Why $120 oil is good

Posted on May 21, 2008 

Why $120 oil is good

With $120 oil not seeming to follow the fundamental law of supply and demand many are wondering if the market is broken.

The Federal Reserve has been cutting interest rates, saving Wall Street but sinking the dollar and driving up food and fuel prices. Investors, also called “speculators” by some, have been pouring money into commodities of all sorts, artificially driving prices higher in an attempt to squeak out healthy profits in the face of falling stock values.

But to many, all the financial voodoo is merely a distraction. The fundamental reality of oil – and the thing that makes it so attractive to investors in the first place – is that we are using ever more and finding ever less. High prices are necessary if we are to reduce demand, find new oil, and develop alternative technologies.

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