What’s really pathetic about all this is that no one on this damn thread is actually arguing against what the authors of the article are actually saying. Am I the only person here who actually read the damn article?
All the article is saying is that the vast majority of oil the world consumes is bought by OIL COMPANIES by OIL PRODUCERS (not the same thing, dammit!) in PRIVATE DEALS. Because these deals are private it is hard to reach a universal, publicly known price. That is purpose the futures market serves. The futures market helps determine the price of oil for the PRIVATE DEALS. Because the futures market is small, however, it can be cornered. Why is this so friggin’ hard to understand. If 9 billion dollars can buy up all the contracts in the futures market, it’s obvious that the market can be swayed in one direction or the other. And because the OIL PRODUCERS have a lot of money, why not try to sway this price.....THEIR PRIMARY OBJECTIVE IS NOT TO MAKE MONEY ON THE FUTURES MARKET - THEY ARE ONLY TRYING TO DRIVE UP THE PRICE OF OIL BECAUSE THEY WILL MAKE MORE IN ANOTHER MARKET!!! THE FUTURES MARKET DICTATES THE PRICE FOR THE OTHER, MORE PRIVATE MARKET. They are leveraging the futures market against the REAL market for oil. Do you guys honestly think that the futures market IS the market used by OIL COMPANIES when they want to buy oil to refine?? GO To NYMEX.com and take a look at how much oil is ever delivered - it’s close to nothing!! You people clearly didn’t read the article, and are only trying to make this a political issue. Why don’t you go to their wikipedia page and read what the Officer-Hayes Hypothesis is really saying. You’ll learn something from it.
http://en.wikipedia.org/wiki/Officer-Hayes_Hypothesis
People, people, people...
I don’t know. I only found it in a roundabout way, and have frankly little interest in it. I am open to either idea at this time, it is “fixed” or it is not.
We read the article, pal. We understand fundamentally what they are trying to say. Many of us don’t buy it. Thank you for creating a logon just yesterday to inform us of our errors. This article was given a response by BobbyT (just a few posts earlier). I’m going to paste it again, because it eloquently states just why the article’s hypothesis doesn’t work:
This argument doesn’t hold water. It’s like claiming Ford can make money by buying up Ford stock.
As a trader tried to bid oil futures past market levels, he’d be spending more and more to inflate the price. To make money he has to be able to sell back all the contracts he bought at above-market prices.
That can only happen if his play was fundamentally correct and other traders agree the price should be there...meaning there wasn’t anything “artificial” about the move and nothing was “inflated”, it was just the old price moving to the market price.
If he’s truly artificially inflating the futures, he’ll then be long a ton of expensive contracts as sellers step in to take advantage of the idiotic prices being bid. The price gets slammed back down where it belongs, and he loses.
Oh and if he’s doing it enough to significantly move the market, that means his position is massive, and traders will notice. Traders being the vicious bunch they are will attack the huge long position once they spot it, aggressively selling because they know the guy behind it is probably highly leveraged, meaning his loss gets substantially bigger at each price move...that means he has little room for error, and as soon as traders start to hammer it he’ll exceed his margin and have to puke his position for a massive loss (in doing so, letting the traders who sold against him buy their shorts back cheap and make money...their reward for forcing the market back to efficiency).
You can’t both build up a position big enough to move a market AND be able to liquidate out of that position for a winner. It’s like thinking you can make money by buying your own product if you just buy enough of it...or powering your house with a fan pointed at a windmill.
Howdy there, nube.