“What does “recover” mean? Reach ridiculous prices based on the greed of 100 traders on the commodities exchange and some powerful countries and people.”
Traders and speculators reduce the price of oil by removing the producer’s risk. Let’s say you’re an oil speculator. Assume the price today is $60 per barrel. You decide that the price in January will be $100 per barrel. You offer to buy 100,000 barrels at $65 per barrel for delivery in January. The driller now has a guaranteed price of $65 in January so he can arrange financing and other deals based on this guarantee.
Now, two things can happen. Come January the price has gone up or down from the $65 you agreed to pay. If it went up you sell oil that did not exist for sale prior to January at the higher price and pocket the profit. Or, you sell your oil at less than $65 and accept the loss.
At no point did your speculation affect the price. The price is set by market conditions.
Now, Saudi Arabia, which has the world’s lowest cost of production, has set the market price as low as possible. This was to force Russia to abandon its support of Syria and to hurt Iran (which has a much higher cost of production) for their support of Syria. Saudi Arabia is doing this so they can eventually build a pipeline through Syria to the Mediterranean. This will hamper Iran’s efforts to affect SA’s production once Iran becomes a nuclear power. At which point Iran will be able to close off SA’s access to the sea lanes with impunity.
I’ve traded futures and stand corrected. It is a hedge and a way to make a lot of money with options on major swings, although the safe money is writing puts and calls.
You point about the Saudis is also well taken
I wss on the floor during the Gulf War!!!! The swings were incredible!! millions made and lost in a single hour by the big players.