Summer Gas woes ie higher proices around the corner...

[Lin]

Who would have thought that electing a government of the oil companies, by the oil companies,  for the oil companies would create any sort of problems?

[Len Silva]

I also saw a piece on C-Span, I think the tail end of some hearing.  The gist of what I caught was that some oil execs and oil industry analysts agree the the realistic price today should be $60-70/bbl.  They were saying that the price has been driven up not by the cartels but by speculators.

I don't understand at all how commodity markets work or how speculators can control the price.  Part of what I heard is that other commodity markets are regulated to prevent this from happening but oil is not.  Can't imagine why that would be.

[HighTechRedneck]

I don't understand at all how commodity markets work or how speculators can control the price. 

Think of it like an auction with a bunch of aggressive bidders.  What happens?  Sometimes they run the bidding well above the market value. 

I just hope to see the day that it all crumbles for them and they lose so much of their own money that they are seen jumping out of their high rise windows.

[kyle4501]

. . . . . THe national news is saying . . . .  

. . . . . According to the gas companies . . . .   

Wouldnt belive them if they Swore on the Popes Naked butt.. 

Me either!

I'm just surprised nobody is pi$$ed off about ice cream prices!!!

I am, but that's another board to bitch on 

Who would have thought that electing a government of the oil companies, by the oil companies,  for the oil companies would create any sort of problems?

Ummmm, did I miss something? The president ain't a dictator (but he seems to be a great scapegoat for the media). I thought the democrats have been controlling the house AND senate while the gas prices have been shooting up lately . . . .

[belfert]

The speculators are controlling the market right now because the stock market is not making good returns and they see oil prices going up and up.  The speculators keep buying oil so the price keeps going up.  The price can't keep going up forever if there is not another force besides speculators buying.

[FloridaCliff]

I also saw a piece on C-Span, I think the tail end of some hearing.  The gist of what I caught was that some oil execs and oil industry analysts agree the the realistic price today should be $60-70/bbl.  They were saying that the price has been driven up not by the cartels but by speculators.

I don't understand at all how commodity markets work or how speculators can control the price.  Part of what I heard is that other commodity markets are regulated to prevent this from happening but oil is not.  Can't imagine why that would be.

Len,

Here's sort of a brief example:

I sell widgets, today they are selling for 1.00 each.

A speculator wants me to agree to sell widgets to him for 1.10 in one year.

I beleive the price of materials and such won't go up and drive my price up any by then, so I agree.

My motive is I will get .10 more each, if my costs go up, my loss, if they drop I make even more.

The speculators motive is He thinks the price will be even higher than 1.10 and I will be bound to sell it to Him for that.

In my opinion its not investing, but gambling. 

So you can see how the Oil futures are being driven up by this.  Contracts are sold many months out and lots of gamblers.

Just remember the .com boom, get ready for the OIL boom!

Cliff

[skipn]

Cliff,

     So basically buy long sell short and hedge everything between

   The kicker is the ones the commodity floor are the one pushing the prices up and
covering with shorts when/if things drop through the floor. In other words they
would be protecting themselves at both ends.


Skip

[Len Silva]

I just hope that in 2009 President Clinton puts some regulation on speculators

[Len Silva]

What I'm hearing about is the "Enron Loophole" which exempted energy trading from federal commodities laws pertaining to certain types of trading environments.

Not sure exactly how it works but that seems to be the reason oil speculation is unregulated compared to other commodities.

Of course, the price of oil drives up the price of other commodities.  If a wheat speculator thinks oil will be $200/bbl next year, then he also thinks wheat will be up because of the energy it takes to produce. Copper smelting and aluminum production take lots of energy. I guess this would apply to most commodities but not the other way around.

http://www.closetheenronloophole.com/

[Jeremy]

Our news programs are currently full of items on fuel prices as petrol has just past the significant £5 per gallon mark (that's $10 a gallon to you, although our gallons are slightly bigger than yours). I've just heard a bit of an interview with a haulier who said that his fuel costs had risen by £30,000 ($60,000) a month since last November. There was also an item on 'ways to to reduce your fuel consumption', and the presenter actually suggested people turned their car radios off.

Petrol apparently hit £6.70 a gallon in parts of Scotland last week due to filling stations raising their prices in anticipation of likely fuel shortages due to workers at a refinery up there going on strike - pure profiteering though, as by all accounts there was more than ample fuel in storage, and more arriving all the time in an attempt to persuade the public not to panic buy.

Jeremy

[Stan]

Speculators usually never lose money. They are just percentage people and they get their cut whether the price goes up or down. The people who make or lose the money are the investors, like Joe Blow looking for a higher return than a CD or your pension fund and insurance companies.

[jjrbus]

 When the oil bubble bursts, which it will. It will be after  protected off shore and Alaskan fields are opened up to exploration.  The speculators will lose thier shirts. But dont fret about them the Gov will bail them out!

[superpickle]

When the oil bubble bursts, which it will. It will be after  protected off shore and Alaskan fields are opened up to exploration.  The speculators will lose thier shirts. But dont fret about them the Gov will bail them out!

You got THAT right..
they Subsidize Tobacco, Oil and Gawwwd knows what else..

Can anyone spell "The Boston Tea Party" ? 

[jjrbus]

For anyone afraid that oil is going to $10 a gal. and staying there. Here is an interesting artical by a man who was an oil trader for many years.

http://www.thestreet.com/s/forget-fundamentals-when-it-comes-to-oil/university/personalfinance/10414145.html?puc=_htmlbtb

The people of the US have the power to stop the speculation.

[prevost82]

I have to agree with you JJ this is an oil bubble and when it crashes it will go as all commodities have gone in the past ... straight down without hitting the sides. Good article ... thanks, at least one of the talking heads has a brain on this issue.
Ron