Whos to blame?...All the dirty capitalists pigs on this board.

Hey, those of you on here, go to my "Oil Company Profits" thread and post your answers.

I agree with those saying the free market. Those purchasing Oil Futures are driving the price up. (Much more than S&D, lack of alternatives, etc.). And those overseas are driving up the price most. In the U.S. commodities aren't traded over the counter (NASDAQ style). They are only traded in brick and mortar places.

In some nations overseas there is no restriction on this. So everyone is getting on their computer and buying up oil futures while those who have been in on it the longest (mainly the richest of the rich) are advertising it to the lower classes, thus giving themselves even more profits.

I believe that if the US were to announce plans to drill or even talk strongly about considering it, those who hold the most stock in these oil futures would be scared enough to sell. Causing the price to plummet, and screwing over those middle class investors who got in late in the game.

I'm no economist, foreign specialist, or even investor. But I feel if this were just supply and demand, we'd be able to impact it some by now. There is another market force at work.

Raider_ATO Wrote:I agree with those saying the free market. Those purchasing Oil Futures are driving the price up. (Much more than S&D, lack of alternatives, etc.). And those overseas are driving up the price most. In the U.S. commodities aren't traded over the counter (NASDAQ style). They are only traded in brick and mortar places.

In some nations overseas there is no restriction on this. So everyone is getting on their computer and buying up oil futures while those who have been in on it the longest (mainly the richest of the rich) are advertising it to the lower classes, thus giving themselves even more profits.

I believe that if the US were to announce plans to drill or even talk strongly about considering it, those who hold the most stock in these oil futures would be scared enough to sell. Causing the price to plummet, and screwing over those middle class investors who got in late in the game.

I'm no economist, foreign specialist, or even investor. But I feel if this were just supply and demand, we'd be able to impact it some by now. There is another market force at work.

It's all about speculation. NOT the American oil companies who own only about 5% of the world's supply.

....but I think your post may make liberals brains overload.

Raider_ATO Wrote:I agree with those saying the free market. Those purchasing Oil Futures are driving the price up. (Much more than S&D, lack of alternatives, etc.). And those overseas are driving up the price most. In the U.S. commodities aren't traded over the counter (NASDAQ style). They are only traded in brick and mortar places.

In some nations overseas there is no restriction on this. So everyone is getting on their computer and buying up oil futures while those who have been in on it the longest (mainly the richest of the rich) are advertising it to the lower classes, thus giving themselves even more profits.

I believe that if the US were to announce plans to drill or even talk strongly about considering it, those who hold the most stock in these oil futures would be scared enough to sell. Causing the price to plummet, and screwing over those middle class investors who got in late in the game.

I'm no economist, foreign specialist, or even investor. But I feel if this were just supply and demand, we'd be able to impact it some by now. There is another market force at work.

It's not JUST speculation. There are some serious fundamentals at work here, too. Greater Beijing puts 100,000 new cars PER MONTH on the road. And they aren't Smartes and Minis and Priuses either.

But there is a speculative bubble effect too. The futures market is based on expectations 6 or 12 or however many months in the future, and that includes some assumptions regarding demand growth and supply availability. For one thing, they're assuming 600,000 or so more Buick Regals in traffic jams on Beijing freeways.

The quickest way to flush the speculative bubble out would be, as you suggest, to announce plans to step up US drilling. Everybody else is pretty much drilling everything they can, as fast as they can. We are the only folks who aren't. And if people start blaming our foot-dragging for their gasoline prices, that may ultimately make us a lot more unpopular around the world than the fact that we were the only folks not to sign onto Kyoto. I can tell you first hand that people on the Gulf Coast get mightily pi$$ed that New Englanders and Californicators expect prices to stay down while they don't allow drilling of their coasts. It's not too hard to imagine Norwegians and Chinese feeling that way about us.

I'm guessing that the speculative bubble is on the order of $30 or so. So after flushing it out, we'd still be about $90/bbl. It's clearly got to be somewhere above $60. And rising. That would get gasoline down into the low $3's instead of the low $4's.

Owl 69/70/75 Wrote:And if people start blaming our foot-dragging for their gasoline prices, that may ultimately make us a lot more unpopular around the world than the fact that we were the only folks not to sign onto Kyoto.

Uh, we weren't and a few countries were exempt.

Rebel Wrote:

Owl 69/70/75 Wrote:And if people start blaming our foot-dragging for their gasoline prices, that may ultimately make us a lot more unpopular around the world than the fact that we were the only folks not to sign onto Kyoto.

Uh, we weren't and a few countries were exempt.

Sorry, just parroting left-wing dogma there.

Owl 69/70/75 Wrote:The quickest way to flush the speculative bubble out would be, as you suggest, to announce plans to step up US drilling. Everybody else is pretty much drilling everything they can, as fast as they can. We are the only folks who aren't.

I don't think so and here's why:

1. Any announcement would be followed up with the realities that getting the permits to drill, getting the equipment to the drilling areas and actually finding oil could take years and that's not even considering the time wasted from lawsuits from wacko environmentalists who all want to prevent the drilling.

2. Even if we had the oil there is only so much capacity to refine it and the wacko environmentalists will use every tactic possible to prevent new refineries from being built thus keeping the amount of usable gasoline at or near current levels.

Finally, speaking of environmental wackos, how come they protest new drilling due to the possibility environmental damage on our coasts and wildlife refuges yet they give the thumbs up for drilling and the possibility of oil spills in other countries? Don't we all share the same planet? Hypocrites.

Actually showing the willingness to do SOMETHING will have a bigger impct than you may think.
That's the problem right now, there's a lot of debating but not much doing.
I love it that the big negative argument against openeng up drilling is that it will be 5 years before it actually affects anything. But the alternatives won't really help much before then either.

demand is greater than supply.

Rebel Wrote:

Raider_ATO Wrote:There is another market force at work.

It's all about speculation. NOT the American oil companies who own only about 5% of the world's supply.

....but I think your post may make liberals brains overload.

From yesterday's Congressional inquisition ... AGAIN ! ! !

http://online.wsj.com/article/SB12142697...lenews_wsj

We STILL need to keep after the goal for us all of obtaining our own oil.
"Drill Here, Drill Now, Pay Less" ... go for it in signature below.

Bump

(04-22-2014 10:56 AM)EverRespect Wrote:  Bump

Well done.

Sorry to burst everyone's bubble but speculation is not causing gas prices to rise.

First, the practical reason. Today's price for crude is $104 per barrel, while the CME futures contracts price for November, 2014 is $97.29 and May, 2015 $92.72. The futures price is LOWER.

Second, and I know this is going to blow everyone's mind, it is impossible for futures contracts to affect current prices because every long contract sold has an offsetting short contract. So someone who wants to speculate that prices will rise, has to find someone who is willing to take the bet that it will not. Futures contracts are a zero sum game.

Third, someone said that contracts are on margin. This is only partially correct since every contract requires a deposit which is RESET DAILY. If contract prices were to fall, the longs get into margin calls very quickly.

Fourth, oil, unlike gold and silver, and like corn, has a high holding cost. So it is virtually impossible to buy-up a large portion of oil and hold it until prices rise. It is more expensive to have oil sitting in a tanker for 6 months than the amount you possibly hope to make.

Finally, the only way futures can affect current prices is if the oil producers decide to hold back production today in anticipation of higher prices in the future. So supply falls, raising prices at the pump. This is an indirect effect at best.

(04-22-2014 11:40 AM)QuestionSocratic Wrote:  Sorry to burst everyone's bubble but speculation is not causing gas prices to rise.
First, the practical reason. Today's price for crude is $104 per barrel, while the CME futures contracts price for November, 2014 is $97.29 and May, 2015 $92.72. The futures price is LOWER.
Second, and I know this is going to blow everyone's mind, it is impossible for futures contracts to affect current prices because every long contract sold has an offsetting short contract. So someone who wants to speculate that prices will rise, has to find someone who is willing to take the bet that it will not. Futures contracts are a zero sum game.
Third, someone said that contracts are on margin. This is only partially correct since every contract requires a deposit which is RESET DAILY. If contract prices were to fall, the longs get into margin calls very quickly.
Fourth, oil, unlike gold and silver, and like corn, has a high holding cost. So it is virtually impossible to buy-up a large portion of oil and hold it until prices rise. It is more expensive to have oil sitting in a tanker for 6 months than the amount you possibly hope to make.
Finally, the only way futures can affect current prices is if the oil producers decide to hold back production today in anticipation of higher prices in the future. So supply falls, raising prices at the pump. This is an indirect effect at best.

There is one way futures prices can impact current prices, and it relates to your fourth point. If there is anticipation of a spike in the future, then speculators will figure out what holding costs are out to the point in the future where they expect the spike, and then back off that amount from the anticipated spike price and buy today at that price. There was some of this going on back around 2008, when there was an expectation of future supply shortages. Since then, with developments such as fracking and the Bakken and Brasil's repeated successes offshore (Tupi, Espirito Santo, etc.), the expectation of future shortages has abated and today's futures prices don't exert the upward pressure they once did. That's why a significant new discovery can cause the price of oil to drop, even if that discovery won't go onstream for several years.

Otherwise, good analysis.