Friday, March 30, 2012

Trayvon Trial by Media: A Public Circus to Rouse the Rabble

The US media company ABC recently added to the media circus surrounding the Trayvon Martin shooting by releasing a police surveillance video, which ABC says does not show any sign of injury to George Zimmerman's -- the admitted shooter -- head. But now it seems that ABC "doctored" the image, obscuring any sign of an earlier injury. Why would ABC do this, knowing that it would only add to the murderous atmosphere of race hustling rage on the part of the constituency of professional rabble such as Al Sharpton and Jesse Jackson?
In fact, not one but both camera views showed that Zimmerman has a laceration several inches long on the back of his head. Any blood had been cleaned up by the Fire Dept assets that had treated Zimmerman at the scene. Bruising would not have shown on the low-resolution video.

More disgusting is the obvious fact that ABC News used a strategically placed chyron (graphic) to cover up the back of Zimmerman’s head for their broadcast, covering up the video evidence that would have disproven their story. View the video at the Daily Caller, and you’ll note that they did not even need a chyron, as there was no need to transmit any additional visual data to explain the story. The only logical reason the chyron exists is to cover-up Zimmerman’s wounds.

ABC News doctored the video to sell a false narrative, in a dishonest attempt to brand a man a murderer. I’d be very interested to know if Zimmerman can pursue legal action against ABC for constructing this false narrative. _Source
If Trayvon Martin had killed George Zimmerman, the story would have never been told beyond the local media outlets. Had Jorge Ramirez killed Trayvon Martin, the story would have likewise never reached the national media. But when George Zimmerman kills Trayvon Martin, even President Obama wants a piece of the action.

Nothing makes human beings resemble monkeys like mass hysteria. In this case, the mass hysteria is being stirred not just by the usual suspect professional rabble, but also by top US politicians and the news media.

Not one of their finer moments.

The following video provides more information than the edited clips released by ABC News:

via Riehl World News

Other than an attempt to boost viewership, why would ABC News tailor its coverage in a way that would fan the flames of racial hatred?

Monday, March 26, 2012

If Trayvon Martin Behaved Like a Thug, Why Is He Treated Like a Hero?

With a single punch, Trayvon Martin decked the Neighborhood Watch volunteer who eventually shot and killed the unarmed 17-year-old, then Trayvon climbed on top of George Zimmerman and slammed his head into the sidewalk several times, leaving him bloody and battered, authorities have revealed to the Orlando Sentinel.

...Trayvon asked Zimmerman if he had a problem. Zimmerman said no and reached for his cell phone, he told police.

Trayvon then said, "Well, you do now" or something similar and punched Zimmerman in the nose.

Zimmerman fell to the ground and Trayvon got on top of him and began slamming his head into the sidewalk, he told police.

Zimmerman began yelling for help.

Several witnesses heard those cries, and there's been a dispute about from whom they came: Zimmerman or Trayvon.

Lawyers for Trayvon's family say it was Trayvon, but police say their evidence indicates it was Zimmerman.

One witnesses, who has since talked to local television news reporters, told police he saw Zimmerman on the ground with Trayvon on top, pounding him and was unequivocal that it was Zimmerman who was crying for help.

Zimmerman then shot Trayvon once in the chest from very close range, according to authorities.

When police arrived less than two minutes later, Zimmerman was bleeding from the nose, had a swollen lip and had bloody lacerations to the back of his head.

Paramedics gave him first aid, but he said no to going to the hospital. He got medical care the next day. _OrlandoSentinel
There is a lot of evidence yet to be reviewed by all of the prosecutors and special prosecutors which have been appointed by local, state, and federal authorities.

But one thing is very clear: US President Obama and almost the entire skankstream media has wasted no time annointing Trayvon Martin as a saint and a hero, and demonising Zimmerman as a "white hispanic vigilante racist killer." (New York Times)

President Obama even went so far as to suggest that Trayvon Martin might have been his son . . . or could have looked like his son.... if he had ever had a son . . . or something equally vapid and politically correct. The rallies, marches, and extravaganzas being promoted by professional rabble such as Rev. Sharpton, and the complicity of the media and the Obama administration in the entire dunghill circus, is nauseating and reprehensible.

The regrettable confrontation that resulted in the death of young Trayvon Martin, appears at this point to have been a preventable tragedy. But nothing that US President Obama, the media, or the professional rabble is doing will prevent future tragedies of this type from occurring. Just the opposite. In fact, Obama and his supporters seem to be intentionally turning up the heat in the hopes that further tragedy will occur -- tragedy that they can and will happily use for political gain.

Is this case headed for the political abyss?

Thursday, March 15, 2012

First you kill the fathers, then you kill their sons. There aren't usually enough men left for a third iteration

How The World Has Worked Since the Dawn of Time

AF2011-A1 Double Barrel .45 Auto
Peace Through Superior Firepower

"We are a bit confused about Syria," I began. "Its leader, Bashar al-Assad, is slaughtering his own people to suppress an uprising. And he is allied to Iran, which wants to acquire nuclear weapons and dominate the region. If we overthrow Assad, Sunni radicals will replace him, and take revenge on the Syrian minorities. And a radical Sunni government in Syria would ally itself with the Sunni minority next door in Iraq and make civil war more likely."

"I don't understand the question," Richelieu replied.

"Everyone is killing each other in Syria and some other places in the region, and the conflict might spread. What should we do about it?"

"How much does this cost you?"

"Nothing at all," I answered.

"Then let them kill each other as long as possible, which is to say for 30 years or so. Do you know," the ghastly Cardinal continued, "why really interesting wars last for 30 years? That has been true from the Peloponnesian War to my own century. First you kill the fathers, then you kill their sons. There aren't usually enough men left for a third iteration."

"We can't go around saying that," I remonstrated.

"I didn't say it, either," Richelieu replied. "But I managed to reduce the population of the German Empire by half in the space of a generation and make France the dominant land power in Europe for two centuries.

"Isn't there some way to stabilize these countries?" I asked.

Richelieu looked at me with what might have been contempt. _Spengler_via_AmericanDigest
Global politics as played by powerful states has always been callous, cruel, and without mercy. The modern approach of the USA, with the attempt to distinguish combatant from civilian, and a focus on protecting troublesome people from themselves and each other -- this is neither historic nor sustainable.

The US should either stay out of petty internecine squabbles, or it should adopt the realistic approach taken by empires throughout history -- allow potential enemies to eliminate each other, with a bit of assistance if needed. The anti-war approach is often the crueler and more final solution.

Never accept a pacifist at face value. Something much darker often lurks beneath. And that is not necessarily a bad thing.

Life has never been easy, or fair, for the most part. There has never been such a thing as lasting peace nor justice, and there will never be as long as humans exist. There is only a constant striving and an attempt at first overcoming, then balance. Throughout the eons, kindness and restraint were apt to get you killed.

Monday, March 12, 2012

US National Debt Infographic

US Debt Infographic
[Via: Amazing penny facts about the US debt]
View a larger copy of the US debt infographic along with the code to add this infographic to your own website.
Forex Forum via Zero Hedge

It is difficult to imagine the size of the US debt -- which has grown exponentially since the inauguration of US President Obama.

There is no end to trillion dollar deficits as long as the Obama administration runs the executive, and the US Democratic Party runs at least one house of congress.

As long as US government officials cannot conceive of any parts of government which should be abolished or be cut in size, the destructive growth in government debt and public sector strangulation of the private sector will continue.

An ongoing demographic decline toward the Idiocracy is not helping matters. Dumb electorates elect corrupt governments. How could it be any other way?

Choice Tidbits on China's Economic Situation

First, from Michael Pettis:
The problem in China is as much the amount of debt as the structure – and by structure I don’t mean the distinction between bonds and loans (bonds end up mainly on the banks’ balance sheets anyway) but rather the unstable and self-reinforcing relationship between underlying conditions and debt servicing costs. The fact that much of the debt is being accumulated in an opaque fashion only explains why so many people did not see this coming, but it is not the fundamental problem.

As for the claim that successful fiscal reform can keep the impact limited, I am not sure what this means. Fiscal reform in China can only be successful, in this context, if it eliminates loss-making investment activities, and unfortunately I see it doing nothing of the sort. If the problem is that China is keeping growth high only or mainly by borrowing and misallocating the proceeds, then hidden losses are rising and one way or another the bad debt must be resolved. The only two ways to resolve the bad debt are by defaulting or by forcing someone else to make up the loss, and the former almost certainly won’t happen to any great extent.

That leaves the latter....

The best solution for China, economically, seems to be off limits because it will be politically difficult. In that case the second best solution, a gradual build-up of government debt as growth slows for many years, is the most likely outcome.

And how much will growth slow? The World Bank report apparently doesn’t say, but the consensus has been slowly moving down towards 5-6% annual growth over the next few years. That’s better than the crazy numbers of 8-9% most analysts were predicting even two years ago (and some still are), but it is still too high. GDP growth rates will slow a lot more than that. I still maintain that average growth in this decade will barely break 3%. It will take, however, at least another two or three years before a number this low falls within the consensus range.

And by the way when it does, metal prices should fall sharply. Copper prices have done reasonably well in the past few months as Chinese buyers have restocked, as we suggested might happen to our clients last fall. With the recent easing we may see more strength in copper over the next month or so, but I have little doubt that within two or three years copper prices are going to be a whole lot lower than they are today. Chinese investment demand simply cannot hold up much longer. _Michael Pettis
What Pettis is saying is that actions have consequences. While economists may pretend that they can make gold out of feces, reality eventually calls at the doorstep for an accounting.

This is from Also Sprach Analyst:
It seems to be widely believed that China has almost unlimited tools and power to gear the economy towards whatever direction they would like to. It is probably true in some respects. For instance, there are rooms to cut interest rates and reserve requirement ratios, and if you believe the official data (which I don’t) that China has very sound fiscal position, they can certainly throw another trillions RMB to invest in more pointless stuff for the sake of generating GDP growth and create jobs.

However, we have already heard deposits flight where households are seeking better returns other than deposits, and if China slow down (as it is, and as I expect), it will not be surprising to see capital outflow and trade surplus shrinking. In the likely event of these happening, it will tighten the screw of monetary policy automatically, and cutting reserve requirement ratio, while it looks useful, could be seen as offsetting the tightening effect of capital outflow and other things. Furthermore, if money is flowing out of the banking system (for whatever reasons, like capital outflow), that makes it difficult to cut interest rates. As I mentioned earlier, the view here is that while reserve requirement ratio will be cut, it is important to understand that it may not make monetary condition easier, and that interest rates may not be an available tool at all. And if things get so bad, we could expect a small probability that RMB will have to be depreciated. And with respect to the fiscal side of the story, if my analysis on the debt side of the story is accurate, the Chinese government’s fiscal position might not be as good as it seems, one will have to question 1) whether they have the financial resources to invest in more for the sake of creating GDP growth and 2) whether it still makes sense to invest in a place where over-investment has happened.

The key conjectures (or the only things that you need to know) are:

1. Inflation might actually surprise on the downside. We might even see deflation.

2. Real estate industry will slow down drastically, and drag the whole economy.

3. Home prices and other asset prices will fall, possibly resulting in debt deflation.

4. The government and central bank may have some tools to help the economy, but the tools are not unlimited.

_Also Sprach Analyst
Al Fin economic analysts suggest that the CCP government achieved a superficial success using one growth model. But they are attempting to sustain the same level of success using an altogether different growth model which is unsustainable.

In other words, China's government may be the victim of its own success and a prior fortunate timing in global markets. We are in a very different global market than that which existed from 1985 through 2007. The dragon which the CCP is attempting to tame has grown too large and unwieldy. Fortune cookie says: Expect surprises.

Sunday, March 11, 2012

Obama: Hiding the Unemployed Just to Jack the Numbers

There’s so much hidden unemployment in the labor force that even Friday’s improved jobs numbers failed to decrease the official unemployment rate of 8.3 percent.

In February, the private sector added 233,000 new jobs, but 476,000 non-working people began looking for a job. According to Bureau of Labor Statistics (BLS) rules, only by seeking work did those individuals officially become unemployed.

That’s because BLS does not count workers as unemployed unless they have actively searched for work in the last four weeks. As a result, millions of non-working people are not counted as unemployed by BLS officials.

The statistical quirk is the flip side of the administration’s effort to minimize the high level of unemployment for the last three years, and it may hinder progressives’ efforts to claim victory on the jobs front in November.

If more non-working people begin searching for jobs, “the economy is going to have to create an average of 246,000 jobs between now and November, just to keep the unemployment rate at eight percent, and so we are not even at that pace yet,” said Doug Holtz-Eakin, an economist and the president of the American Action Forum.

If the BLS rules weren’t in place, the current unemployment rate would be somewhere around 11 percent, analysts say. The unemployment number would be as high as 15 percent if part-time workers seeking full-time employment were recognized in the unemployment rolls.

...For some people, “it appears that we are looking at a world where expectations are so low that 8.3 percent unemployment is okay,” Holtz-Eakin told The Daily Caller.

“It shouldn’t be [because] there are millions of Americans out there who would like to get jobs and have those jobs cover their monthly bills... _DC
Obama is hiding millions of unemployed people, just to keep the unemployment rate at a miserable 8.3%. If those unemployed begin to show up suddenly, driving even the artificially minimised official unemployment rate even higher, what will Obama do? Adopt the Auschwitz solution, and hide them away in concentration camps? Or worse?

The real world would be a terrible disappointment to the idealistic Barack Obama, if he were able to see it as it is. He deserves much better, of course. Try not to get in the way of Mr. Obama's vision of what he thinks the world is really like.

Saturday, March 10, 2012

Lord Monckton Does Schenectady

Video streaming by Ustream
Video via Watts Up With That (Some sound problems)

Lord Monckton moved into the auditorium and began with his now-famous, exuberantly verbose parody of how the IPCC might describe a spade. This elegantly hilarious gem, delivered from memory, is rumored to be longer than the Gettysburg Address. Then he said that, unlike the IPCC, he was going to speak in plain English. Yet he proposed to begin, in silence, by displaying some slides demonstrating the unhappy consequences of several instances of consensus in the 20th century.

The Versailles consensus of 1918 imposed reparations on the defeated Germany, so that the conference that ended the First World War (15 million dead) sowed the seeds of the Second. The eugenics consensus of the 1920s that led directly to the dismal rail-yards of Oswiecim and Treblinka (6 million dead). The appeasement consensus of the 1930s that provoked Hitler to start World War II (60 million dead). The Lysenko consensus of the 1940s that wrecked 20 successive harvests in the then Soviet Union (20 million dead). The ban-DDT consensus of the 1960s that led to a fatal resurgence of malaria worldwide (40 million children dead and counting, 1.25 million of them last year alone).

You could have heard a pin drop. For the first time, the largely hostile audience (for most of those who attended were environmentalists) realized that the mere fact of a consensus does not in any way inform us of whether the assertion about which there is said to be a consensus is true.
Watts Up With That

Lord Monckton then startled his audience by saying it was settled science that there is a greenhouse effect, that CO2 adds to it, that CO2 is increasing in the atmosphere, that we are largely to blame, and that some warming can be expected to result. But these facts had been established by easily-replicable and frequently-replicated measurements first performed by John Tyndall in 1859 at the Royal Institution in London, “just down the road from m’ club, don’t y’ know” (laughter). Therefore, these conclusions did not need to be sanctified by consensus.

The audience were startled again when Lord Monckton showed a slide indicating that the rate of warming since 1950 was equivalent to little more than 1 Celsius degree per century, while the rate of warming the IPCC predicts for the 21st century is three times greater. His slide described this difference as the “IPCC credibility gap”.

Next, Lord Monckton baffled his audience, including the professors and PhDs (whose faces were a picture) by displaying a series of equations and graphs demonstrating that, while it was generally accepted that a doubling of CO2 concentration would cause 1 C° of warming in the absence of temperature feedbacks, the real scientific dispute between the skeptics and the believers was that the believers thought that feedbacks triggered by the original warming would triple it to 3.3 C°, while the skeptics thought the warming would stay at around 1 C°. _Much more description of Monckton's talk and aftermath at WUWT
Lord Monckton's Union College audience in Schenectady was far more polite than a typical academically lobotomised university audience for such an informative and not-PC talk.

When authority commits abuses -- as with the climate catastrophe orthodoxy -- it is up to responsible and thinking persons to disabuse students of their dysfunctional belief in and obedience to authority.

Human societies are faced with enormous problems, chief among them the twin threats of debt and demographic decline. Both problems are caused by government policy. Bad governments are chosen by an irresponsible electorate. It is in the interest of bad governments to keep the electorate uninformed and irresponsible.

This process of electoral decline inevitably results in idiocracy, unless something extreme happens. Hint: Something extreme frequently happens.

Thursday, March 08, 2012

US College Tuition Racing to Infinity and Beyond!

We are inundated with news stories about the costs of gasoline and medical care. But take a look at the chart below, and see the expense that is truly shooting through the ceiling -- the cost of a university indoctrination and academic lobotomy!
College tuition and fees today are 559 percent of their cost in 1985. In other words, they have nearly sextupled (while consumer prices have roughly doubled).

...“If you’re a state legislator, you look at all your state’s programs and you say, ‘Well, we can’t make prisoners pay, but we can make college students pay,’” said Ronald Ehrenberg, the director of the Cornell Higher Education Research Institute and a trustee of the State University of New York System.

College students do end up paying more. But in the past, after the economy recovered, most states did not fully restore the funds that were cut. As cuts accumulated in each business cycle, so did tuition increases...States will soon have to pay out trillions in public pensions for the retiring baby boomer generation — squeezing the funds for training the next generation of workers even more. _NYT
The New York Times article is being oh, so politically correct. The real reason for sky-rocketing university costs is the bloating dead-weight corpse of university administrations.
Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent. Arizona State University, for example, increased the number of administrators per 100 students by 94 percent during this period while actually reducing the number of employees engaged in instruction, research and service by 2 percent. Nearly half of all full-time employees at Arizona State University are administrators.

A significant reason for the administrative bloat is that students pay only a small portion of administrative costs. The lion’s share of university resources comes from the federal and state governments, as well as private gifts and fees for non-educational services. The large and increasing rate of government subsidy for higher education facilitates administrative bloat by insulating students from the costs. _Report from Goldwater Institute
Read the full report (PDF)

Universities have taken as their primary mission the indoctrination of young minds into a dysfunctional leftist ideology. By doing so, they are reducing the future productive options of these young people, who will be less inclined to promote an opportunity society and more inclined to support a redistributive welfare state -- which tends to reduce long term opportunities for all, except insiders and preferred recipients of government spending.

Clearly this trend in skyrocketing university costs cannot go on much longer. Thus it won't. Alternative methods of learning and certification of knowledge and achievement are likely to divert large numbers of would-be university students into more productive and less indoctrinating learning paths.

It cannot happen too soon.

Update 10 March 2012:

The Student Loan Debacle

Higher Education Bubble Exploding in Taxpayer's Faces

Grading Student Loans -- New Report

Making Student Loans Invisible, or when what you can't see can still do you unimaginable harm.

Tuesday, March 06, 2012

China's Economic Growth is Whatever China's Government Says It Is

Construction sites across Guangzhou used to be floodlit, so that work could continue through the night on the forests of new residential and office towers reaching toward the stars. But now, during a nationwide real estate downturn, builders are not starting projects or scrambling to finish ones already under way, so there is little need for night-work illumination.

The Chinese economy, after nearly three decades of rapid, almost uninterrupted growth, seems to be settling down to a still strong but less blistering pace. But some sectors are struggling, including exports and luxury residential real estate construction.

Shop clerks in a wholesale market complained about the scarcity of customers. At a factory gate, workers said that few jobs were available except at the minimum wage. And at an employment office, the jobless fretted that even if they found work, they would have little hope of buying apartments typically priced beyond their means.

Su Weizhong and three other clerks late Monday morning stood at a desk with little to do at a plumbing supplies store in the wholesale market.

“A year ago, there were people in every shop, looking and asking about the prices,” Mr. Su said. “Projects are finishing, but there are absolutely no new projects this year.”

With China having been the world’s main growth engine in recent years, a slowdown is hardly welcome news for the global economy. Neither is the prospect of a restive population — a continual worry for Beijing, if it cannot meet the aspirations of a rising middle class. _NYT
Even if China were to slip into recession, it is unlikely that the economic numbers coming out of official Chinese government outlets would reflect the true picture of events. The Chinese people are accustomed to being lied to, and outsiders should expect the same from the Chinese government.

Global commodities markets -- including oil markets -- have been artificially propped up by artificially boosted Chinese demand. But all of this dysfunctional Chinese debt and misallocated capital will eventually have a chilling effect on the Chinese economy.

It is not clear, however, how long one might have to wait to hear a truthful report from the Chinese government.

Monday, March 05, 2012

Professor Richard Lindzen on Climate at UK House of Commons

MIT Professor Richard Lindzen has more climate intelligence in the distal phalanx of his right ring finger than all the IPCC hockey team can conjure up -- body, mind, and soul. Here he presents the basics of understanding climate in the committee rooms of the House of Commons.

Part 1 of 2

Part 2 of 2

H/T Climate Realists

This is the type of rational discussion of climate which school children and college students should be exposed to, rather than the officially sanctioned carbon hysteria orthodoxy dumbing down programme.

Friday, March 02, 2012

Russia Haunted by Tens of Thousands of Ghost Villages

Despite abundant happy talk and spin claiming that Russia has turned the corner on its demographic collapse, the facts on the ground tell a starkly different tale.
The discrepancy in life expectancy between Russian men and women has created a gender imbalance that can be seen most acutely in the country's "ghost villages".

Russia has tens of thousands of 'ghost villages' with populations of less than 10 people. Tens of thousands of such villages, whose populations can be counted in handfuls, are dotted across Russia, particularly in the west of the country.

While the exodus of the rural population to cities since the collapse of the Soviet Union has contributed to the trend, the premature deaths of many men has left some villages populated solely by elderly women. _Source
The public health disaster that is modern Russia, is not likely to improve no matter who is president or prime minister. Rates of adult smoking, drinking, suicide, and other risky behaviours are simply too high -- reflecting a palpable despair and nihilistic atmosphere choking the lungs.
Adding to Russia's demographic problems, many skilled Russians are also leaving the country in search of better and higher paid jobs.

A survey in 2011 by the Levada Centre, an independent, non-governmental polling and sociological research organisation, revealed that half of Russians did not think there was a future for them in the country, while 63 per cent said they would like their children to live abroad.

...Speaking to Russians in Moscow, citizens seemed both aware and concerned about the problem.

Aleksei, 33, an opera singer from Perm, said: "I think that the demographic situation in Russia is very bad. There is a lot of dying, and few are born."

While the population decline is mainly among ethnic Russians, other mainly majority-Muslim populations such as Chechens, Ingush and Dagestanis are seeing a rapid increase.

Marina, 43, an accountant from Moscow, said: "The number of Slavs [ethnic Russians] has become much smaller, it is very noticeable; even without considering such large central cities as Moscow and St Petersburg."

...The entire eastern third of Russia has a population of less than 10 million people, while the Chinese provinces immediately on Russia’s border have a combined population of more than 120 million.

Last month, the Russian government announced that it would spend $993bn on the development of Eastern Siberia and Far Eastern regions.

The programme outlines various preferences for citizens willing to move to Russia’s sparsely populated eastern territories, but similar schemes have made little difference in the past.

...If present trends continue, experts say that Russia's population will drop from 143 million to 107 million by 2050.

That problem is a major talking point in the country’s upcoming presidential election, due on March 4, with all the candidates offering various policies to tackle the issue.

Vladimir Putin, who is running for a third term as president, has described the decline as "the most acute problem of contemporary Russia" and last month declared that the country faced becoming a "a geopolitical void” if the trend was not reversed. _Source

A Word About Oil Prices

There is a great deal of discussion about why global oil markets are engaged in yet another price feeding frenzy. Some claim it is simply supply and demand. Others point out that both "supply" and "demand" can be manipulated in many ways. Others point to international tensions in the middle east, particularly Iran. Yet others point to Wall Street and blame the bankers. And not just a few in the US are pointing fingers at Barack Obama's broad agenda of energy starvation as being a significant factor in price increases. But where does the truth "lie?"
A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes they'll be able to sell it later on at the future price. This drives prices up in reality -- both future and present prices -- due to the decreased amount of oil currently available on the market.

Investment firms that can influence the oil futures market stand to make a lot; oil companies that both produce the commodity and drive prices up of their product up through oil futures derivatives stand to make even more. Investigations into the unregulated oil futures exchanges turned up major financial institutions like Goldman Sachs and Citigroup. But it also revealed energy producers like Vitol, a Swiss company that owned 11 percent of the oil futures contracts on the New York Mercantile Exchange alone [source: Washington Post].

As a result of speculation among these and other major players, an estimated 60 percent of the price of oil per barrel was added; a $100 barrel of oil, in reality, should cost $40 [source: Engdahl]. And despite having an agency created to prevent just such speculative price inflation, by the time oil prices skyrocketed, the government had made a paper tiger out of it. _HSW: Oil Speculation and Oil Prices
Inflation Adjusted Crude Oil Prices

As you can see from recent history, oil price shocks are nothing new to global markets. In fact, as you can see from the chart above, oil prices are not yet back to last April's (2011) highs -- the most recent price scare.

What about oil futures and oil prices? Many people suggest that if oil futures speculators do not take delivery of oil contracts, that they cannot influence the real price of oil. But that is not necessarily the case:
A speculator betting on a single futures contract will have no effect on the market. A speculator with a sizable amount of capital to put to work however, can purchase a stake that is sizable enough to sway the market, and is considered the major factor in how oil futures raise prices.

As speculators purchase on rumor rather than fact, a speculator purchasing a large amount of futures at a price that is higher than the market value of oil currently can lead to the hoarding of the commodity by producers in the hopes that the commodity can be sold for a higher price in the future.

As the supply of oil is reduced by these actions on the part of the producer, this leads to a realized increase in the price of the commodity both in the present as well as the future. An investment firm as well as oil producers stand to make a huge profit, as an estimated 60% of oil’s per barrel price is the result of speculation on the part of investment firms and other major players. _HowtoTradeStocks
Large scale, coordinated oil speculation would appear to be one way in which "oil demand" can be manipulated so as to drive up prices. There are several other ways in which this can be done, and we will look at some of those in later postings.

Those who think that oil speculators do not actually take delivery of oil may be in for a bit of a shock to discover that speculators have periodically stockpiled oil -- then strategically released stockpiles -- for some time.
The oil-storage trade is a trading strategy where oil tank owners and companies that lease storage buy oil for immediate delivery and hold it in their storage tanks, then sell contracts for future delivery at a higher price. When delivery dates approach, they close out existing contracts and sell new ones for future delivery of the same oil. The oil never moves out of storage. Trading in this fashion is only successful if the forward market is in "contango", that is if the price of oil in the future also known as forward prices are higher than current prices or spot prices. Storing oil became big business in 2008 and 2009,[1] with many participants—including Wall Street giants, such as Morgan Stanley, Goldman Sachs, or Citicorp—turning sizeable profits simply by sitting on tanks of oil.[2]

It has been estimated that one in twelve of the largest oil tankers are being used for the storage, rather than transportation of oil,[3] and that if lined up end to end, the tankers would stretch out for 26 miles. _Wikipedia
The actual proportion of tankers and oil depots used for speculative purposes is likely to fluctuate over time, according to prices and price-manipulating opportunities.

There is a great deal riding on oil prices. Hedge funds, pension funds, university endowments, foundations, big money NGOs, and more, are betting on oil prices going higher. The risk involved is significant, but with the deteriorating value of the dollar and the general stagnation in global economies, opportunities for significant returns on investment seem to be few and far between, the past few years.

While many analysts are scratching their heads as to how oil prices could increase in the absence of any clear increase in natural (as opposed to artificial) demand, Al Fin energy analysts believe that several concurrent factors are in play:

  1. Russia is far more than a bystander in the current price runup More here

    International tensions tend to create a "defensive demand," a type of artificial demand which involves stockpiling oil in anticipation of future reductions in supply. Russia is best situated of all nations to both ramp up international tensions -- either directly or via proxies -- then to profit in several ways from a runup in energy prices.
  2. OPEC has an interest in driving up the global price of oil as high as can be sustained by the markets.
  3. National oil companies in many oil-producing countries neglect their oil production equipment and their oil fields, leading to artificial reduction in production and supply due to Oblomovism.
  4. Official policies of "energy starvation" on the part of the US Obama administration and other western nations, leads to artificial reduction of supplies.
  5. The rapid buildup of the "infrastructure to nowhere" better known as the "Great China Bubble" has led to an artificial demand surge. The Chinese government appears to be engaged in "doubling down" on this policy, despite early warning signs of impending turbulence.
  6. The progressive decline in the value of the dollar creates an inexorably upward trend in oil pricing.
There are many more factors involved, of course. But it is enough to understand that the causes of the current oil price runup are many and varied.

What are the counter-vailing forces, seeking to drive oil prices downward again? The most significant force in the short-term is the desire of speculators to take profits. Once investors decide the house of cards is due for yet another inevitable collapse, the rats will get out while the getting is good.

In the intermediate term, demand destruction eventually sets in -- even in emerging nations, BRICs, and third world nations. But demand destruction in the advanced worlds of the North America and Europe never truly went away after the price runup of 2007-2008. And such demand destruction in North America and Europe is likely to add to the general economic doldrums both there and in exporting nations such as China.

In the longer term, high oil prices stimulate increased production of oil, increased exploration for new oil, better technologies for recovering more oil from existing fields, and better technologies for producing economical substitutes for crude oil. All of these price-stimulated supply increases put downward pressure on oil prices.

The entire dynamic is complex, with several opposing and reinforcing factors in play. It is best to expect to be surprised, and to be prepared, in case you are.

First posted on Al Fin and cross-posted to Al Fin Energy

More: Gas Prices - Much Ado About Nothing?