Tuesday, July 15, 2008

Rite Price

General belief is the foundation for all illusions.

Definitely, today the oil is not trading at its right price. Neither was it priced right in 1999. Commodities have now broken free from the shackles of slavery and are in a soul searching mode.

With regards oil, it lies at the bottom of the growth pyramid. The two most populous developing nations, now steaming full ahead on growth roads, have suddenly created a cyclonic low over oil supplies and thus we see this spiral in the prices.

On the other hand, oil is a highly geo-politically sensitive commodity. And these factors are now acting to lift oil prices, same had worked in the opposite direction in the past.

Thirdly, the new techno financial instruments and flow of information add liquidity and volatility to the markets, thus the over-reaction. And of-course, this over-reaction is not possible without the over supply of money. Eversince the Iraq war, loads of Saddam's money is acting joker in the commodity and equity circus.

But I believe, these screaming prices are in peaceful solicitation to mankind to restrict its growth and advent within the perimeters of available resources. In the past, history has used much more violent and uncivilised methods like wars, epidemics etc to cut man to size. So, lets be more civilised and sane and respond to the screaming prices, which are prompting us to change our ways.


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