Speculators are not to blame, says petroleum economist Phil Verleger
- Product demand and available crude are key factors in the recent fall in oil prices
- Speculators are not to blame for the decline in oil prices
- Refined product prices dictate crude oil’s moves
- Refiners have access to the wrong crudes, leading to reduced availability of high distillate content crude oil
- Modern financial markets and derivatives, such as options, also impact oil prices
Petroleum economist Phil Verleger has highlighted product demand and available crude as key factors in the recent fall in oil prices. Verleger argues that blaming speculators is a myth, as short positioning represents just 2.7% of total open interest. He emphasizes that it is refined product prices that dictate crude oil’s moves, not the other way around. Refiners currently have access to the wrong crudes, leading to a reduced availability of high distillate content crude oil. Verleger also points out the impact of modern financial markets and derivatives, such as options, on oil prices. These factors combined have contributed to the decline in oil prices, and Verleger suggests focusing on the operators of the oil ‘casinos’ rather than blaming speculators.
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Key People: Phil Verleger (Petroleum economist), Denton Cinquegrana (Reporter), Michael Kelly (Editor)
Factuality Level: 7
Justification: The article provides information from petroleum economist Phil Verleger and includes quotes from him. However, it does not provide any counterarguments or alternative perspectives, which could limit the overall factuality of the article. Additionally, the article includes some tangential information about options and derivatives, which may not be directly relevant to the main topic of oil prices.
Noise Level: 4
Justification: The article provides some analysis of the factors affecting oil prices, such as refined product demand and crude oil availability. However, it also includes some repetitive information and does not provide a comprehensive analysis of long-term trends or antifragility. It does not hold powerful people accountable or explore the consequences of decisions on those who bear the risks. The article lacks scientific rigor and intellectual honesty as it relies heavily on the opinions of one economist without providing evidence or data to support the claims. Overall, the article contains some relevant information but lacks depth and critical analysis.
Financial Relevance: Yes
Financial Markets Impacted: The article discusses the factors influencing oil prices and their impact on refiners and the oil market.
Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article primarily focuses on the factors affecting oil prices and does not mention any extreme events.
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