this just in - rise in price of oil has nothing to do with speculators

my last post as well.

And guys who make a profit from writing sensational books entitled "Peak Oil" - which is never quoted by anyone other than self loathing college types who are bitter because they have to ride a bike or walk across campus - are going to give an objective analysis?

Tell us about Al Gore and global warming while you are at it.

Mr. Madison, what you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.

a) prices respond to news of future supply and demand, this is how it should be and how it always has been. they don't necessarily have to do with current supply and demandb) price volalitity of any good,commodity will depend on the steepness (slope) of the supply and the demand curve - quick, what is the commodity with the steepest supply and demand curves? Hmmm, we know oil demand hardly responds to price changes AND we also know given what has been done already, it takes substantial time and investment to get more oil out of the ground, short run supply and demand curves are incredibly steep ---> high price volatility

Post Much wrote:

The price fell $22/barrel in a week.

This had nothing to do with supply or demand. No one can change supply or demand that quickly. The sudden "surge" in supply was because speculators purchased it, and then quickly realized there was no market to sell it at the price they bought it. So they shorted supply driving the price up, and in turn demand dropped. Then they were left with this oil they bought at $145/barrel... thinking they could sell it, but guess what, the supply caught up to the decline in demand and they had to resell it before they lost big bucks.

Ergo we have a correction for the speculation. Which still follows supply and demand, but it's a false supply and demand.

neb-ulous claims wrote:

my last post as well.

And guys who make a profit from writing sensational books entitled "Peak Oil" - which is never quoted by anyone other than self loathing college types who are bitter because they have to ride a bike or walk across campus - are going to give an objective analysis?

Tell us about Al Gore and global warming while you are at it.

What's your point? Are these authors somehow bribing the CFTC to help them sell more books?

Please tell me how the CFTC is wrong - either in their analysis or their data - otherwise this really is a waste of time.

neb-ulous claims wrote:

my last post as well.

neb wrote:

What's your point? Are these authors somehow bribing the CFTC to help them sell more books?

You have got to be the dumbest smart person I know.

He says "my last post".... so you ask him a question.

BRILLIANT!

it's called a rhetorical question - i didn't expect him to answer it - i just asked it to prove a point.

oh you really showed him...

he's not coming back, what point are you proving?

that you can get the last word?

neb, you are wrong...it is ridiculous to sit there and claim that speculation did not cause this run up, if speculation did not cause the run up then prices would still be at $147 but it is now $124 and going the way of the natural gas...accept it and move on...it was really dumb to bring this back up right now.

right they don't have to make money, but if the price has been rising which it has and a report I saw says that 66% of oil futures are purchased by speculators and there are $30 to $60 in the price of a barrel of oil because of this.

So if there were no speculators wouldn't oil be cheaper?

This is the report I am going by. (obviously bias)

An Open letter to All Airline Customers:

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now. Visit

www.StopOilSpeculationNow.com

.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem. We need your help. Get more information and contact Congress by visiting

www.StopOilSpeculationNow.com

.

Robert Fornaro

Chairman, President and CEO

AirTran Airways

Bill Ayer

Chairman, President and CEO

Alaska Airlines, Inc.

Gerard J. Arpey

Chairman, President and CEO

American Airlines, Inc.

Lawrence W. Kellner

Chairman and CEO

Continental Airlines, Inc.

Richard Anderson

CEO

Delta Air Lines, Inc.

Mark B. Dunkerley

President and CEO

Hawaiian Airlines, Inc.

Dave Barger

CEO

JetBlue Airways Corporation

Timothy E. Hoeksema

Chairman, President and CEO

Midwest Airlines

Douglas M. Steenland

President and CEO

Northwest Airlines, Inc.

Gary Kelly

Chairman and CEO

Southwest Airlines Co.

Glenn F. Tilton

Chairman, President and CEO

United Airlines, Inc.

Douglas Parker

Chairman and CEO

US Airways Group, Inc.

sickofneb wrote:

neb, you are wrong...it is ridiculous to sit there and claim that speculation did not cause this run up, if speculation did not cause the run up then prices would still be at $147 but it is now $124 and going the way of the natural gas...accept it and move on...it was really dumb to bring this back up right now.

why would oil still be at $147 if speculation didn't cause the run up? That makes no sense. Demand is decreasing - the economic outlook is bleak - so the price goes down. More speculators might bet that the price is going to go down based on that information - but that doesn't mean that speculators are CAUSING the price to go down.

neb wrote:

why would oil still be at $147 if speculation didn't cause the run up? That makes no sense. Demand is decreasing - the economic outlook is bleak - so the price goes down. More speculators might bet that the price is going to go down based on that information - but that doesn't mean that speculators are CAUSING the price to go down.

Right but we knew this before the run-up from $125 on June 8th as you mentioned to $147. So why would it be going up then, the out look was bleak, housing and construction were down back then. That upturn over the course of two weeks where oil was going up $2-3/day made no sense according to you.

The futures plummeted substantially in a weeks time. Biggest drop since the end of the Gulf War. It wasn't like they JUST found out the economy was doing bad. Demand has been down since well into June. Especially relative to years past.

As for the other guy I believe it too. Airlines Vs. Oil Speculation is a huge lobbying topic on capitol hill right now. Big Business used to roll along with it cause as AnEconomist pointed out... people didn't used to care. However, as of recent, they've started to care by flying and driving less. So the Airlines are finally being killed by the prices, and they're fighting back.

They may be big business rats, but they are angry rats. I sort of trust them on this one.

The funny thing is that airlines are some of the biggest oil speculators out there. How has Southwest kept their fares low and consistent? By hedging oil on the futures market. Speculating! Of course it works out for them when they keep the price low, but the guys driving the prices up are playing the same game.

east sac wrote:

The funny thing is that airlines are some of the biggest oil speculators out there. How has Southwest kept their fares low and consistent? By hedging oil on the futures market. Speculating! Of course it works out for them when they keep the price low, but the guys driving the prices up are playing the same game.

Amazing how little people understand about the commodities markets. Hedging isn't speculating. Hedging is the reason commodities markets exist in the first place.

A refinery needs to hedge against price increase in the future so it buys futures contracts. The increase in the cost of crude is offset by the increased value of the futures contract, thereby stabilizing the refinery's operating margins and profits. Likewise, the crude producers need to hedge against future price decreases so they SELL futures contracts. If the price of crude drops they make money to offset the losses in the spot markets. If the price of crude increases they make money in the spot markets to offset the futures market. Either way, their costs and profits are hedged to insure a stable profit.

No hedger or speculator is "selling oil back and forth many times increasing the price blah blah blah" It doesn't work that way. Commodities trading is a zero sum game, there is a profit or a loss on each trade that is marked to the market every day.

Please people learn before you post. What the Democrats and idiots like StopOilSpeculationNow are doing is flat-out ignorant. Speculators only help to make the commodities markets more liquid and transparent.

Interesting Question wrote:

Right but we knew this before the run-up from $125 on June 8th as you mentioned to $147. So why would it be going up then, the out look was bleak, housing and construction were down back then. That upturn over the course of two weeks where oil was going up $2-3/day made no sense according to you.

The futures plummeted substantially in a weeks time. Biggest drop since the end of the Gulf War. It wasn't like they JUST found out the economy was doing bad. Demand has been down since well into June. Especially relative to years past.

.

Yes - we knew the economy wasn't really strong back at the beginning of june - but that was still pre Fannie Mae and Freddie Mac - pre Indy Mac. A lot of $%#^ has hit the fan since oil was at $147. Also, China and India rolled back their oil subsidies, which will lead to decreased demand - or at least lower rate in the increase for demand in that part of the world.

But, the most important change from June until now were the weekly US oil/gas/distallate stock reports. Every week that the US reserves were lower than expected the price went up - every week since $147 per barrel the reserves have been higher than expected. That was the first "real" sign of demand destruction. Check it out - it's basically a perfect corralation.

neb, i will make this real simple for you. unless you are purchasing oil for business use (ie. airlines) you are speculating...its that simple...when you purchase a stock you are speculating...when a stock is going up it makes other investors notice and want to jump in and speculate too leading to a higher demand FOR THE STOCK, not for the company...driven by speculators...its not rocket science neb, its not even Econ 101.

neb wrote:

Yes - we knew the economy wasn't really strong back at the beginning of june - but that was still pre Fannie Mae and Freddie Mac - pre Indy Mac. A lot of $%#^ has hit the fan since oil was at $147. Also, China and India rolled back their oil subsidies, which will lead to decreased demand - or at least lower rate in the increase for demand in that part of the world.

But, the most important change from June until now were the weekly US oil/gas/distallate stock reports. Every week that the US reserves were lower than expected the price went up - every week since $147 per barrel the reserves have been higher than expected. That was the first "real" sign of demand destruction. Check it out - it's basically a perfect corralation.

First of all oil was at $147 ~10 days ago. This was after IndyMac and Fannie and Freddie. BUSTED. People buying things in markets don't react to day-of news, they're usually WAY ahead of what we hear.

Also people buying in futures aren't going off current demands, they're buying on FUTURE demand. The surplus was just last week as well.

Your time frame is way off man.

Except it is not "just in". It has been common knowledge for months to anyone who actually understands how futures work.

nebgetaneducation wrote:

neb, i will make this real simple for you. unless you are purchasing oil for business use (ie. airlines) you are speculating...its that simple...when you purchase a stock you are speculating...when a stock is going up it makes other investors notice and want to jump in and speculate too leading to a higher demand FOR THE STOCK, not for the company...driven by speculators...its not rocket science neb, its not even Econ 101.

So, Mr. Econ 101 - what is the effect of speculators on a market? I'll give you a multiple choice since I don't think you can handle fill in the blank.

a)More speculators mean that the price of the commodity always rises

b)More speculators mean that the price of the commodity always decreases

c) More speculators don't necessarily raise or lower the price of a commodity - but, since they are acting out of self interest - they add information to the market which sends signals that producers and consumers can act upon.

Here's a hint - you do understand that speculators can bet that prices will either fall or rise? right?

Interesting Question wrote:

First of all oil was at $147 ~10 days ago. This was after IndyMac and Fannie and Freddie. BUSTED. People buying things in markets don't react to day-of news, they're usually WAY ahead of what we hear.

Also people buying in futures aren't going off current demands, they're buying on FUTURE demand. The surplus was just last week as well.

Your time frame is way off man.

Hey buddy - you need to check your dates. Oil hit it's high on July 11 - IndyMac was taken over by the FDIC on July 11. Fannie Mae and Freddie Mac hit stock market lows early the next week on July 15. Paulson was in front of congress warning of a slow down in the economy on July 10th.

"People buying things in markets don't react to day-of news"

Are you serious?????