are oil markets really being inflated by speculators?

[Joshua G]

I believe that wall street, in collusion with oil producers, is jacking up the price of gas way beyond supply & demand would dictate.

But my guy on matters of oil & alternate energies says its a myth.

http://gregor.us/fossil-fuels/specul...e-oil-machine/

He makes me doubtful on my long held conspiracies. But wall street & big oil are evil evil evil. How can they not be gouging us?

[L-Pink]

Wall Street continues to fuck up our country.

[Furious_Male]

Its easy to blame everything on speculators when its very clear that the Feds money printing policy is causing commodity inflation. Watch what happens to the price of crude when/if POMO comes to a halt.

[BFT3K]

[ThatOtherGuy - BANNED FOR LIFE]

The spice must flow...

[jimmycooper]

You guys are foolish conspiracy kooks. Wall Street does not set the price of anything, let alone oil. The markets do and high oil prices can simply explained by the laws of supply and demand, just like pretty much everything else.
China and India are industrializing countries with combined population of something like 2.7 billion people and they will continue to demand more and more of what is a limited resource, so get used to the high prices.
http://www.bloomberg.com/news/2010-0...er-cities.html

[mynameisjim]

It's not a conspiracy, but the problem is the concentration of wealth. A few firms control a majority of the money these days. For example, it's not at all unusual for one or two firms to hold over half the oil futures. So there doesn't need to be any collusion, when one huge group of investors makes a move, the rest will follow suit and it only takes a few to follow suit. They move their own market.

Another issue is that EVERYBODY invests in oil now, not just those involved in the oil industry. Hedge funds, sovereign funds, banks, they all invest in oil now which is not the way the oil market was meant to function. So all that money drives the price up artificially. It's like if one day every single American decided to invest $10K in the stock market, the market would surge.

Same thing with food prices. The super wealthy are sitting on so much cash they don't know what to do with it. Starting a new business is a waste of time so they are investing in commodities, artificially driving up the prices, and making a fortune.

The value of the dollar plays a part in this as well.

[clipper]

Its a giant geo political picture that has to be observed from many angels. Simply put the answer is yes, they do inflate the market for unjust reasons. Its amazing when you find out how easy it is to do what these people do. The government practically rolls out the red carpet to people like this because they make so much short term profit. Its an addiction to these people, and human nature is in full effect.

I could write a book on this subject but for the sake of brevity i'll keep this one short and sweet. But fuck the speculators, fuck the federal reserve, and most of all fuck the IRS!

[Bill8]

Well, there are at least two interesting problems with "speculator theory".

First, is that while one frequently hears the claim, and even named culprits like Goldman Sachs, to my knowledge noone has ever provided anything that looks like a proof of the claim.

I'd be interesting in looking at proofs if anyone has them.

The second is, even if it is speculators, what can be done about it in a global marketplace, especially in an era in which the republicans and neoliberal centrists have declared that regulation is an evil that destroys jobs?

The global marketplace naturally allows speculators to thrive, and who's going to regulate american and european companies from commodities speculation?

I often find it interesting that neoliberals are an even bigger proponent now of speculator theory than republicans and tea baggers.

[icymelon]

hedge funds imo

[jimmycooper]

It's not a conspiracy, but the problem is the concentration of wealth. A few firms control a majority of the money these days. For example, it's not at all unusual for one or two firms to hold over half the oil futures. So there doesn't need to be any collusion, when one huge group of investors makes a move, the rest will follow suit and it only takes a few to follow suit. They move their own market.

Another issue is that EVERYBODY invests in oil now, not just those involved in the oil industry. Hedge funds, sovereign funds, banks, they all invest in oil now which is not the way the oil market was meant to function. So all that money drives the price up artificially. It's like if one day every single American decided to invest $10K in the stock market, the market would surge.

Same thing with food prices. The super wealthy are sitting on so much cash they don't know what to do with it. Starting a new business is a waste of time so they are investing in commodities, artificially driving up the prices, and making a fortune.

The value of the dollar plays a part in this as well.

Commodity futures are a zero sum game and derivatives never dictate the price of the underlying. In this case, the underlying is oil. Sure, institutions who hold a ton of futures contracts can somewhat manipulate the daily fluctuations of the contracts, but they can't dictate the cost of the underlying.

[jimmycooper]

Its a giant geo political picture that has to be observed from many angels. Simply put the answer is yes, they do inflate the market for unjust reasons. Its amazing when you find out how easy it is to do what these people do. The government practically rolls out the red carpet to people like this because they make so much short term profit. Its an addiction to these people, and human nature is in full effect.

I could write a book on this subject but for the sake of brevity i'll keep this one short and sweet. But fuck the speculators, fuck the federal reserve, and most of all fuck the IRS!

It's good to know that you at least subconsciously realize that nobody would buy your book.
Congrats on not writing it!

[mynameisjim]

Commodity futures are a zero sum game and derivatives never dictate the price of the underlying. In this case, the underlying is oil. Sure, institutions who hold a ton of futures contracts can somewhat manipulate the daily fluctuations of the contracts, but they can't dictate the cost of the underlying.

What? The future contract determines the final delivered price.

As for the underlying, OPEC sets the daily output to control supply.

So one or two companies can control a majority of the futures contracts and one organization controls the supply of the underlying asset. How on Earth can that be considered a free market?

Free markets work and I'll defend them. But the oil market is no longer a free market. It will settle down though when these firms move on to something else.

[Phoenix]

who knew a porn board would hold so many educated investors

anyone using their knowledge to make money in the markets?

[mynameisjim]

who knew a porn board would hold so many educated investors

anyone using their knowledge to make money in the markets?

I have a case of Quaker State in the garage. That's my nest egg.

[v4 media]

oil price traded in dollars, dollar in the shit. Hence higher oil prices.
Same with most commodities.

[jimmycooper]

What? The future contract determines the final delivered price.

As for the underlying, OPEC sets the daily output to control supply.

So one or two companies can control a majority of the futures contracts and one organization controls the supply of the underlying asset. How on Earth can that be considered a free market?

Free markets work and I'll defend them. But the oil market is no longer a free market. It will settle down though when these firms move on to something else.

You can buy physical oil through futures if you take delivery of the oil, but at that point, the spot price and delivery price will be equal. The spot price drives the futures price and the spot price is driven by supply and demand. The only way banks can impact the spot prices would be if they were to take physical delivery and inventory it.

[wehateporn]

This is not a conspiracy, it is well known that Goldman Sachs are telling investors the price of oil will keep going on, so that's where they should put their money

[mynameisjim]

You can buy physical oil through futures if you take delivery of the oil, but at that point, the spot price and delivery price will be equal. The spot price drives the futures price and the spot price is driven by supply and demand. The only way banks can impact the spot prices would be if they were to take physical delivery and inventory it.

I've sort of lost track of what you are trying to argue here. I've already stated it's not a conspiracy so I'm not sure if that's what you are debating or not.

There is no question that money being redirected in the oil futures market raises the final price. That's how markets work.

A very limited number of firms are controlling that influx of money.

As for taking physical delivery, that doesn't matter. Companies will buy and store oil at a high price if the future prices are even higher. That's how a financial institution can manipulate the futures market without ever taking physical delivery themselves.

My position is that there is no conspiracy, but the market is not free at this point and is being exploited by a very small number of players.

I'm off to bed though and that's my last post. Good discussion.

[Joshua G]

My position is that there is no conspiracy, but the market is not free at this point and is being exploited by a very small number of players.

if a market is being exploited by a very small number of players. isnt that the definition of conspiracy?

My own take is that the oil market does have speculative excesses, just like every other financial asset traded on an exchange. Anytime the oil market reprices "in anticipation" of a supply or demand shock, speculation is in full effect. & my thinking is that the small # of players amplify the price adjustments & derive higher profits then they would otherwise get in a rational market. Its no coincidence to me that Exxon always reports its highest profits at the same time consumers are getting killed by the price of gas.

[bronco67]

Wall Street continues to fuck up our country.

A bunch of people with no talent, except to somehow make money by not producing or creating a damn thing. Really, what the fuck do those people do, and why does the average Wall Streeter make more than a guy that designs buildings? It's seriously fucked up.

[Joshua G]

A bunch of people with no talent, except to somehow make money by not producing or creating a damn thing. Really, what the fuck do those people do, and why does the average Wall Streeter make more than a guy that designs buildings? It's seriously fucked up.

wall street is gossly paid because of the scale of their business. When you manage the savings/retirement assets of trillions of dollars, the small percent you charge to manage it quickly adds up to the billions in revenue wall street banks generate.

its really nothing more then an ivy league fraternity that doles out million dollars jobs to its friends. Only people with connections or can understand rocket science can get into the fraternity.

[dyna mo]

wasn't there direct correlations made between the egyptian uprising and the price of oil?

The price of an oil barrel continued to be above US$ 100 in electronic exchanges in Asia. This level is due to market fears amid the unprecedented turbulences in Egypt and the risk of these events on the traffic through the Suez Canal.

[ajrocks]

Honey Badger don't give a shit! Just buy oil stocks, you will earn more then you lose at the pumps.

[mayabong]

The Value

The Value of your oil, gold and silver is not going up, the value of the dollar is going down the poop hole.

[BFT3K]

[jimmycooper]

There is no question that money being redirected in the oil futures market raises the final price. That's how markets work.

The futures market trades contracts. The price of those contracts are derived from both the spot price and a time variable.

[DamageX]

You guys are foolish conspiracy kooks. Wall Street does not set the price of anything, let alone oil. The markets do and high oil prices can simply explained by the laws of supply and demand, just like pretty much everything else.
China and India are industrializing countries with combined population of something like 2.7 billion people and they will continue to demand more and more of what is a limited resource, so get used to the high prices.
http://www.bloomberg.com/news/2010-0...er-cities.html

So what happened when financing dried up back in 2008-2009? How come oil went from $150/barrel to $38/barrel? The world demand never changed, only the supply of cheap money?

Since you seem to have some grasp on the subject I'm interested in your answer.

[wig]

So what happened when financing dried up back in 2008-2009? How come oil went from $150/barrel to $38/barrel? The world demand never changed, only the supply of cheap money?

Since you seem to have some grasp on the subject I'm interested in your answer.

The world demand did change -- drastically.

The role of "speculators" in commodity bubbles is vastly overrated by the general public, for two reasons.

First, speculators are trading cash-settled futures contracts, and never take possession of the actual goods they're trading, and in many cases they can't. If you buy a futures contract for a million barrels of oil come October, you will have to sell that contract to someone else or else you're going to have a oil tanker come and park on your lawn (figuratively speaking). While they can to some extent adjust the price, they can't adjust the level of supply, precisely because they lack the storage capacity to hold goods off the market.

Second, for every futures contract that is bought, another is sold. Options and futures contracts are what mathematicians call a zero-sum game, meaning that the wins and losses balance out among the players. When one oil speculator makes a killing buying a contract, he does so at the expense of the other speculator who sold it to him.

Oil is going up because as was stated earlier, there is more demand chasing the resource. There are emerging economies like China / India with large populations that want what the west has and that takes oil. Oil is in everything. Same with Corn. Agricultural commodities have also been hit by climatic and natural disasters, so supply gets hit when that happens.

Yes, the Dollar is down and yes weakening currencies play a role, but it is not the main driver of price (not at this point anyway). If we experience uncontrolled inflation or hyperinflation as some predict, then sure. But that is not what is happening NOW and several markets indicate that the world doesn't really expect that in regards to the US$ anytime soon.

And for the 10th time, the US$ index is trading at 73.60 just barely below it's low of 2008, yet Oil is not at $140 it is at currently at $98.70. This should tell you that the US$ is not the driving force, but rather that post crisis demand is up and supply is not sufficient to the extent that the market believes it should be cheaper.

[PR_Glen]

oil price traded in dollars, dollar in the shit. Hence higher oil prices.
Same with most commodities.

it's more than just that, our dollar is doing really well lately and our gas prices are the highest ever...

I'm not sure about any conspiracies.. but they definitely take advantage of setting oil prices.. there is no supply and demand issue, there is plenty of oil on this planet to last us (even at this rate) thousands of years... The point is we should find something more economical and lest wasteful, we have the technology already. If it doesn't happen in the US another country will do it first and they/we will be playing catch up...

[DamageX]

While they can to some extent adjust the price, they can't adjust the level of supply, precisely because they lack the storage capacity to hold goods off the market.

They can't adjust the supply, but they can adjust the demand. Cheap money = demand for everything else.

Oil is going up because as was stated earlier, there is more demand chasing the resource. There are emerging economies like China / India with large populations that want what the west has and that takes oil. Oil is in everything. Same with Corn. Agricultural commodities have also been hit by climatic and natural disasters, so supply gets hit when that happens.

The demand for oil in both China and India has been rising constantly and did so during the financial crisis as well. Demand never went down.

[wig]

it's more than just that, our dollar is doing really well lately and our gas prices are the highest ever...

I'm not sure about any conspiracies.. but they definitely take advantage of setting oil prices.. there is no supply and demand issue, there is plenty of oil on this planet to last us (even at this rate) thousands of years... The point is we should find something more economical and lest wasteful, we have the technology already. If it doesn't happen in the US another country will do it first and they/we will be playing catch up...

It is about supply and demand. Just because their is oil in the ground doesn't mean it equates to supply. Also, different types of oil exist and the costs to refine / deliver it varies. Take your oil sands as an example.

I agree that new technologies should be pursued further and that more money should be put into them, but it is simply economics. Oil is just still too cheap and other technologies are just still too expensive.

It's a shame in a way that these short term concerns outweigh the long term costs / benefits.



.

[wig]

They can't adjust the supply, but they can adjust the demand. Cheap money = demand for everything else.

What part of zero sum do you not understand?

The demand for oil in both China and India has been rising constantly and did so during the financial crisis as well. Demand never went down.

No it didn't. Moreover, demand went down globally, which is the only way to measure a fungible commodity like oil.


.

[wig]

The demand for oil in both China and India has been rising constantly and did so during the financial crisis as well. Demand never went down.

I stand corrected. I just looked it up and although the rate of demand dropped for China / India, it still grew in 2009.

World consumption however, declined by 1.7%

2009 over 2008 Oil consumption by region:

OECD -4.8%
European Union -4.4%
Former Soviet Union -4.0%
Emerging Markets +2.8%

World Consumption -1.7%