WHY IN GOD's NAME DID OIL REACH $147.27 ON JULY 11, 2008?!!

The whole world knows that crude oil prices are down - it even crashed below $40/barrel. Alright, so? So? Well, a simple question is bothering me no end. The question is: What changed in terms of demand for crude oil, from July 11 and now, that the oil prices are going southwards continually? Has the demand plummeted so much in last 5 months that it should cause the crude oil price to breach even the $40/barrel price?

And, another question that is disturbing me is: what were the factors that led to the price of $147.27/barrel in the first place? Or, was the $147.27 an artificially bloated price? Oh, how dumb of me! Of course, it was bloated like hell! Okay, but how was it artificially inflated to that level? What were the manipulating factors that caused it?

It may be mentioned here that there was a well known CEO who said around that time, when oil prices were riding the crests, that oil prices were high simply based on demand and supply relationship, that there was no hanky panky, and that oil traders played no role in pushing the floor price artificially. You know who that CEO was? He was none other than the CEO of a major oil producer - BP!!

So, can the 'great', 'intelligent' CEO of BP please explain why the oil prices are languishing now? Has the demand suddenly dropped so much - more than 70% - that the crude prices went crashing? Was he, when he tried to justify the upwardly moving prices, trying to create some sort of smoke screen, or is he really an idiot of highest order who did not have the requisite intellectual ability to fathom the actual reason?

Nah, chances of him being a classic idiot are remote given that he rose to the position of CEO. Surely, it doesn't seem that BP would have had a corporate goal to create a Guinness Book of Records of sorts by becoming the first oil company of that stature to install a super idiot as CEO.

Anyway, one thing is certain: the rise of oil to $147.27 and then fall to below $40 is definitely not result of natural market forces. Both these phenonmenon, especially, the rise to $140+ smack of something mysterious, surreptitious, insidious and befitting cloak-and-dagger operations.

So, what caused the oil prices to get skyrocketed upwards all the way to $147.27? Was there a high level international conspiracy? Who would be the players in such a conspiracy? There is no doubt that the biggest gainers of high crude prices were the OPEC, and other major oil producing nations, like, Russia, Venezuela and, of course, the oil companies.

Is it possible, then, that OPEC or some non-OPEC countries were in cahoots with oil companies to somehow enlist the help of oil traders in pushing up the prices. In all of this how can one ignore the role of the media - print or TV - which kept up the hysteria as if oil is going to run out soon, and it added to the maddening frenzy that besieged the world oil trade. Whatever it was, there certainly was something utterly fishy that happened at a very high level in pushing the oil prices to $147.27.

Then came the downward movement in oil prices as soon as the US financial institutions started to come down crashing like pack of cards. In view of that in Q3 of 2008, IEA made only a marginal reduction in global demand of oil in 2008 from their earlier estimates of 86.8 million barrels per day to little more than 86 million barrels. The corresponding supply figure, as per IEA, at that time was a little more than 88 million barrels per day. This clearly shows that the demand for oil was not estimated to shrink so drastically so as to warrant a drop of crude price from $147.27 to below $40.0 per barrel.

Just as the price spike to $147.27 seems very fishy, is the precipitous drop in prices also due to some fishy reason that the world doesn't know of? There is a theory that Saudi Arabia periodically causes the oil prices to drop below $50 per barrel to render the oil production projects in other countries to become economically unviable.

Let us think for a moment as to which countries will hurt most if the crude prices were to hover below $50 per barrel. Well, the countries who hurt most are Russia, Iran, Venezuela among others. Surely, US won't mind these three getting hurt economically.

So, was US part of some concerted action to engineer such a drastic drop in crude prices? One may argue that low prices would impact adversely the profits of big US oil companies who are said to be very close to the Bush administration. But then national interests always take precedence over corporate interests, never mind even if they happen to be US corporate entities. One may mention here for the record that owing to sharp drop in oil prices the OPEC countries are estimated to have cumulatively lost more than $700 billion dollars.

Whatever may be the real truth, one thing is certain - the rise of oil price per barrel to $147.27 can not be justified by any rational economic theory. In other words, the rise of prices in first half of 2008 was due to some very high level concerted operation. But who were the main actors in doing this, that is not clear at present. May be in some future time the truth will see the light of the day.

Equally intriguing is the steepness of the fall in prices. Who knows who pulled the rug from underneath the feet of the beneficiaries of high crude prices. Who is trying to cut whom is not clear, some thing very sinister of very high level can not be ruled out. Why this inference can not be dismissed aside is because the global demand for oil has certainly not contracted by more than 70 percent during the period July-end 2008.

In Nov/Dec 2008, OPEC announced cuts of 4+ million barrels per day to stem the falling crude prices. Analysts say market did not feel buoyed by these cuts, and depressing economic news continued to pummel the oil prices. The consensus among the crystal ball gazers is that oil may hit $75 per barrel only in 2nd half of 2009.

It seems a James Bond like figure may only be able to unravel the saga of rise and fall of crude prices in 2008, I am kidding. Seriously, the unprecedented rise and fall of crude prices in latter half of 2008 is something that is extremely serious and people somehow need to reach to the bottom of this story. While the world will wait eagerly for the truth to be unravelled, the immediate challenge facing the G-20 nations is to somehow reverse the recessionary situation and bring the economies back to growth mode.

When the economies look up again, the oil prices will automatically find the motivation to move upwards. Will another cycle of unprecedented rise in crude prices commence? We will have to wait and see. But before that let us hope that the global economy gets back on track soon. Amen!