Posted on 06/21/2008 5:26:49 AM PDT by kellynla
SEN. John McCain recently called for a "thorough and complete investigation of speculators" to see if they've driven up oil prices. And Senate Democrats plan a new bill aimed at commodity speculators - a witch hunt that's clearly about oil.
But, much as politicians would like to blame speculators, it's just not so.
For starters, there's nothing about futures or options that makes it any more attractive to bet that commodity prices will go up than to bet they'll go down. Guess wrong on the direction, and you lose money.
The "blame speculators" theorists have several worries. Investors in oil futures don't take delivery of oil, they note with unexplained suspicion. More, futures and options may involve margin debt and leverage - meaning you might need put only, say, $8 down to make a $100 investment (though you're still liable for the whole $100 if you've bought a lemon). And there's been a marked rise in investing in commodity-index funds, greatly increasing the total amounts in those markets.
The first complaint is irrelevant nonsense: Investors in oil futures don't take delivery of oil because they sell their contracts before the contract expires to oil refiners and distributors - who do take delivery of oil.
Yes, if the price of next month's oil futures goes up, that can encourage producers to slow their sales on the spot market. And a higher price for next month's oil can encourage refiners to buy more now rather than later. Both reactions could push the cash price up.
But they would also cause oil inventories to rise. And rising inventories always bring the price back down.
(Excerpt) Read more at nypost.com ...
Many of these speculators are not driving the price up in order to make money, they're doing it to try to screw over the Republicans and get Obama elected.
That isn't going to happen any time soon. Global demand continues to grow while supply seems "stuck" at 85 million bpd. Oil traders know this and will continue to bid up the price of oil until something gives.
BINGO
Hopefully some will listen to Reynolds' reasoning, which is quite sound, IMHO.
Why should we want to rein them in?
Their massive trade surpluses.
So? What's wrong with that?
Speculators are betting on price increases at the expense of consumers and stories of how they are laughing all the way to the bank are plentiful
Yes, I've seen lots of people make this claim. Unfortuantely, there is no evidence of it.
Currently, a future contract of $110,000 in oil can be purchased with as little as $7,700.
So? The purchaser is still liable for the remaining 93,300 should the price of the contract go down.
Investing on oil futures is one thing. Using a 10 percent margin is gambling.
Only institutions with good credit and a solid balance sheet can do this. Why do you have a problem with lenders extending credit to credit-worthy borrowers?
Forget regulation, just make this 50% of the investment and the speculation problem will go away.
You have yet to demonstrate that there is a problem in the first place.
Am going to believe my lying eyes or you? Let’s face it, I might not completely understand it, but I can see that for over 20 years the price of oil has been fairly stable through two gulf wars, terrorist attacks, an unsettled middle east; and if you want to go back further the cold war. Now that speculators entered the market big time and are trading overseas while risking 2,000% more capital, the price has jumped 550% with no sign of weakening. Demand has gone down since the drastic price rise, yet the price hasn’t.
1979 $25.10
1980 $37.42
1981 $35.75
1982 $31.83
1983 $29.08
1984 $28.75
1985 $26.92
1986 $14.44
1987 $17.75
1988 $14.87
1989 $18.33
1990 $23.19
1991 $20.20
1992 $19.25
1993 $16.75
1994 $15.66
1995 $16.75
1996 $20.46
1997 $18.64
1998 $11.91
1999 $16.56
2000 $27.39
2001 $23.00
2002 $22.81
2003 $27.69
2004 $37.66
Most Americans are going to blame the oil companies and the speculators for the high price of gas. This takes the real culprits, the environmentalists and their Marxists collaborators, the Democrats, off the hook.
We need an easy explanation for the oil crisis that any voter with a third grade equivalent education will understand.
1979 $25.10
1980 $37.42
1981 $35.75
1982 $31.83
1983 $29.08
1984 $28.75
1985 $26.92
1986 $14.44
1987 $17.75
1988 $14.87
1989 $18.33
1990 $23.19
1991 $20.20
1992 $19.25
1993 $16.75
1994 $15.66
1995 $16.75
1996 $20.46
1997 $18.64
1998 $11.91
1999 $16.56
2000 $27.39
2001 $23.00
2002 $22.81
2003 $27.69
2004 $37.66
Is this inflation or CPI adjusted??
Actual price not adjusted for inflation. I shown this to make a point that prices were cheaper for oil three years ago than several years in the past (even during great turmoil). However, there was only 1 year where the adjusted for inflation price was close to $80.00. The last couple of years’ 500 per cent increase is a statistical aberration and I still say that there is a direct relation to the 2,000 per cent increase in speculation and the increase in the price of oil. Do I believe other factors contribute, sure but...
1979 $25.10
1980 $37.42
1981 $35.75
1982 $31.83
1983 $29.08
1984 $28.75
1985 $26.92
1986 $14.44
1987 $17.75
1988 $14.87
1989 $18.33
1990 $23.19
1991 $20.20
1992 $19.25
1993 $16.75
1994 $15.66
1995 $16.75
1996 $20.46
1997 $18.64
1998 $11.91
1999 $16.56
2000 $27.39
2001 $23.00
2002 $22.81
2003 $27.69
2004 $37.66
where did your numbers come from?
here are my numbers from EIA
1978-Jan 13.08
1989-Jan 13.58
1990-Jan 18.91
1991-Jan 24.72
1992-Jan 16.22
1993-Jan 16.77
1993-Dec
0 0
1994-Jan 12.37
1995-Jan 16.13
1995-Feb
1996-Jan 18.41
1996-Apr
1997-Jan 23.18
1997-Feb 21.56
1997-Mar 18.54
1997-Apr 17.62
1997-May 17.25
1997-Jun 17.69
1997-Jul 17.39
1997-Aug 17.68
1997-Sep 17.22
1997-Oct 18.66
1997-Nov 18.25
1997-Dec 17.01
0 0
1998-Jan 15.21
1998-Feb 13.38
1998-Mar 11.81
1998-Apr 12.39
1998-May 12.39
1998-Jun 12.11
1998-Jul 10.82
1998-Aug 11.49
1998-Sep 11.61
1998-Oct 13.76
1998-Nov 11.79
1998-Dec 9.48
0 0
1999-Jan 9.76
1999-Feb 10.04
1999-Mar 10.26
1999-Apr 14.09
1999-May 15.94
1999-Jun 14.21
1999-Jul 16.28
1999-Aug 18.74
1999-Sep 20.09
1999-Oct 22.68
1999-Nov 21.49
1999-Dec 24.33
0 0
2000-Jan 23.17
2000-Feb 25.95
2000-Mar 27.15
2000-Apr 23.39
2000-May 24.29
2000-Jun 27.72
2000-Jul 28.70
2000-Aug 25.21
2000-Sep 30.59
2000-Oct 28.33
2000-Nov 29.37
2000-Dec 29.66
0 0
2001-Jan 22.10
2001-Feb 24.76
2001-Mar 23.44
2001-Apr 22.76
2001-May 25.38
2001-Jun 26.55
2001-Jul 23.73
2001-Aug 23.61
2001-Sep 24.90
2001-Oct 20.09
2001-Nov 18.31
2001-Dec 17.35
0 0
2002-Jan 18.68
2002-Feb 17.77
2002-Mar 19.16
2002-Apr 24.83
2002-May 24.50
2002-Jun 22.31
2002-Jul 24.14
2002-Aug 24.51
2002-Sep 26.07
2002-Oct 27.44
2002-Nov 24.53
2002-Dec 24.27
0 0
2003-Jan 29.03
2003-Feb 30.00
2003-Mar 31.71
2003-Apr 25.01
2003-May 22.04
2003-Jun 25.72
2003-Jul 26.52
2003-Aug 26.66
2003-Sep 27.05
2003-Oct 26.29
2003-Nov 26.28
2003-Dec 27.23
0 0
2004-Jan 28.00
2004-Feb 27.56
2004-Mar 30.88
2004-Apr 30.07
2004-May 33.63
2004-Jun 35.29
2004-Jul 31.61
2004-Aug 38.27
2004-Sep 37.05
2004-Oct 41.62
2004-Nov 40.84
2004-Dec 36.83
0 0
2005-Jan 35.16
2005-Feb 41.54
2005-Mar 45.07
2005-Apr 46.84
2005-May 45.20
2005-Jun 46.65
2005-Jul 52.55
2005-Aug 55.05
2005-Sep 60.75
2005-Oct 55.99
2005-Nov 53.39
2005-Dec 49.42
0 0
2006-Jan 55.12
2006-Feb 59.84
2006-Mar 55.98
2006-Apr 61.27
2006-May 66.94
2006-Jun 64.67
2006-Jul 67.74
2006-Aug 69.79
2006-Sep 64.49
2006-Oct 54.92
2006-Nov 53.32
2006-Dec 56.13
0 0
2007-Jan 54.63
2007-Feb 52.11
2007-Mar 57.83
2007-Apr 64.93
2007-May 63.40
2007-Jun 65.37
2007-Jul 69.91
2007-Aug 73.81
2007-Sep 71.42
2007-Oct 75.57
2007-Nov 86.02
2007-Dec 85.91
2008-Jan 92.93
2008-Feb 88.71
2008-Mar 98.01
2008-Apr 98.39
2008-May 110.21
2008-Jun 121.36
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.