Posted on 07/09/2008 8:35:21 PM PDT by curiosity
It'd be a good double-check whichever way, to look at the average daily or weekly price changes (as a percentage of daily price) over the past 20 - 30 years, and to compare that to the average price itself.
If the *normalized* volatility remains in a constant range even while the price has gone up 48% in a year, that's well and good.
But if the (read the word again!) *normalized* volatility has increased just at the same time that the price has skyrocketed, that indicates something other than supply vs. end-user demand at work.
Cheers!
Just received this one today:
AN OPEN LETTER
TO ALL AIRLINE CUSTOMERS
From 12 Airline CEOs.
Hello {Mr. Airline Customer},
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.
Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
The nation needs to pull together to reform the oil markets and solve this growing problem.
We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.
During the housing bubble of 2002-2005, new spec homes were being thrown up by the millions.
Where's the new oil being pumped to meet the so-called bubble demand of 2008?. There isn't any. And you can't blame Harry Reid or Al Gore for the fact that there are no existing oilfields outside the US which show significant volume increases over the last couple of years.
Oh, it's coming - every drilling rig in the world is running right now.
In short, I really don't care if price only drops a half percent, that's better than nothing. Unfortunately, Congress could care less about us and they won't allow anything that makes us happy take place until after Nov. I say: Throw the bums out!
bttt
Follow the oil, not the futures
bttt
Despite their dismal reputation, the oil speculators provide a vital service
It makes for some fun "Golly, Gee!" reading, but Harper's magazine is probably not where you're going to find any hardcore economic thoughts.
Hhahahah.... I heard the same thing about housing prices and tech stocks.... oh and as a child I recall a similar thing too “Ignore the man behind the curtain”.
If you really want to hurt speculators, Congress would be more effective if they would secretly set forces in motion that would dump about half of the Strategic Petroleum Reserves on the market overnight. Then, as the gov't is dumping the reserves on the market, have both parties hold a joint news conference and announce what they are doing as it is happening. The spot price of oil would go into the dumper. Speculators would take it in the shorts all the way down. When the new (lower) equilibrium spot price is sensed, the gov't jumps in and uses its ill-gotten profits to refill the SPR. While the spot price would go back up somewhat, it probably would increase due to the very real increase in demand from new markets like China and India rather than speculators who would likely be licking their wounds somewhere.
Obviously, our Congress doesn't have the stones to do such a thing, but I'd sure prefer that to more gov't intervention in the market place. I'd much rather see the gov't use the market than try to change the market through ill-conceived regulation.
We'll never see the good side of $80/bbl again.
Actually, crude OI is rising just a little bit over the past week. Natgas OI, though, is off 30K contracts in a week's time, and the mkt is down some 6-7% during that period, This is clearly the liquidation of long positions.
You say that someone is manipulating the oil market. Can you name names or have evidence of who specifically is doing it?
I haven’t seen any evidence. And I don’t think speculators are Causing the high oil prices. It is Democrats who have caused the high oil prices. Democrats have said no to more oil drilling, no to more nuclear power plants, no to more refineries, no to drilling in ANWR, no to drilling in the OCS, no to oil shale, no to coal to oil liquefaction, no to coal mining, no to coal power plants, etc. etc. and so on ad infinitum.
Congress Has Made It Illegal to Develop Oil Shale!, Do you believe this???...
http://forums.4aynrandfans.com/index.php?showtopic=8625
How much have you made off speculating so far?
The search function does seem to be hit-or-miss sometimes — this could happen to anyone.
When a large consumer (such as airlines) doesn't hedge oil — that consumer is speculating. It's speculating that the oil price won't rise.
The futures market exists to provide insurance against wild price swings — for both consumers and producers. Hedging is like buying any other kind of insurance — a prudent business practice.
These CEOs don't believe a word of what they're saying (if their CFOs told them this crap — they should be firing their CFOs). They're just desperate to deflect blame. Shareholders should be in revolt & demanding some accountability from the respective Boards of Directors.
I don't speculate. I put about 5% of my savings in a commodities index fund as a hedge against inflation, just like the university endowments and pension funds are doing.
The following graphs of world oil supply and demand clearly show that world oil supply has not met world oil demand for several years. Demand has been greater than supply.This , the most basic law of economics, the law of supply and demand should put an end to all this scapegoating of the speculators (the free market), hopefully.
Proof that demand has not met supply for several years
We have enough oil in the ground , in oil shale , in coal to oil, etc. But democrats have not let us get to that oil and they won't unless the American people make them. How can we have enough oil production/supply when for decades Democrats have said no to more oil drilling, no to more nuclear power plants, no to more refineries, no to drilling in ANWR, no to drilling in the OCS, no to oil shale, no to coal to oil liquefaction, no to coal mining, no to coal power plants, etc. etc. and so on ad infinitum?
LOL! That's funny! Get your guaranteed profits now. Buy oil, the price goes up every time it trades. LOL!
-——You and others like you who are pushing peak oil theory-——
Not a problem. Nobody is woried about Peak Oil.
VIENNA (AP) — World energy needs will spike by more than 50% by 2030 but adequate oil reserves, conservation and new methods of recovery mean supply will keep pace with demand, the Organization of Petroleum Exporting Countries said Thursday.
. . .
The report projected oil demand to rise by 29 million barrels a day from 2006 through 2030 to reach a daily 113 million barrels a day - a drop of 4 million barrels a day over its predictions last year, “due in part to the higher oil price assumption” - expectations that pricey petroleum is here to stay.
New recovery methods to boost supply
A large part of that projected demand will be met by new recovery and production procedures, meaning total demand for “conventional crude” - oil pumped from wells and other methods using present day technology - will not exceed 82 million barrels a day by 2030, said OPEC.
. . .
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