Before people look at me as a
just wanna say I do have a background in E&P Oil as an Analyst at a mid-cap company. I reviewed countless number of companies and have read numerous california energy reports along with EIA (kinda the standard) reports as well.
Two ways this got out of control, one is my conspiracy and the other is a fact.
Your idiot government spent too much money that it didnt have, on you. that money was borrowed by the Chinese in form of treasuries. Mortgages are also types of bonds that are bought and sold as well, (and since everyone and their mother has a real estate license and took advantage of the equity boom along with shady lending) we had to swap these securities for treasuries. Thus making treasuries worth more. I believe someone/government is gradually selling these treasuries now and buying up crude at abnormal prices. Could buying up 2billion dollars worth of crude significantly alter the market? Also remember that the FED (not the government aka the 6 richest people in the world who really control the world) temporarily allowed investment banks to borrow money for the first time, so what are they buying?
A lot of mid-line oil companies work a tad different from the big players like Exxon, Chev, Valero. These companies are relatively small and are made up of speculators that too have a lot of money and buy/sell crude on their own. They are master limited partnerships, (try Magellan, or Bronco Drilling, Frontier etc.) they lend their money out to a public company to buy/lease gas lines and make wells. From 2003 to now, (same time when oil got out of hand) you can see how profitable and expansive these companies have became. The LP like I said lends the money to the public company, drills the oil, gets the $$$, throws the money back at the MLP (master limited partnership, which by the way is taxed wayyyy less than the big boys, however many seasoned execs sign on to form their own MLP) and the partners inturn use the money to buy futures contracts. This is how every since financial quarter since the dawn of time have always posted atleast a 3% growth profit.
But there's hope, think of it as gears on a watch. Once there is some sorta sell off and the MLP cannot be repaid they cannot buy more contracts and they cannot expand/drill. Stripping these gears will hopefully force them to resell their assets back to Shell/Chev/Exxon. Many of the pipelines are salvaged/old lines that cause all the problems and pollute. I'm sure there will be some dissent coming but my question for you is, who do you think is buying these contracts for almost $134?