Posted on 06/28/2008 10:15:47 AM PDT by Cringing Negativism Network
(remember all those "speculators"?...)
"Speculators are driving up prices at the pump".
Let's take that assertion for a moment, as fact. What does that mean?
That means, there is a massive amount of speculative investment money, which is betting that the price of oil will continue to rise. That money is all, uniformly, locked in what is referred to as "long" positions, in oil futures.
What's being overlooked in all this hand-wringing, and all the claims "drilling won't help anything" obstruction, is the simple fact: speculators can be long. Or speculators can just as simply, be "short".
All it takes, is one mouse click, or one phone call - and all that money can switch sides... and bet on the price of oil, decreasing. Just one decision, is all that's needed. One program trader, whose software switched from "green", to "red".
That's all it will take.
Billions of dollars, are currently "long" oil - that's been the trend for several months. Betting that supplies will continue to be limited, and demand will continue to grow. Betting ... on FUTURE prices of oil.
That's the rub. Markets (never) go one direction. But oil, has been going ... one direction.
That's the reason drilling now for our own oil, will bring prices down IMMEDIATELY.
All it will take in this environment to bring prices back down, is for those billions of investment dollars which are currently betting "long" on oil ... to go "short".
And we will see:... the Mother of All Price Drops.
AND they will get burned and not speculate with oil in the future
Agreed....we don’t have to punch a single hole in the ground....When (and unfortunately, if) we make a firm commitment (repeal the moritorium on offshore drilling, open up ANWAR to exploration, etc.) to increased domestic production, the price of oil will start to collapse.
I hope this is correct, but this notion always causes me to wonder:
1. How far out are oil futures contracts traded?
2. How soon can new US domestic oil actually hit the market?
I think the answer to the first is months and the second years, but maybe not.
Democrats don’t want prices to go down. They’re too busy investing in “alternative” sources of energy, i.e., Tom Daschle has a large investment in ethanol. They want to starve the poor. They’re starving children!
“Out to 2015 on the NYMEX.”
2015, I would not have thought that far out. So, I guess some policy changes and serious plans by the US would bring the price down some. Thanks.
Excellent illustration. Thank you for contributing to this discussion.
(your slumberer on the right, is *so* my type)
We humble readers, really need you to explain the subtleties of oil futures, further...
:)
“The Ultrashort Oil and Gas ETF (DUG) that bets on declining oil prices has an average daily trading volume of nearly 17 million shares - that by itself is a lot of interest on the short side.”
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Thanks for that data point. Some time this week, I was about this close ==> ‘ ‘ to calling my broker to ask how I might be able to short oil.
I didn’t, and considering oil popped above 140 the very next day, I’m glad I didn’t. But it’s quite useful to know how one might do so, when the time comes.
Thanks. Much appreciated.
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