eleven thirty pm moscow time i'm kevin owen with the top stories from r.t. a terrorist plot to kill vladimir putin after sunday's presidential election is being prevented by moscow and kiev two suspects arrested in ukraine of confessed to preparing. yes to reform the syrian people overwhelmingly approved a new constitution after voting on a landmark referendum for the e.u. stepping up the pressure with tough new sanctions on president assad's regime. iran's nuclear envoy tells us that his country is open to genuine u.n.

inspections but accuses the i.a.e.a. of working for american embassy. was responding to the latest u.n. atomic watchdog report accusing iran of still not cooperate. and lawmakers in cash rich germany have voted to back a new rescue deal for greece despite worries it won't be enough to save the country some reading german m.p.'s are making fresh calls on greece to leave the euro zone . examines how the growth in oil prices is shifting the balance in the world economy these days it's right here on our. if you. want. a low end welcome to cross talk i'm peter lavelle the price of crude remains stubbornly high and consumers feel the pinch but why are energy prices so high is that the lack of supply and security jitters surrounding the growing tensions over

iran or is it due to greedy speculators and the way for oil is traded. to cross-talk the reasons that make oil prices escalate i'm joined by ferdinand banks in stockholm he is a professor of economics at duke university in east lansing across to kurt cobain he is a writer and author of preclude a peak oil novel and in paris we have sobered carbo's he is director of hydrocarbons at the mediterranean observatory for energy all right gentlemen cross talk rose and if i mean you can jump in anytime you want fred if i can go to you to stockholm why are oil prices so stubbornly high because it seems to me and you know i'm not an expert on oil but supply and demand the market seems to be out of whack because there is an excess amount of oil out there but prices continue to go up and i should point out to our viewers that in even in the united states the united states is an excellent net exporter of gasoline right now but gasoline prices are

very high so fred why are energy prices so high. well there's only one answer here and that's there's some monopoly elements in the picture but in so far as the price of oil is concerned over the years it's gone up since two thousand and eight because demand is out running supply and olympic kind of just the price of oil they are the ones who determine the supply on the margin opec determines the supply and opec of course has an agenda that agenda is to bank. an enormous amount of money this year and and they intend to do that and game theory we call that a focal focal. and their goal is to get as much this year as a guide last year which was an enormous amount of money and so they want to not allow the price to go down if you were in their place you would do exactly the same thing it's not speculate should well we'll get back to just thank you yes i'll get

to speculation in a second her what do you think the reasons are supply and demand is the market out of whack is it reacting to the market forces or is it opec just just going to banking itself a time and enormous amount of cash. look i don't disagree with fred but i do think there's something else at play here and that is since two thousand and five oil production worldwide has been flat and besides that global net exports have actually been declining from about forty five and a half million barrels a day to about forty two and a half million barrels a day and that means importers like the united states and china and japan and india are having to compete for a shrinking pie of global exports and there are one hundred fifty countries out there are so that are importing oil so the competition has gotten very keen i think that's one of the reasons that we've seen prices hovering around one hundred for nearly a year now i think there are lots of other factors but i think that's one of the main factors ok so but in paris what do you think the primary reason is because you

get if you open up a mainstream media a newspaper or mainstream television only to be generous around iran ok if there's a premium because of the by the possibility that the israel the united states will attack iran and plus we have the whole oil game of cutting off of a imports of iranian oil into europe eccentrics cetera is that how much is that playing a role well i would say that first of all prices fluctuate based on perceived current market conditions and expect that feature market fundamentals now what is the current market conditions this is. because we really don't know how much oil is produced and how much oil is close so this is just. a perception second anything that happens in the market.

here's expectations of traders. that has big implications on the trading traders behaviors so well i mean i expect i mean so you're saying i mean you're more on my side as you're more on my side of the issue because i think a lot of this pricing is extremely artificial and i think there is an enormous amount of speculation there because of who controls the oil market curd if i could go back to you there are some people who will say that anything about seventy five dollars a barrel now in today's conditions is speculation that means that's thirty dollars a barrel speculation you think that's outrageous is it possible i don't think it's outrageous there's so many paper instruments now that trade oil i mean the average investor can now can go into the stock market and actually get a sort of hybrid security that looks like a stock but trades in the futures markets and these have become so enormous and so influential in the marketplace that i think they do have an upward effect on the

oil prices of course if we get a crash and oil at some point which i think we will because it because i think the economy is weakening then all of those things that work in reverse are right now they push the price of oil higher than it would normally be and i think then the downdraft they push it down lower than it should be fred what do you think about that i mean how again you know. i'm i guess i'm already in the race is that this is artificially price to be grossly high go ahead yes yes i can say that i agree with could supply demand thing is concerned. so far as speculation is concerned i don't agree with that at all all of course if you look at the situation in two thousand and eight what happened was when the oil price started going into orbit the speculators joined in they were the act they don't it's not a question that determine anything it's a question of them reacting to what they think is going to happen when the oil price started going up people were talking about that price going to two hundred

dollars a barrel eventually. stopped at one hundred forty seven dollars a barrel and then it crashed and then the most important thing of all into ours the oil market is concerned happened when opec showed their power or their or upright price drop to thirty two dollars a barrel they took it up to the seventy's and then they waited until the economy got started again got back on the rollers and then they started moving it up their goal is to get the oil price up to one hundred dollars a barrel minimum minimum what it is today it's about one hundred twelve if you look at both. westpac west texas so birds and paris i mean how how much is it determined like a country like saudi arabia because we've seen because of the arab spring they don't want any of this democracy nonsense and their country so they have to pay off their people i mean how much is that play into the dynamic of global oil prices because of course being such an important producer they do impact the price and they need this for domestic social policy and like i said to pay off their people

to make sure they're happy they don't want any of this revolutionary stuff visiting them. absolutely absolutely you know when saudi king returned back to. non-standard thirty billion dollars of social for social programs but this is this is other side of the story of course southerner doesn't want cheap oil they need they need money but why can't or how can we ignore financialization of commodity markets look at last year five fifth of may come of that the market is crushed including oil so what happened i mean. why should we ignore there is. doesn't the capital isn't. if you ignore. the. amount of money circulating at on in one second from wal-mart good to are the market to one call more than two other commodities

and we don't know exactly who these players are so saying speculators just as a name doesn't mean much because we don't know who they are this is a point think we know my things and i think we know who they are is unlike anything we do know who they are these are major advantage all institutions these are major financial institutions that are driving this they're the ones that are the traders ok it's not the consumers and it's not the producers here fred you want to jump in . yes yes i want to jump in and see i've studied this market for about thirty years when the one nine hundred seventy three the king of arabia whoever that was at the time said that saudi arabia would never produce more than ten million barrels a day and they own companies they wanted to go up to fifteen or twenty but that's irrelevant in one thousand and twenty twenty thousand and eight when the oil price started going out of reach president bush he didn't good when wall street he didn't

go to one of the big banks so all the big banks and talk to the traders he went to saudi arabia because he wanted them to produce more oil and they simply said to him well have a nice trip home because we're not going to produce more oil that's the end of the producing oil and now of course they say well you know we're going to do something if there's a fall off an oil we go to produce this much of that much they are not going to produce more than ten million barrels a day that is this is stained oil production and then there is this surge production which is about a million and a half or two million but that can't go on for a little ok saudi arabia is going to saudi arabia wants one hundred dollars a barrel minimum ok we can we can look at that a little bit later but as a kurd if i go back to you i mean energy consumption in the united states is actually going down why are you surprised going up ok i mean there's there's more people are buying more environmentally friendly cars because people are bidding mrs

ray did they can't spend as much on heating oil and things like this i mean again is the market out of whack because consumption is going down but prices going up. well i can say i do get a more i shouted i'm sitting here in the united states i'm going to and i'm watching i'm watching oil prices i'm watching gasoline prices basically trend down for the last several weeks they've gone up a little bit now and i'm watching gasoline consumption just drop like a rock like so it tells me that the u.s. economy is a little soft now either the chinese economy and the indian economy are really really growing fast and so they're making up for the lack of consumption here in the united states or as you say there's some element of speculation paper oil if you will that is pushing the market around in the short term now i want to agree with with fred i think he said that the oil market is or a sold out said that the oil market is very opaque it's very opaque any regime down

the line here gentlemen i'm going to go to a short break and after that short break we'll continue our discussion on the causes and consequences of high oil prices stay with r.t. . if you. still. want to. have a load of bull dogs will get into notes we have a lot of groups you know the clothes in the schools is also i've used in the right enough against my mouth it was like many of that knowledge that wasn't forced marriage it's a smile when i was fifteen yes you can liberate their women and you certainly can't do it through the barrel of a gun only that the social changes will be asked guns themselves.

and many women we believe are going to stand up to the cross plan laid out the most efficient. people. talking about how much they care about the women of afghanistan it's not true they don't care about the women of afghanistan. and realized. the big picture.

of the true science technology innovation called the list of elements from around russia. and if you. want to. welcome back to. remind you we're talking about energy prices. plummet. ok fred before we ended the first part of the program said something that i completely agreed with the oil market is opaque ok so you want to take it from there go ahead. yes yes well i agreed with just about everything that curtis said but one thing i will never agree with regardless of who says it and that is that speculation leads the way speculators react and again president bush in two

thousand and eight he didn't take a greyhound bus to new york and talk to the speculators he took a play into saudi arabia speculation was a big discussion about speculation it's too long to take up here but i will never agree about this speculation and i would love to have a long discussion about speculators who would anyone who wants to have it and i will straighten this out for the ok well i don't want to go i don't want you to a large argument with you so far to find out do you i mean traditionally a seventy percent of the oil market to the trading of it was with involved producers and consumers and snow but now seventy percent of it is financial institutions and i you can't convince me and i'm sorry fred and maybe we'll have to have that long conversation one day but it's very much in their interest to speculate with a price of oil because they make an enormous amount of money i mean look i think actually scenario fred let me finish a financial institution says we predict the price of oil be one hundred fifty

dollars well that's a self-fulfilling prophecy it's going to suburbs in paris what do you think about that. but they look speculators have to make money ok they make money with money that that is it but of course speculation is or speculators are not built on the reason when the tight markets are tight fundamentals are tight supply demand is tight this gives a big leverage for speculators to bet on the prizes because i mean we say hedge funds financial institutions this or that this is not important today in financial markets we don't know how much oil is traded in paper barrels compared to world oil production consulate of estimate is fifteen or twenty times more oil is traded so there is no supply demand in financial markets you know and then if you

are selling a product you see that financial market price of paper barrel price is high then why should you sell your oil cheap you can't you cannot. the people are talking about supply demand but we have pathetically poor data on market fundamentals i mean we have not transparency so you really are still reinforcing my point it has nothing to do with the market fred you want to react to that in reality and i have to say i want to react don't say nothing of the work to it go ahead fred. yeah i want to i want to react to it on the demand side china is taking up the slack if the united states is actually consuming less oil on the supply side makes the decisions i mean i don't like agreeing with the mayor right donald trump but he's absolutely correct here they make the decision this particular issue in business is concerned i have talked to these people in new york they agree one hundred percent

with me that the speculators are doing what they have always done they're making money. and they are not leading the market they are not they are reacting to the market so when you've got a price that's growing up the way it went to two thousand and eight all you have to do is decide by and then when you see that something is gone has gone wrong then you sell it's really quite simple it's a very simple operation and it's just as transparent as it can be the behavior is just as threadbare and as it can be right it's just like it's just like speculation or buying and selling and other a lot of money so the only thing about the oil market is the transparency of how you later so ok current go ahead and east lansing. yeah well i'm going to agree with both you and fred i know that's probably seems like it's impossible but i think that fred is right that speculators. and speculators tag along with with the fundamental trend and exaggerate it but i think you're right yeah that's right the

leaders have become so dominant in the paper markets that that they that eventually what i think is going to happen is that fundamentals are going to drag the market in the opposite direction and then take and then speculators are going to tag along in the other way and exaggerate the price in the longer i don't think it's helpful for us to have this a long run in the long run you know i don't i think in the short run in the short run they can move the price around. quite fantastically and out of sync with the fundamentals but in the long run they can't and i truly think that this is damaging to world economies to have these huge swings and i'm not sure that allowing this much speculation oil is a good thing for long term energy planning ok if i can if i go back there had fred . i said. so would my students that you were wrong that boy ok. ok so that if i go to you i think something was mentioned earlier purchase that i think is very interesting here and i want to throw

a little bit of politics in here is obama is up for reelection and we have the eurozone it's touch and go touch and go the last thing they need to do is they need to have some kind of energy price shock ok and again going back to the speculation i mean if we speculators if we looking at one hundred fifty dollars a barrel i mean the eurozone is going to have a hard time swallowing that one plus with all this stuff going on with the imports exports of oil from iran i mean again i don't want to throw it on in the hands of speculators but we're kind of playing with fire right now i mean you know american consumers their gasoline prices sank or sank when you go to the the polls ok so i mean how much is this could have played into a political realm consumers pay for the high price is due to politically motivated actions or sanctions all of the elected representatives ok. saying that oil prices guzzling prizes up for approaching four gallons four dollars per gallon in the united states. and it is hurting american citizens but in europe.

guzzling price is double the amount in the united states yes all american citizens should learn that this is not right they never will she in every way they should just like the european consumers are just they have to live with the high oil prices this is the point i mean how you do that this is this is others other issue . if you want to put other sanctions then you say the. blame or pick this is one three voluntary actions you don't want to buy iranian oil then you cannot blame iran for high oil prices very good point kurt if i go you i hear jumps in and release stocks ok if i could go in there i mean to be as an american you know how sensitive our gasoline prices can be with the electorate. well i guarantee you there will be no american politician in this election

lecturing the people of the united states about how they have to get used to high gasoline prices that's not going to happen and fact keep in mind that america has a huge strategic reserve and already the president and the congress are talking about letting some of those reserves out to try and calm prices down now the last time they did it it didn't do much good because what they were doing is they were just sending sending out a little bit and hoping that would spook the market if they really want to bring the price down they're going to have to start draining those reserves at a pretty fast clip and i don't think they're going to do it so they're going to have a head fake and put out on a little and see if that knocks the market down. and of course i think that the obama administration will try to blame the situation in iraq or i'm sorry in iran for the high oil prices and to a certain extent they'll be right but they're not going to get in the people who lost it would be right when they tell the world not to buy iranian oil it's purely

nonsense ok i mean if you want to keep prices down then import oil because they will be on the market i mean it's shooting yourself in the foot fred if i go back to you i really like what curt had to say about the strategic reserve because that puts the united states pits the united states against saudi arabia because you're telling us the saudis will keep it a certain price no matter what. yes that's right that's what i believe but let's. but that that particular question i'm really not prepared to discuss that at the present dime because i've looked at it it's off that i'm tired of it but i just want to say one thing about the oil price. the west texas price is hundred five dollars and the brant prices are more than one hundred twenty dollars. average we're get you one hundred ten dollars if that price goes up another twenty dollars then we're all in trouble ok that's a good sign. if we go to paris i mean we had before running out of time here i mean what price in your mind is it going to break the back of the economy because we i

believe there's a lot of speculation out there these oil companies are making huge huge profits right now at what point do we risk raking the economy breaking down to make in the united states is it really kind of a sluggish recovery and europe it's just a flat lining right now i mean one hundred fifty what that would that be a number who are going to ask you i don't i seem to characterize with the remaining three. i believe that. oil prices will remain in three digits and you should just hope that the first remains one if the first teach it to them will have problems hundred fifty dollars the we can live a hundred fifty dollars two hundred sixty dollars but after two hundred dollars i think we will then we'll have a problem and then we'll think about it what do you think about that curtain east lansing what you think about the price where's the book breaking poverty well peter i think more and more important more important than the absolute price level is the rate of change every i should say ten of the last eleven recessions have been

preceded by oil price spikes so if this is an oil price spike and it continues to go up then i think we're very likely to see another recession so yes could the world economy stand this level of prices if it's if it just stood still maybe but if the rate of change going upward increases then i think we're in for we're in for a lot of trouble ok friends and i hate i mean when you seem to agree go ahead you have the last word in the program go ahead i have one quick thing to say if you want to know about the oil price look at the work of professor. james hamilton university of california san diego use the top man on this subject you'll find out everything you need to know and once again when the oil price gets to one hundred thirty dollars a barrel then we were in dangerous territory ok gentlemen we've run out of time here won't be dangerous territory for those speculators many thanks to my guest

today in stockholm east lansing and in paris and thanks to our viewers for watching us here are to see you next time and remember rostock rules.