Chapter Two $130 USD per barrel is Shadow Price

The economist was right. Current oil price is shadow price, made by investors and speculators on trading but the fact the real oil price is around $70-$80 USD per barrel. With external intervention, oil price run bigger than 50 percent and made it new record $134 USD per barrel on last week. I have posted many articles about the naughty investors and speculators behavior such as Who behind Uncontrolled Oil Price, Demonstration against Government Decision Cutting Oil Subsidy, Oil and Food, Oil price and China’s Demand , Oil US Dollar and Investor, Government Deletes The Oil Subsidy , Hello Investors! Why did you do to us? with one summary, They took profit otherwise they make more unemployment people, more poverty, more hunger countries, high inflation in countries, politics destabilization in countries, lowering purchasing power parity, increasing on price in all sectors and more. Transportation sector demand for repairing current tariff, goods and markets also do the same while citizen still in lower PPP (Purchasing Power Parity).

So what the meaning of $130 USD per barrel as Shadow Price? Shadow price doesn’t describe the natural price (read real price) because had been intervened by external cost and factors. But the economist forgot something. He forgot that the shadow price is becoming real price and we buy oil with $130 USD per barrel not $70 USD per barrel. He also forgot that we can’t intervened to market, investors and speculators have much money; bigger than Indonesian budget. It is hard to make some intervention to the market; because if we haven’t no money and the market rules, no government intervention directly.

Continue to Chapter three; Shadow Price becomes Real Price