But while markets are 'smart' over the medium to long term, they can be very irrational in the short term.
Oil has doubled/bubbled in the past year, due to irrational speculation as trillions of dollars search for greater returns after the dot.com and real estate boom-n-busts.
Irrational because demand has NOT doubled in the past 12 months. If the supply/demand was out-of-whack before this, and oil 'should have' been higher, then this also says that the markets weren't working correctly (or smartly) the past couple of years.
Read deep into the article, toward the very end to find that countries will respond to domestic unrest caused by short-term market manias with subsidies. So much for the free-trade and capitalism without interference.
Spanish authorities have promised measures such as loans and cash subsidies to help truckers cope with higher fuel costs.
Some 'free-trade' countries such as China (a Communist controlled economy) and India (a socialist country that is new to capitalism) have had to increase oil prices that are State-controlled after the Govt's having lost billions subsidizing it, although they still subsidize.
Look for these economies to show a LOT of signs of social unrest. They have lots of have-nots in their countries.
Spanish Truckers Block Border
PARIS — Gasoline at $4 a gallon? If only.
As prices across America hit an average $4 a gallon over the weekend, European motorists, truckers and economic planners wrestled with fuel costs around twice as high, blamed not only on the soaring price of oil but also high government taxes levied at the fuel pump.
That has made few people happy. In the latest show of distress, Spanish truckers Monday began a blockade of their country’s border with France, lining up their rigs in a crawling strike to protest the cost of diesel. In France, farmers on their tractors did the same, offering a foretaste of a planned national strike by truckers next Monday.
The rising European anger may well be matched by the price of oil, according to Jeffrey Currie, the global head of commodities research at the investment bank Goldman Sachs. At an oil and gas conference in Malaysia on Monday, he suggested oil prices are likely to hit $150 a barrel this summer, surpassing the record of $139.12 last Friday, Reuters reported.
“I would suggest that the likelihood of that happening sooner has increased tremendously — sometime in the summer,” Mr. Currie was quoted as saying. “Demand for oil is weak but supplies are even weaker.”
In Spain, tens of thousands of truckers launched an indefinite campaign of blockades and demonstrations at midnight to protest diesel prices, up by one fifth this year to around $8 per U.S. gallon, depending on where it is bought and the levels of official discounts available in many parts of Europe to truckers, farmers and commercial fishermen.
The protests provoked clashes between supporters and opponents of the action. Spanish television showed the trucks of alleged strike-breakers with their windshields and headlights smashed and tires slashed. Spanish truckers said the price of diesel — which varies among European countries -- was now 1.30 euros per liter, roughly $7.73 per U.S. gallon, compared to 0.95 euros per liter, around $5.58 per U.S. gallon, one year ago. At highway filling stations, diesel can cost 1.5 euros per liter, or $8.90 per gallon.
Spanish authorities have promised measures such as loans and cash subsidies to help truckers cope with higher fuel costs. But the strike in Spain is likely to have much broader consequences, hitting supplies of goods to stores and supermarkets within days.
Spanish motorists and shoppers formed long lines at gas stations and supermarkets to stockpile fuel and food.
The Spanish strike is only the latest in weeks of protests stretching from Britain to Italy. Fishermen in northern Spain planned to join the truckers’ strike later.