Smart traders know oil price retreat is temporary

Human beings are a predictable bunch and we tend to wait until things get to a painful crisis mode before taking drastic action. My question is why does it always have to get to that point?

Take the most recent run-up of oil prices, when crude hit $147 a barrel and gasoline was trading around $5. As prices reached nosebleed levels, the general public was in a great deal of pain and they acted accordingly. There was an outcry for more alternatives, more refineries, conservation, infrastructure investment etc. Everything from clean-coal technology to nuclear was on the table.

Fast forward to today, with crude prices at around $38 and gas back below $2, and it's a very different picture. No pain means no gain in solving the problem. Let me be clear, though. That problem hasn't gone anywhere.

$300 crude not far off

While the global recession and credit crunch have severely impacted global demand for energy, it's only temporary. The problems propelling oil prices to $147 haven't gone away. The patient is, at best, in temporary remission. Traders are seasick from the oil markets lately; the volatility has been so extreme. Aside from the obvious macro-factors, what else is driving the abnormally large swings in crude oil?

Source: http://www.marketwatch.com/news/story/P … ecMostRead