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Oil trade's winners now reap the wrath
Los Angeles Times ^ | May 24, 2008 | Tom Petruno

Posted on 05/24/2008 5:40:18 AM PDT by RayChuang88

Investing in commodities has been a brilliant move in this decade -- so brilliant that the strategy has attracted untold numbers of large and small players, particularly in the last few years.

What do you suppose all of their buying has done to the price of oil? Pushed it down?

With crude surging above $130 a barrel this week for the first time, a long-simmering issue is threatening to boil over: the role these new investors, often derided as rank speculators, have had in stoking the prices of oil and other commodities.

Their standard line has been, "It's not our fault." They point to rising demand for raw materials in China and other developing nations and to tight supplies as the main drivers of prices.

But at a Senate hearing Tuesday, a hedge fund manager named Michael Masters offered a different viewpoint.

He branded institutional investors such as pension funds as "one of if not the primary factors affecting commodities prices today."

(Excerpt) Read more at latimes.com ...


TOPICS: Business/Economy; News/Current Events
KEYWORDS: commodities; energy; hedgefunds; oilprice
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To: lexusppd
Oil will again be where it belongs today, at about $55-60bbl

NEVER going to happen. We will never see $2-a-gallon gasoline again in our lifetimes.

21 posted on 05/24/2008 10:42:49 AM PDT by IronJack (=)
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To: IronJack
Speculation in any commodity, especially one as volatile as crude and refined fuels, can't HELP but have an impact on price.

As the brilliant Michael Lewis wrote once, everyone who is in a market is trying to manipulate the price. That is the whole point of being in the market.

The reason speculators can make a profit is because the price that sellars can sell for, today, is lower than the price that buyers can be forced to pay in the future. If there were no arbitrage opportunity there could be no speculation.

Of course they have an impact on prices. That is how speculators (anyone who is not, simplistically, a producer or consumer of the commodity) make money. That is the point of the game. The reason why they are allowed in the game is that they provide some value in providing liquidity and making it possible for producers and consumers to hedge risk.

22 posted on 05/24/2008 10:55:44 AM PDT by AndyJackson
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To: IronJack
This isn't about "hedging"; it's about an entire industry of parasites ...to make a lot of money for doing nothing.In the old days, they were called "profiteers," and it wasn't unusual to see them hanging from lampposts when an enraged and exploited populace finally figured it out.

I contend that because of 50 years of easy living and easy money, helped along by the rest of the world taking fiat in exchange for valuable goods and services, we have a very very large structural problem in the US economy. Before we can slim down, and live within our means, we have to cut out a lot of parasitical activities, including a legal system that takes 6 or 7 years to settle simple disputes, a governmental system where untold trillions go to beltway bandits to produce papers and viewgraphs to "inform" the policy and regulatory process, a regulatory scheme that encourages fee seeking and rent-seeking behaviors even though little or no value is provided in return for those rents and fees.

Of daily life in the average corporation, or especially daily life in a governmental or regulatory agency or law firm, what fraction of your time is spent doing something that provides a real direct benefit to a customer, client or taxpayer. Of your purported income, what fraction do you have voluntary control over and freely spend to obtain wanted goods and services, as opposed to services and fees that you are forced into willy-nilly.

23 posted on 05/24/2008 11:03:33 AM PDT by AndyJackson
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To: IronJack
When technology triumphs, as it surely will and we have automobiles powered by a hydrogen cell like devices, and thru mass production they become affordable, we will indeed see $2.00 gallon gasoline and perhaps even less.

The laws of supply demand cannot be revoked and if these devices, which can power homes as well as automobiles become the norm, the oil producers will lower their prices to wherever they must in order to sell their product.

24 posted on 05/24/2008 1:02:20 PM PDT by lexusppd
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To: lexusppd
When technology triumphs, as it surely will and we have automobiles powered by a hydrogen cell like devices, and thru mass production they become affordable, we will indeed see $2.00 gallon gasoline and perhaps even less.

Where will the hydrogen fuel come from?

25 posted on 05/24/2008 1:17:25 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: RayChuang88
I've heard on CNBC and read from several news sources that commodities hedge fund traders could be controlling as much as forty percent of the price of oil, driving it up to make a profit at the expense of the rest of the economy.

How do they drive it up and make a profit?

26 posted on 05/24/2008 1:18:36 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: Toddsterpatriot
How do they drive it up and make a profit?

It's the old formula. Buy low, sell high. Selling above your costs is the usual way you make money in any business.

27 posted on 05/24/2008 1:21:50 PM PDT by AndyJackson
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To: AndyJackson
everyone who is in a market is trying to manipulate the price.

Agreed, but consumers are trying to manipulate the price downward, while speculators and profiteers are trying to drive it upward. The gasoline we buy today is no better as a fuel than the gasoline we bought for a third the price 5 years ago. So we're getting nothing more for our money at all. Speculators add nothing to that product. They simply make phone calls, ride the market up, then sell when it approaches its peak, collect the money and wait for the next opportunity to profit by doing nothing. They CREATE a "demand" that exists only on paper, and not even a demand for the commodity per se but for the profits inherent in an upturn of the commodity's price.

They are the ultimate in parasites, and their profits always come at someone else's expense. They are the bane of capitalism, the deadbeat fat-cat the socialists always point to when they need to indict the free-market system.

28 posted on 05/24/2008 1:45:26 PM PDT by IronJack (=)
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To: Toddsterpatriot

Hydrogen comes from water.

One molecule of water is comprised of 2 atoms of hydrogen and one atom of oxygen bonded together.


29 posted on 05/24/2008 1:56:39 PM PDT by lexusppd
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To: AndyJackson
It's the old formula. Buy low, sell high.

That still doesn't explain how they drive it up.

30 posted on 05/24/2008 1:56:39 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: lexusppd
Excellent! What magic trick do you use to get the hydrogen out of the water?
31 posted on 05/24/2008 1:57:22 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: PSYCHO-FREEP; Oldexpat
You had me all the way up to your last sentence.

He said he was going to take his best shot by voting GOP. Do you have a better shot? E.g., a way to take the nomination away from McPain? Or a third party with a decent chance of winning?

Voting is not a statement of principle. It is an act of political expediency.

32 posted on 05/24/2008 2:13:10 PM PDT by cynwoody
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To: lexusppd
In fact, there are signs that the current US$130 price is WAY too high, and because demand is starting to drop. If the price stays this way we could see a price crash very soon because at the current price, oil has started to become an elastic (consumer sensitive to price) item.
33 posted on 05/24/2008 2:27:50 PM PDT by RayChuang88
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To: Toddsterpatriot
I understand where you are going with this and agree with current technology it costs more in terms of energy expended to manufacture hydrogen then we get of the product.

That is why I said Hydrogen fuel cell “like”. Technology changes and we advance in a geometric fashion with esch advance fostering greater and more rapid advances that follow. Probably what the ultimate solution will be, if in fact there ever is an “ultimate” solution (as opposed to an ever evolving one) it will be something unheard of today. Or perhaps it will be the finding of the key to use cold fusion as a power source. This would give us the great power of the sun and seemingly would solve our energy problems forever.

34 posted on 05/25/2008 3:59:26 AM PDT by lexusppd
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To: Robert A. Cook, PE

thanks, bfl


35 posted on 05/25/2008 5:35:01 PM PDT by neverdem (I'm praying for a Divine Intervention.)
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To: RayChuang88
I've heard on CNBC and read from several news sources that commodities hedge fund traders could be controlling as much as forty percent of the price of oil, driving it up to make a profit at the expense of the rest of the economy.

So where are they keeping all this oil that they are supposedly buying up?

36 posted on 05/25/2008 6:41:28 PM PDT by curiosity
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To: lexusppd
I understand where you are going with this and agree with current technology it costs more in terms of energy expended to manufacture hydrogen then we get of the product.

It will always take more energy to extract hydrogen from water than the useful energy we will get out of the hydrogen.

37 posted on 05/26/2008 7:38:02 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: RayChuang88; AdmSmith; Berosus; Convert from ECUSA; dervish; Ernest_at_the_Beach; Fred Nerks; ...

IMHO, you’re right on the money.

Thanks neverdem for the link.


38 posted on 05/26/2008 11:03:40 PM PDT by SunkenCiv (https://secure.freerepublic.com/donate/_______________________Profile updated Monday, April 28, 2008)
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To: Toddsterpatriot
It will always take more energy to extract hydrogen from water than the useful energy we will get out of the hydrogen.

Given the geometric progression of technology, it is impossible to make a claim like this with any certainty. Besides, I didn't say this was the answer. I said "hydrogen fuel cell LIKE" power source. What I meant by that was something other then fossil based fuel.

39 posted on 05/27/2008 4:53:50 AM PDT by lexusppd
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To: lexusppd
It will always take more energy to extract hydrogen from water than the useful energy we will get out of the hydrogen.

Given the geometric progression of technology, it is impossible to make a claim like this with any certainty.

Only if you have a weak understanding of physics.

Besides, I didn't say this was the answer. I said "hydrogen fuel cell LIKE" power source.

What else is "like" that?

What I meant by that was something other then fossil based fuel.

You mean a fuel source that doesn't use more energy than it gives? Yeah, that would be a better answer to our energy needs. Try something that actually has energy in it already, like oil, coal or uranium.

40 posted on 05/27/2008 5:29:41 AM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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