Crude Oil Prices and Mumbai Lease Rents
Posted by kiranmalla on June 28, 2008
…some things are beyond economics…however economists find suitable principles to defend them. almost anything can be explained by economics. so funny it is.
crude oil touched 142 USD today. here are some interesting statistics on its journey.
the prices have largely been around 25 USD until year 2000 (after adjusting for inflation) but for few spikes. the current spike is relatively unexplainable – here is a look at demand and supply in last quarter
Avg. Demand: 2008 Q1 86.98 mb/d; 2007 85.79 mb/d i.e 1.38% Increase in demand in 2008 Q1
Avg. Supply: 2008 Q1 86.69 mb/d; 2007 84.80 mb/d; 2.2% Increase in supply in 2008 Q1
The growth in supply had actually outstripped growth in demand. However there has been a 35.20% Increase in prices in 2008 Q1!!!
So if its not the suppliers or consumers, who are actually pushing up the prices? King of Saudi comments that he has no idea where and how the oil prices are moving and even goes on to say that oil trading is like gambling at Las Vegas.
now here is my take on the oil prices – i find some things uncannily similar between mumbai lease rents and global crude oil prices. btw my flat rent this year jumped to 55,000 Rs/month from 40,000 Rs/month last year. i am shouting foul on this for the past few days almost every time i walk into or walk out of my house, religiously so.
the answer to these price behaviors, in my opinion, is this – people who could source money cheaply would invest and hoard the critical resources, if they are up for trading – so here in mumbai u have a bunch of builders, celebrities and HNIs investing in real estate and hoarding the houses. the astronomical profits in their businesses make their money cheap. the same with speculators in oil trading. the weakening USD and lowering interest rates in US have made the availability of money cheap and the speculators are hoarding on to the oil resources. Today 70% of the US crude oil trade comprises of speculators.
i don’t know how profitable this trading business is, but it surely snatches the resources away from common man. think again – Rs. 55,000 per month for residing in a shit hole in suburbs i.e. 30 kms away from town. these are the instances when i vehemently support communism – man drove out animals and gobbled most resources and now its the rich man’s turn to do the same to the poor.
