This is not IMO a totally accurate article. The notion that a futures market is an artificial market is not correct. It does not track pure supply and demand at the end use, but it is based on pure supply and demand of the futures contract.
If not, then just buy oil futures and retire, cuz they never go down, right? Wrong.
I will say that futures market does mean that extremes can be exaggerated, but this works both ways. We’ve seen oil at 147 and at 32 in the last 36 months. The 32 was as unrealistically low as the 147 was high. The average of those two is about what it should be actually.
The point is, the futures market drove it down to 32. No one was bitchin about the “artificial” futures market then, were they?
Yes, the article has a very flawed premise. The vast majority of the oil market is based in real supply and demand. Speculation operates at the margin and most of the time it acts to depress price volatility, not make it worse. Speculation can temporarily distort price discovery, but the door closes fast and speculator’s monetary fingers get smashed if they don’t get out of the way when they are on the wrong side of the trade.
The writer asked a question, but failed to answer it, and oversimplified his attempt.
The writer also seems unduly taken with govt regulation as the way to keep the market real as oppposed to artificial. He’s got that not just wrong, but backwards.