There is no crime without punishment; we won’t get fooled again

The mini spike in oil prices suddenly reversed itself in recent trading sessions. The spike was triggered by news that OPEC countries were willing to put a cap on production. Then reality set it. Like so many pronouncements, it was more hope than reality. Sure you can always announce you are planning to do something like losing weight and eating better but without the will (and I mean real determination) it will remain only an intention.

And, at least for me, is there is no enforcement. So, Iran agrees to cap production but then prices rise. The lure of more money is too hard to pass up and the country starts selling more oil. What’s OPEC planning to do? Nothing.

This is the case with the EU. They keep imposing conditions on Greek debt that the Greek government forgets about. What’s the EU planning to do? It already sunk billions into that failed state?

No one really wants to talk about enforcement only the pronouncement. And, we get fooled again.

Finally, OPEC is no longer the BIG DOG in oil. Even if OPEC caps production and prices rise, there will be plenty of other producers, read fracking, ready to fill the gap.

As I said about the bubble yesterday, you can’t have sustained price increases until capacity utilization is over 90%. In the case of oil, chrome, manganese and virtually all the other commodities it isn’t even close to that.

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