to be traded. It help us, we retain our independent to make decision base on our needs and need not comply with the instruction of the Bull. Back to Oil, we are lucky that we are a producer and net exporter of oil. Other countries are unlucky, they are suffering because of these speculators. Someone must do something. we need to have a control on our commodities, trade as you must but forward trading must be control, this is not a gambling place for it destroy nation. I am not being anti Jew, but funny, that most of the trading house are Jews like Sach, Solomon and you start to wonder?

Fossil fuel is bad for earth. Burning it creates a green house effect. Good , let's fine something alternative, but do we need to hit bellow the belt? So far the demand of oil has remain constant, we perhaps has produce I trillion barrel of oil and the world up to now has a reserve of a trillion more and a trillion still need to be found. There should be no shortage of oil in fact there isn't. There is a high demand from countries like India and China but overall it has remain constant. So far the cost of producing oil is less than a dollar, even if price has gone up significantly it is perhaps only three times now than it was before, but then the price of oil has traded from USD30 a while back to USD135 now is mind boggling. Soon it would reach USD200 if the prediction of these trading house comes true. This is ridiculous but the havoc it creates for other countries is bad. The poor is getting poorer, sadly most of the food produce need oil to generate her tools thus food is getting pricier and more hunger is created. we must stop this speculators at all cost. As for Malaysia it can't be help, sadly for a small nation like ours keeping the price low and subsidizing it is not an option for we have one of the largest shoreline compare to other nation. making the commodities a hot commodity to be smuggle if it is so cheap!

The government is trying hard to alleviate the poor but subsidizing it should be direct to avoid leakages. As I said I do understand the predicament that the government is facing but it is tough decision that need to be made. Please read this article below and do read some more before jumping to any conclusion.

Thursday June 5, 2008

Idris: There's no global fuel shortage


ISTANBUL: There is no shortage of oil in the world and its present price level was driven up by unreal speculation, said Malaysia Airlines managing director and chief executive Datuk Seri Idris Jala.

He said the present oil price at over US$135 was unrealistic and based on certain global events that might have caused a shortage of supply.

"These people (speculators and hedge funds) buy oil futures and say that this or that event may cause an oil shortage.

"Not very long after this, people react to this and by then the message would be 'there is a shortage of supply' even though there is none," Idris told the international media here at the close of the 64th International Air Transport Association annual general meeting.

IATA, which is an association of legacy full service airlines with over 200 members, had issued a statement at the end of its meeting that the industry was now in a state of an emergency because of the fuel price crisis.

Idris was a former senior executive with Shell Plc based in London and the Hague for almost 20 years. While there, he had headed various departments, including business development.

Speaking as a former oilman, Idris said there were two ways to see whether there was an oil shortage.

"First, look at the oil tankers at sea. If they are not moving and just floating out at sea, that means they have no crude or processed oil to transport. That is not happening and that means there is no shortage.

"Second, go to the petrol stations. If there are long queues, that means there is a shortage. Again, this is not happening and this can only mean there is more than enough supply.

"As an ex-oilman, I tell you there is no shortage."

Idris pointed out that certain analysts and financial companies that produced reports about the shortage were also oil futures traders.

Asked what he thought was the fair value of crude oil at present, Idris replied: "US$40."

He also criticised speculators and hedge funds, saying that he did not trust anything that he could not touch.

"I always believe in the brick and mortar – something I can touch. These people are trading with nothing.

"Many years ago, we at Shell had wanted to buy Enron. I was leading the team then and we hired over 60 consultants to study how a company with no oil fields, refineries or gas stations could make so much money.

"One of the consultants tried to convince me to recommend to the Shell bosses to buy Enron but I said no because I could not touch what they were trading in," Idris said in the one-hour briefing for the media about MAS' performance and future.

He only expressed his opinion on the oil crisis after being asked by several journalists.

Idris was proven right on Enron because the so-called energy company collapsed four years ago under massive accounting fraud.



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