Why Petrol Price is Too High?

The article below may give an insight into the reasons why the prices
of petrol have gone up.

It is not easy to grasp.

I attended a talk on investment which includes a discussion on why the
price of petrol has gone up. I brought along my 2 children who attend
tertiary educational institutions. Both have scored As in English and
Maths.

Whey we got home, I asked them if the price of petrol will go up?
Both said that it will definitely be quoting the normally publicised
reasons, i.e. the lack of petrol due to over consumption. This is
contrary to the information given at the talk.

Just imagine how common people will understand the situation. My two
children are among the top students and yet they seem so ignorant
despite having attended a 3 hour session, which includes some basics
in investment strategies.

The fund manager does not make a decision on whether the price of oil
will go up or not but he gave these useful indicators:

1) there is no shortage of petrol as judged by the petrol stations and
general availability in world markets,
2)the future price of petrol is higher than current price in the spot
market,
3) hedge funds(i.e. unit trust companies) start trading in commodity
recently.

Despite the availability of supply, someone is buying lots of petrol
and storing them somewhere. There is a limit to how much you can store
if they are not used up.

With the removal of subsidies in petrol, there will be a tendency
towards less consumption.

My opinion is that, with the recent rapid rise, there will be a rapid
decline but the price of petrol will be higher than in 2007. The
reduction in consumption will not be enough to lower the price of
petrol.

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/22/AR2008062201865.html

Obama Targets Speculation On Energy

By Anne E. Kornblut
Washington Post Staff Writer
Monday, June 23, 2008; Page A04

Sen. Barack Obama rolled out a proposal yesterday to curb speculation
in energy markets, which his advisers said would help stabilize
soaring gasoline prices.

The presumptive Democratic presidential nominee laid out a four-step
program that would, among other things, close an "Enron loophole" that
protects some trading in energy futures from federal oversight, his
advisers said.