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07-25-2008, 11:24 PM #26
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McCain credits Bush for drop in oil price
When oil supplies dwindle and they forsee a demand in oil going up, it'll drive the price of oil futures. Since oil is a non-renewable resource, there is expectation that the price would continue to go up. Oil futures sends signals to the physical market because after all, it's correlated. If speculators think that they'll be less supplies, they'll continue to increase the value of oil as a commodity, making it a profitable investment.
When there is news that increases the oil supply, the wagers go from up to down. The futures market is simply that speculation. Bush temporarily changed the expectations.
Though the futures market effect on oil price is limited, but none the less apart. It's not a long-term solution, a simple band-aid.
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