Posted on 07/04/2008 5:53:48 AM PDT by kellynla
I’m not arguing that all oil speculation is bad. I’m arguing that the rapid influx of long-term ‘investment’ speculators such as hedge funds into a market that is already extremely tight serves no purpose except to drive up the price of oil.
Because anytime there is a rapid influx of new buyers bidding for the same amount of goods... the price spikes.
And yes, eventually, the price will plummet if oil speculators sell en masse. The problem is that the institutional investment funds are not looking to eventually do so. They are viewing oil as the next gold, to keep as a long-term investment... and are, right now, trying to snap-up as much oil as possible, regardless.
But they are only holding on to the contract, not the oil itself.
And yes, eventually, the price will plummet if oil speculators sell en masse.
They do sell en masse. Every month before the contracts mature. Have you noticed oil dropping every month just before the futures mature?
The problem is that the institutional investment funds are not looking to eventually do so.
The only alternative to their monthly selling is taking delivery of the oil and putting it into storage. I haven't heard that they're doing that.
They are viewing oil as the next gold, to keep as a long-term investment
Long term, until they sell every month.
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