Yes. Get government out of the picture.
Come now.
BOTH of our stellar presidential candidates have bragged about going after BigOil, so that MUST be where the fault lies for “high” oil prices.
Damn right they’re rigged....by your benevolent state and federal government.
They take gas taxes and rather than build roads and lanes to get the traffic moving (30 min at 55 mph or 2 hrs at 15 mph - which pollutes more?) they spend it on pointless idealistic dandelion-powered tramcars or some other boondoggle.
All this ‘alternative energy’ blather can be translated as: ‘we’ve found a new constituency and it’s all the greenie quangos that purport to be developing new technology but can’t get their products above 20 mph.’
Karl Benz and others invented the automobile in the 19th century when there were no computers, no Internet, and no factories - what’s the excuse of the greenies who have all the advantages and more?
This news story is but another indication of how badly our Democrat controlled school system has failed us. Here are the credentials of the authors:
Ari J. Officer teaches financial mathematics at Stanford University. Garrett J. Hayes teaches materials science and engineering at Stanford University
Yes, cause Ms Pelosi will NOT allow for domestic drilling because she is making money off our backs.
“Are Oil Prices Rigged?”
~~~~~~~~~~~
And what was yer first clue?
Saw the headline, went to the site, saw “Time”... went elsewhere. Sorry, Time is the “Coast-to-Coast” of magazines.
Are prices rigged?
The answer is a question....is a pig’s ass pork!
This argument doesn’t hold water. It’s like claiming Ford can make money by buying up Ford stock.
As a trader tried to bid oil futures past market levels, he’d be spending more and more to inflate the price. To make money he has to be able to sell back all the contracts he bought at above-market prices.
That can only happen if his play was fundamentally correct and other traders agree the price should be there...meaning there wasn’t anything “artificial” about the move and nothing was “inflated”, it was just the old price moving to the market price.
If he’s truly artificially inflating the futures, he’ll then be long a ton of expensive contracts as sellers step in to take advantage of the idiotic prices being bid. The price gets slammed back down where it belongs, and he loses.
Oh and if he’s doing it enough to significantly move the market, that means his position is massive, and traders will notice. Traders being the vicious bunch they are will attack the huge long position once they spot it, aggressively selling because they know the guy behind it is probably highly leveraged, meaning his loss gets substantially bigger at each price move...that means he has little room for error, and as soon as traders start to hammer it he’ll exceed his margin and have to puke his position for a massive loss (in doing so, letting the traders who sold against him buy their shorts back cheap and make money...their reward for forcing the market back to efficiency).
You can’t both build up a position big enough to move a market AND be able to liquidate out of that position for a winner. It’s like thinking you can make money by buying your own product if you just buy enough of it...or powering your house with a fan pointed at a windmill. TANSTAAFL.
YES. Although I have no basis to back it up. I will just vote for CHANGE this year and the messiah will part the seas and oil will magically bubble up from the oceans on our coast without any environmental consequences. .10 cent gasoline by January 21, 2009.
When investors are lined up, more than willing to drill in ANWR and off shore, but the government is the ultimate power that issues the permission slip that allows drilling, who exactly is limiting supply??
It’s the government stupid. Not the oil companies limiting supply.
Why don’t people understand??
Their entire premise appears to be that the market is rigged because oil suppliers are going to do what's in their best interests...
Of course they are going to do what is in their best interests. At times that is going to mean producing less than what they might be able to produce because overproduction causes a glut of supply and drives down the prices. It also drive up demand, but at some point they are better off selling less for more.
Underproduction causes scarcity and drives up prices but drives down demand. It also makes it more cost effective for others to develop new sources of oil.
Thus the free market regulates itself.
The only real way the market is rigged is the political and regulatory hurdles to developing additional sources of oil limit supply and the ability to develop new sources of supply.
The article tries to make it sound like the fact that you don't have to have the full purchase price of the oil you are buying a future contract for in that bank is something strange and nefarious.
The oil has to be paid for when it is delivered. You have to put some money down when buying the future to reduce the risk that you will be unable to pay for the price of the oil, or cover the loss if the oil is can be sold for less than you agreed to pay for it.
Even if they know that the price of oil is too high (to the point of reducing demand) it is not in their interest to correct it. By setting prices in the smaller but more "trusted" futures market, oil producers realize multiplied gains on their physical oil sales.
Suppliers don't set prices in the futures market. The sell the futures for the price that purchasers are willing to pay. If purchasers are willing to pay more the price goes up, if they are willing to pay less the price goes down, though if the price goes down too far the suppliers may reduce the amount of futures they are willing to sell in hopes that the price will go back up. That's the way a market works.
Prices in the futures market — and, indeed, any real-life market on a standardized good — do not form where actual supply meets actual demand; they form where perceived supply meets perceived demand. Participants in the futures market merely represent the world around them. A veil has been placed over the public's eyes, and they accept this illusion of a fair price.
What a bunch of garbage. Just because there is risk involved that they will incorrectly predict future supply or future demand, fairness becomes an illusion?
No one is forcing people to buy futures. They do so because they feel they can make money through assuming the risk that supply or demand will change. Suppliers offer futures because it reduces the risk for them. They know they have a buyer for the oil before they pump it out of the ground. They know what it will be sold for, and they can make business decisions based on that price.
Oil futures offer value to the suppliers through a guaranteed price, and opportunity to investors.
The futures market has become the public driving force in pricing oil. But the vast majority of oil consumed in the world is purchased through private deals, given the massive undertaking of physically delivering millions of barrels. However, a series of private deals cannot establish a market price.
Absolutely and completely absurd.
The private deals behind the scenes unquestionably have a great effect on the market price.
Investors that invest in oil futures need to sell that oil to someone that is actually going to use it, and no one is going to buy it from those investors for a price that is greatly different than they can get it for in some private deal.
Investors in the futures market try to anticipate what people will be willing to pay for oil. To say that the futures market, which is a small portion of the total oil, independently sets the price for all oil is absolutely ridicules. The futures market tries to anticipate what they oil can be sold for when that oil is actually delivered. However, the actual price they can sell it for is still determined by the market.
The owners of the futures can't just decide to sit on the oil they purchased when it comes time for the oil to be delivered unless they've got some place to store the oil. It is the market price of oil at that time that determines what the oil can be sold for. If they guessed well they make a profit, if they guessed poorly, they lose money.
In the sense that Russia is using it’s oil as political
leverage and blackmailing it’s customers, it is rigged.
Oil prices are very bullish again, in part thanks to the Russian invasion of Georgia, coupled with increased fear of Putin’s energy blackmail routine this coming winter.
Then it comes to me, I would have to become a politician.
...The feds “rig” everything. The deficit, the economic status, the ressesion, the depression, everything. It’s a lie and an illusion...
Prices are ultimately set in the primary market. In commodities, that refers to producers.
The Hunt brothers did that with silver back in the late 70s early 80s and I think some other folks have done it with some other commodities.
I think the key in all cases was The underlying physical product has to be in short supply. You have to squeeze the shorts by making them run the risk of not being able to deliver on their contracts.
I think if you can do this you can rig a futures a market. If not you can't for the reasons set forth above.
In the case of oil I don't think you can possibly control the underlying physical commodity. IOW, eventually the rubber has to meet the road.