A guide into the $100 Oil. Rule #1: Don't panic (updated)

BBC News reported on a guy at the New York Mercantile Exchange (NYMEX) who purposefully sold a lot of oil barrels at a loss to push the prices just above 100$ - or, in the words of another trader, "He paid $600 for the right to tell his grandchildren that he was the first in the world to buy $100 oil."

The reason I find the story interesting is that, beyond being amusing, it means that the $100 mark is only that: a mark. It’s no different than it being $111 or $50, it was just a nice round figure.

Nothing to panic about, basically.

Why are prices increasing then? It’s surely not the maneuvers of a lone trader playing around. It’s violence in Pakistan and in Algeria, instability in Nigeria, war in Iraq, rigged elections in Russia. But that’s marginal, and essentially circumstantial. More importantly though, it’s a (still) strong US economy, and booming -very, very booming - Chinese and Indian demands. And until the demand slows or the supply increases, we’re heading in the same increasing direction. Nothing strange - it’s just supply and demand...

Are the prices this ginormous? Hmmm, not totally. In PPP adjusted dollars, we’re still below prices in 1981. Call it a $100 or £51, the numeric value is secondary.

Who’s to blame? It’s easy to bitch about OPEC hiking prices - even though they control less than 40% of the world supply, and that countries like Russia and Norway can very, very easily send prices in either direction. OPEC (and its big guy, Saudi Arabia) is under a lot of pressure from importing countries to keep pumping - even if it runs against their own interests. In a word: OPEC is helpless.

A final thing, because I’m tired of hearing people bitching about ‘those Arabians who charge us $4 a gallon (of gas)” (real quote). A barrel of oil is 159 litres. Even at $100 the barrel, it’s still less that a buck a litre.
Now tell me how much is a litre of Coca-Cola - at the cheapest, a dollar?

Comparing relative importance for the world economy, well, when Coca-Cola Inc. stops charging more than Oil for its sugary beverage, we’ll talk.

UPDATE -- I just got these numbers yesterday: in France, 75% of the price of gasoil is TAXES - which is an income of 17 BILLION euros per year.

Stop blaming the producers, for fuck's sake.