Posted on 04/27/2012 4:55:28 AM PDT by SeekAndFind
Speculators have an easy bet with Democrats in charge of any of the 3 parts of the legislative branch of government, gas supply will be down, making prices go up.
I think you need to go back to square one and learn how speculation works. Here’s a good start:
http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm
People who deny that speculation raises the price of oil beyond its actual worth are basically living under a rock.
That's funny. Beyond it's actual worth? That's even funnier.
The CFTC was established by Congress in 1974 specifically to prevent speculation from artificially inflating the price of commodities.
No it wasn't.
The CFTC's mission is to protect market users and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives that are subject to the Commodity Exchange Act, and to foster open, competitive, and financially sound markets.
Source
In fact, at that source, the words inflate, artificially and inflating aren't even there.
But a speculator with the capital to purchase a sizeable number of futures derivatives at one price can actually sway the market.
But a speculator with the capital to sell a sizeable number of futures derivatives at one price can actually sway the market.
A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes they'll be able to sell it later on at the future price.
Or it can cause oil producers to sell their commodity now in the fear they'll have to sell it later on at a lower price.
If they want to sell it in the future, at the "futures price", all they have to do is sell a future.
As a result of speculation among these and other major players, an estimated 60 percent of the price of oil per barrel was added; a $100 barrel of oil, in reality, should cost $40 [source: Engdahl].
I don't know about you, but if I have a product that is "only worth $40" and it's selling for $100, I'm going to go all out to produce more now and I'll be selling those ridiculously priced futures contracts by the tankerful. In reality, I'd clean up.
Thanks, I needed a good laugh.
I’m sorry, are you under the impression that there are an equal number of long and short positions being held in the oil futures market? The reason speculation has such an effect is because closed long positions, which should theoretically drop the price of oil, are immediately replaced with new long positions.
Yes, it is theoretically possible that speculators could drive the price down. The problem is that history does not show that speculators have ever done this. The speculation market by definition is a zero-sum game. Its effect on the spot price of oil, however, is *not* a zero-sum game.
Global oil demand and global oil supply have mirrored each other for more than 30 years. The oil-producing nations now are as unstable as they have been. The instability, in other words, is nothing new. Yet we have seen massive fluctuations in the price of oil despite this. If speculation has no role, how do you explain this?
I’m sorry, are you under the impression that you can be long a futures contract without a short on the other side? LOL!
“People who deny that speculation raises the price of oil beyond its actual worth are basically living under a rock.”
I would rather see the price of gas go up because of speculation. Then by leftist aka progressive epa laws.
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