Follow up to Pete's thread below
-
True, but in this case they were the first and only petrol station to do so :)
He who makes a beast out of himself gets rid of the pain of being a man
-
Heh. :-\ I wasn't expecting that one...
I'm the ocean. I'm a giant undertow.
73Zeppelin wrote:
I wasn't expecting that one...
Given his job I figure he goes home each night with an ounce or two of perfectly good biofuel in his hair and coating his skin. And he's as coherent as the U.S. energy policy. Shooting him in the foot would be a symbolic act that would signal to the rest of the world that we were about to get serious about conserving our resources.
Jon Smith & Wesson: The original point and click interface
-
jhwurmbach wrote:
The mechanism by which speculators drive the price up (not too much above the current level, lest it would be profitable to buy the physical commodity *now* and store it until the specualtion runs out) is by preventing the price going *down*.
Speculators never hold the physical! Do you know how much infrastructure and cost there is behind taking delivery of the oil represented by a futures contract? Do you think the hedge funds on Wall Street "store oil" and "hold it"? That's not how the futures market for oil works at all. Speculators provide a service to producers/hedgers. They take on the price risk for them in the hope that the expected future spot price exceeds the futures contract price at maturity. That's called "normal" backwardation. In doing so, what the speculators earn is a risk premium (a.k.a. profit) for bearing the price risk for the hedgers. Also: preventing the price going down (although I don't know how speculators would do that unless they refuse to buy futures contracts at lower prices - which makes no sense) is not equivalent to pushing the price up.
jhwurmbach wrote:
Why sould a primary producer sell for low prices on the spotmarket, when he could sell for higher prices in advance?
They don't - they take a futures position and hold the physical. Usually in the form of a spread position. That way they're covered if the futures contract price moves or if the price of the physical moves.
jhwurmbach wrote:
Mind you - the primary producers are also speculating, and try to find the right date when to sale.
I think you should do some reading on how the futures market operates.
jhwurmbach wrote:
That speculators do not hold the physical commodity is as irrelevant
Uh, no it's not - it's a fundamental principle on which futures markets are built. :~ That's why speculators exist and operate in the market and that's why the futures markets exist.
I'm the ocean. I'm a giant undertow.
modified on Tuesday, June 17, 2008 10:23 AM
73Zeppelin wrote:
Too funny. Speculators never hold the physical!
So what? Banker never get some of the dollars you earn, but they nonetheless will take your house when you do not pay the mortgage. Oil speculation is one of two things: The trader agrees to sell the amount X of oil (he does not own by now) at the price Y. The trader hopes the prices will fall and he can acquire the oil he agreed to sell for less than Y. The trader agrees to buy the amount X of oil (he does not want physically) at the price of Y. The trader hopes for rising prices, so he can sell the oil for more than Y. During all that time, the physical oil is on the way through pipeline, tanker, refinery into the storage. It may change owner any number of times. And the mechanism that has on the spotmarket is simply: The oil a speculator has a contract on *now* is not going to be on the market in 3 Months, reducing supply. When all oil-producer have already sold their oil for September for A Dollars, you would have to pay more than A Dollars to get something. "backwardation" (beyond a very tiny amount for the costs) occurs when the supply is insecure. Normal would be "contango", but the costs for transport, storage and refining are relativly stable and are integrated into the price.
73Zeppelin wrote:
I think you should do some reading on how the futures market operates.
I think you should take care not to get entangled in the finer details of terminology. We are talking about macroeconomics here.
73Zeppelin wrote:
jhwurmbach wrote: That speculators do not hold the physical commodity is as irrelevant Uh, no it's not - it's a fundamental principle on which futures markets are built.
Sure. Its easier to understand with the classical text-book example "apples-market". The apples are not even growing on the tree, but still may have been sold several times. And the apple farmer is speculating that he will get at least as much apple as he has sole futures for. But he needs the money *now* to pay the beemaster, and later to pay the pluckers.
73Zeppelin wrote:
That's why speculators exist and operate in the market
They do that to earn money. And they found a way to parasite on values created elsewhere by others.
Let's think
-
Probably it does, but that's because they don't understand the mechanics of the futures market. See my reply above.
I'm the ocean. I'm a giant undertow.
73Zeppelin wrote:
but that's because they don't understand the mechanics of the futures market.
And you alone got the understanding, and know what is to do...Oh well. You are right or not, that much is certain.
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency" -
There's no such thing as "false demand". Every contract counted in the CFTC's Commitment of Traders report is an "open" contract. That means it's a contract for which there is both a buyer and a seller and delivery of the physical hasn't occurred. It in no way represents demand for the physical commodity (in this case oil). The positions are classified into several categories divided into sub-categories. The primary is non-commercial positions which represent activity such as speculation by large institutions like hedge funds and banks, etc. Non-commercial open interest is subdivided into long, short and spread positions; "spreads" representing a combination of long and short positions. Due to spreads being included in the non-commercial classification it is not 100% representative of speculative activity - this is because the CFTC defines speculation as taking only a non-commercial long contract, but there is cross-contamination in the data since traders are required to self-classify and there are incentives (tax, legal, etc...) to not be classified as purely speculative. Commercial open interest represents professional hedging activity by producers, etc... These positions are classified into short and long (no spreads) The final category is "non-reporting" which is representative of small time traders like private individuals and small institutions. This category (where the "real" speculators are) represents a very small percentage of the total market open interest - perhaps 5% or less. It is impossible for these types of traders to take possession of the physical commodity - the CFTC forbids it as in most cases they can't cover the minimum contract obligation. I don't even know what you mean by "false demand". If you are implying that an open contract (delivery has not occurred) represents some kind of pseudo-demand against a barrel of physical oil you couldn't be more wrong. Speculators trade the contract, not the physical. Since there is no intention to take possession there is no physical demand. The position can be rolled over at the end of the month and a new contract entered into without any oil ever changing hands....
I'm the ocean. I'm a giant undertow.
73Zeppelin wrote:
Speculators trade the contract, not the physical. Since there is no intention to take possession there is no physical demand. The position can be rolled over at the end of the month and a new contract entered into without any oil ever changing hands....
Why would speculators agree to pay an amount for the contract to acquire oil, when they would not anticipate rising oil prices?
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency" -
73Zeppelin wrote:
Too funny. Speculators never hold the physical!
So what? Banker never get some of the dollars you earn, but they nonetheless will take your house when you do not pay the mortgage. Oil speculation is one of two things: The trader agrees to sell the amount X of oil (he does not own by now) at the price Y. The trader hopes the prices will fall and he can acquire the oil he agreed to sell for less than Y. The trader agrees to buy the amount X of oil (he does not want physically) at the price of Y. The trader hopes for rising prices, so he can sell the oil for more than Y. During all that time, the physical oil is on the way through pipeline, tanker, refinery into the storage. It may change owner any number of times. And the mechanism that has on the spotmarket is simply: The oil a speculator has a contract on *now* is not going to be on the market in 3 Months, reducing supply. When all oil-producer have already sold their oil for September for A Dollars, you would have to pay more than A Dollars to get something. "backwardation" (beyond a very tiny amount for the costs) occurs when the supply is insecure. Normal would be "contango", but the costs for transport, storage and refining are relativly stable and are integrated into the price.
73Zeppelin wrote:
I think you should do some reading on how the futures market operates.
I think you should take care not to get entangled in the finer details of terminology. We are talking about macroeconomics here.
73Zeppelin wrote:
jhwurmbach wrote: That speculators do not hold the physical commodity is as irrelevant Uh, no it's not - it's a fundamental principle on which futures markets are built.
Sure. Its easier to understand with the classical text-book example "apples-market". The apples are not even growing on the tree, but still may have been sold several times. And the apple farmer is speculating that he will get at least as much apple as he has sole futures for. But he needs the money *now* to pay the beemaster, and later to pay the pluckers.
73Zeppelin wrote:
That's why speculators exist and operate in the market
They do that to earn money. And they found a way to parasite on values created elsewhere by others.
Let's think
jhwurmbach wrote:
So what? Banker never get some of the dollars you earn, but they nonetheless will take your house when you do not pay the mortgage. Oil speculation is one of two things: The trader agrees to sell the amount X of oil (he does not own by now) at the price Y. The trader hopes the prices will fall and he can acquire the oil he agreed to sell for less than Y. The trader agrees to buy the amount X of oil (he does not want physically) at the price of Y. The trader hopes for rising prices, so he can sell the oil for more than Y. During all that time, the physical oil is on the way through pipeline, tanker, refinery into the storage. It may change owner any number of times. And the mechanism that has on the spotmarket is simply: The oil a speculator has a contract on *now* is not going to be on the market in 3 Months, reducing supply. When all oil-producer have already sold their oil for September for A Dollars, you would have to pay more than A Dollars to get something. "backwardation" (beyond a very tiny amount for the costs) occurs when the supply is insecure. Normal would be "contango", but the costs for transport, storage and refining are relativly stable and are integrated into the price.
Speculation does not affect oil prices. A futures contract does not represent demand for the physical - I can indefinitely roll-over a futures contract for 10 years if I wanted to and never, ever, never take possession of the physical. It does not induce demand for the underlying. Furthermore, what you describe is normal market behaviour. But that behaviour does not affect the price level. Also, "contango" is not normal (except for gold). The oil market is backwardated about 95% of the time and thus contango (for the oil contract) is most definitely NOT normal. If I enter into a futures contract and three days before it expires I roll over my position into another contract, where is the demand for physical oil? I can do this indefinitely. Let's say I do it for a year. At the end of 1 year I have bought, say, 12 futures contracts of 1 month maturity yet not once did I take possession of any oil. Why do you believe that represents demand (demand is demand for the underlying; the physical commodity)? How do you think that drives up the price of oil? Why, as a speculator, would I be willing to bid up the price of a futures contract when I know I could possibly lose if the future spot price is less than the futures price at
-
73Zeppelin wrote:
but that's because they don't understand the mechanics of the futures market.
And you alone got the understanding, and know what is to do...Oh well. You are right or not, that much is certain.
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency"jhwurmbach wrote:
73Zeppelin: but that's because they don't understand the mechanics of the futures market. jhwurmbach: And you alone got the understanding, and know what is to do...Oh well. You are right or not, that much is certain.
Isn't it such a bummer when the sort of "reasoning" one so typically employs comes home? ;)
-
73Zeppelin wrote:
but that's because they don't understand the mechanics of the futures market.
And you alone got the understanding, and know what is to do...Oh well. You are right or not, that much is certain.
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency"jhwurmbach wrote:
And you alone got the understanding
I never suggested that at all. I am, however, directly involved with the futures market so I happen to know how it works.
I'm the ocean. I'm a giant undertow.
-
Ravel H. Joyce wrote:
Which is kinda weird, because I thought he'd be the first person to give me a 5.
Well, of course, because he never (what never? Well, hardly ever) gives 1's. He posted to that effect. For him to give 1's out now would be *dishonest.* I am sure you are simply imagining a correlation. As is Christian; as am I. :laugh: :laugh: :laugh:
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
He posted to that effect.
Someone is quite misrepresenting what "he" said. But then, Someone does that sort of thing. Why, if Someone couldn't [spend his time] misrepresenting what others have said, there'd be no point in living, would there?
-
73Zeppelin wrote:
Speculators trade the contract, not the physical. Since there is no intention to take possession there is no physical demand. The position can be rolled over at the end of the month and a new contract entered into without any oil ever changing hands....
Why would speculators agree to pay an amount for the contract to acquire oil, when they would not anticipate rising oil prices?
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency"jhwurmbach wrote:
Why would speculators agree to pay an amount for the contract to acquire oil, when they would not anticipate rising oil prices?
Speculators agree to buy futures contracts in order to earn the risk premium - the difference between expected future spot price and the price of the futures contract at maturity. If expected future spot price exceeds the futures contract price at maturity, the speculators pocket the difference and thus profit. If the expected future spot price is less than the futures price at maturity they lose. It's a gamble and has less to do with rising oil prices than it has to do with the difference between the spot price and the contract price at maturity. Do you understand how a futures contract works?
I'm the ocean. I'm a giant undertow.
-
jhwurmbach wrote:
So what? Banker never get some of the dollars you earn, but they nonetheless will take your house when you do not pay the mortgage. Oil speculation is one of two things: The trader agrees to sell the amount X of oil (he does not own by now) at the price Y. The trader hopes the prices will fall and he can acquire the oil he agreed to sell for less than Y. The trader agrees to buy the amount X of oil (he does not want physically) at the price of Y. The trader hopes for rising prices, so he can sell the oil for more than Y. During all that time, the physical oil is on the way through pipeline, tanker, refinery into the storage. It may change owner any number of times. And the mechanism that has on the spotmarket is simply: The oil a speculator has a contract on *now* is not going to be on the market in 3 Months, reducing supply. When all oil-producer have already sold their oil for September for A Dollars, you would have to pay more than A Dollars to get something. "backwardation" (beyond a very tiny amount for the costs) occurs when the supply is insecure. Normal would be "contango", but the costs for transport, storage and refining are relativly stable and are integrated into the price.
Speculation does not affect oil prices. A futures contract does not represent demand for the physical - I can indefinitely roll-over a futures contract for 10 years if I wanted to and never, ever, never take possession of the physical. It does not induce demand for the underlying. Furthermore, what you describe is normal market behaviour. But that behaviour does not affect the price level. Also, "contango" is not normal (except for gold). The oil market is backwardated about 95% of the time and thus contango (for the oil contract) is most definitely NOT normal. If I enter into a futures contract and three days before it expires I roll over my position into another contract, where is the demand for physical oil? I can do this indefinitely. Let's say I do it for a year. At the end of 1 year I have bought, say, 12 futures contracts of 1 month maturity yet not once did I take possession of any oil. Why do you believe that represents demand (demand is demand for the underlying; the physical commodity)? How do you think that drives up the price of oil? Why, as a speculator, would I be willing to bid up the price of a futures contract when I know I could possibly lose if the future spot price is less than the futures price at
73Zeppelin wrote:
A futures contract does not represent demand for the physical - I can indefinitely roll-over a futures contract for 10 years if I wanted to and never, ever, never take possession of the physical.
"rolling over", that is exchanging you contract for oil due *soon* for one due *later*, would have ruined you. In case of the backwardation benefit being higher than the rolling over costs, no one would buy new, longer contracts. And the physical oil will make its way from the tanker to the refinery to the customer unhindered. For sure no one will try to unload his crude-oil-truck into your garden.
73Zeppelin wrote:
Speculation is not parasitation. Speculation is necessary in order for the futures market to exist.
Thats the point: We don't need the futures market. It once came out of the sheer information deficit, in times when information where not faster than the physical matter. It then institutionalized. But it does not do anything good which could not better be done in other ways.
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency" -
jhwurmbach wrote:
So what? Banker never get some of the dollars you earn, but they nonetheless will take your house when you do not pay the mortgage. Oil speculation is one of two things: The trader agrees to sell the amount X of oil (he does not own by now) at the price Y. The trader hopes the prices will fall and he can acquire the oil he agreed to sell for less than Y. The trader agrees to buy the amount X of oil (he does not want physically) at the price of Y. The trader hopes for rising prices, so he can sell the oil for more than Y. During all that time, the physical oil is on the way through pipeline, tanker, refinery into the storage. It may change owner any number of times. And the mechanism that has on the spotmarket is simply: The oil a speculator has a contract on *now* is not going to be on the market in 3 Months, reducing supply. When all oil-producer have already sold their oil for September for A Dollars, you would have to pay more than A Dollars to get something. "backwardation" (beyond a very tiny amount for the costs) occurs when the supply is insecure. Normal would be "contango", but the costs for transport, storage and refining are relativly stable and are integrated into the price.
Speculation does not affect oil prices. A futures contract does not represent demand for the physical - I can indefinitely roll-over a futures contract for 10 years if I wanted to and never, ever, never take possession of the physical. It does not induce demand for the underlying. Furthermore, what you describe is normal market behaviour. But that behaviour does not affect the price level. Also, "contango" is not normal (except for gold). The oil market is backwardated about 95% of the time and thus contango (for the oil contract) is most definitely NOT normal. If I enter into a futures contract and three days before it expires I roll over my position into another contract, where is the demand for physical oil? I can do this indefinitely. Let's say I do it for a year. At the end of 1 year I have bought, say, 12 futures contracts of 1 month maturity yet not once did I take possession of any oil. Why do you believe that represents demand (demand is demand for the underlying; the physical commodity)? How do you think that drives up the price of oil? Why, as a speculator, would I be willing to bid up the price of a futures contract when I know I could possibly lose if the future spot price is less than the futures price at
73Zeppelin wrote:
The only thing I will agree to is that speculators can affect price volatility but NOT price LEVEL.
Zep, is it true that it is the hedgers who are driving the price up? They do want to take physical delivery of the oil they buy and they are, for all intentes and purposes, bidding against each other and thus bidding the price up. I'm told that America West has hedged oil scheduled for delivery through 2012.
Jon Smith & Wesson: The original point and click interface
-
Ilíon wrote:
What does "keeping their prices relatively in line" even *mean*?
All stations charge roughly the same price at any given time. No one station typically charges a lot more or less. Does that make sense to you? Think about it, why didn't other petrol stations raise their prices? Why did the petrol station in question reduce their prices after a bit of criticism? If they were in the right to do so, why didn't they?
He who makes a beast out of himself gets rid of the pain of being a man
It depends a lot on # of stations in an area, and transpertation costs, taxes and fees. If you don't like the price you are free to choose other stations, at least here in USA you can.
MrPlankton
-
True, but in this case they were the first and only petrol station to do so :)
He who makes a beast out of himself gets rid of the pain of being a man
Phannon wrote:
first and only petrol station to do so
So they will be punished by the market. People simply go somewhere else.
MrPlankton
-
73Zeppelin wrote:
A futures contract does not represent demand for the physical - I can indefinitely roll-over a futures contract for 10 years if I wanted to and never, ever, never take possession of the physical.
"rolling over", that is exchanging you contract for oil due *soon* for one due *later*, would have ruined you. In case of the backwardation benefit being higher than the rolling over costs, no one would buy new, longer contracts. And the physical oil will make its way from the tanker to the refinery to the customer unhindered. For sure no one will try to unload his crude-oil-truck into your garden.
73Zeppelin wrote:
Speculation is not parasitation. Speculation is necessary in order for the futures market to exist.
Thats the point: We don't need the futures market. It once came out of the sheer information deficit, in times when information where not faster than the physical matter. It then institutionalized. But it does not do anything good which could not better be done in other ways.
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency"jhwurmbach wrote:
"rolling over", that is exchanging you contract for oil due *soon* for one due *later*, would have ruined you.
That's not what "rolling-over" means. Rolling-over a position means that I sell the expiring futures contract and buy a new futures contract. If I speculate the oil market, I never take possession of oil.
jhwurmbach wrote:
Thats the point: We don't need the futures market.
:wtf: WHAT? What are you talking about? The futures market mitigates risk! It's vital!
jhwurmbach wrote:
It once came out of the sheer information deficit, in times when information where not faster than the physical matter.
No it didn't! It was originally developed to protect farmers against bad harvests! I'm not sure where you are getting your information from, but it's wrong. Wrong, unless, of course, you think communism is a "good" thing... :~
jhwurmbach wrote:
it does not do anything good which could not better be done in other ways.
Wrong, wrong, wrong, wrong, wrong, wrong, wrong. The futures market reduces risk - reduces risk of price fluctuation and benefits all: you, me, Africans, everyone. Without it the world would be subject to huge and uncontrolled price spikes.
I'm the ocean. I'm a giant undertow.
-
[Message Deleted]
**Ilion:**Listen to you! All emotion, no reason. The first article[^] backs up what I've said. But, you, and those who "think" like you, don't want to *see* reality as it really is; don't want to deal with what *is,* as opposed to what you collectively imagine *ought* to be. MOREOVER, you're actually hypocritical in your "arguments." For instance, we both know that there are many companies which need your programming expertise (or whatever other skill you are selling), but they simply cannot afford to pay the price you are demanding for your time/effort. CLEARLY, this state of affaires is "immoral" [Roll eyes] and you should be compelled to offer your services at a price these poor companies can afford. **Ravel:**You can *say* whatever you wish. In this case, it isn't true; but it's quite to be expected, because you are *not* an intellectually honest person.
You kiddies love to resort to this kind of blatant *habitual* dishonesty when you *know* I'm right (hint: I always am). I am *very* close to complaining to Chris Maunder again.
I'm a Christian: I *know* that I'm perverted. - Ilion
-
jhwurmbach wrote:
"rolling over", that is exchanging you contract for oil due *soon* for one due *later*, would have ruined you.
That's not what "rolling-over" means. Rolling-over a position means that I sell the expiring futures contract and buy a new futures contract. If I speculate the oil market, I never take possession of oil.
jhwurmbach wrote:
Thats the point: We don't need the futures market.
:wtf: WHAT? What are you talking about? The futures market mitigates risk! It's vital!
jhwurmbach wrote:
It once came out of the sheer information deficit, in times when information where not faster than the physical matter.
No it didn't! It was originally developed to protect farmers against bad harvests! I'm not sure where you are getting your information from, but it's wrong. Wrong, unless, of course, you think communism is a "good" thing... :~
jhwurmbach wrote:
it does not do anything good which could not better be done in other ways.
Wrong, wrong, wrong, wrong, wrong, wrong, wrong. The futures market reduces risk - reduces risk of price fluctuation and benefits all: you, me, Africans, everyone. Without it the world would be subject to huge and uncontrolled price spikes.
I'm the ocean. I'm a giant undertow.
73Zeppelin wrote:
If I speculate the oil market, I never take possession of oil.
No. But you have a binding agreement of someone, to sell you a fixed amount of oil for a fixed price at a fixed date. The oil may come from whereever.
73Zeppelin wrote:
unless, of course, you think communism is a "good" thing
Are you talking about the communism as the utopia written by Marx, the one implemented in the Soviet union, the GDR or Kampuchea, the one implemeted in modern China or the one defined by the US Republicans (e.g. anything not being vicious capitalism)?
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency" -
**Ilion:**Listen to you! All emotion, no reason. The first article[^] backs up what I've said. But, you, and those who "think" like you, don't want to *see* reality as it really is; don't want to deal with what *is,* as opposed to what you collectively imagine *ought* to be. MOREOVER, you're actually hypocritical in your "arguments." For instance, we both know that there are many companies which need your programming expertise (or whatever other skill you are selling), but they simply cannot afford to pay the price you are demanding for your time/effort. CLEARLY, this state of affaires is "immoral" [Roll eyes] and you should be compelled to offer your services at a price these poor companies can afford. **Ravel:**You can *say* whatever you wish. In this case, it isn't true; but it's quite to be expected, because you are *not* an intellectually honest person.
You kiddies love to resort to this kind of blatant *habitual* dishonesty when you *know* I'm right (hint: I always am). I am *very* close to complaining to Chris Maunder again.
I'm a Christian: I *know* that I'm perverted. - Ilion
-
73Zeppelin wrote:
The only thing I will agree to is that speculators can affect price volatility but NOT price LEVEL.
Zep, is it true that it is the hedgers who are driving the price up? They do want to take physical delivery of the oil they buy and they are, for all intentes and purposes, bidding against each other and thus bidding the price up. I'm told that America West has hedged oil scheduled for delivery through 2012.
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
Zep, is it true that it is the hedgers who are driving the price up?
Hedgers, speculators...I've heard it all. I've analyzed the Commitment of Traders (CoT) data and I really don't see any effects. There was a report to Congress regarding speculation in the oil market, but that report (I read it and it's publicly available) was flawed in methodology. The problem is that the CoT data is highly aggregated (it's not daily data - it's bi-monthly - i.e. every two weeks) and the classifications are not concrete. As I explained in this thread it is not in the interest of speculators to self-classify as "speculative". As a result the data is also fairly noisy. That being said, I don't think it's either the hedgers or the speculators. I truly believe it's fundamentals: production, supply, demand, inventories and uncertainty regarding in-the-ground oil reserves. The problem is that the data on in-the-ground reserves is dirty and completely unreliable. In some cases these Gulf countries lie about how much oil is left. This works its way into the market along with everything else including the weakness of the dollar, and the fundamentals I mentioned above. I don't see much evidence of a bidding war - the bid-ask spread is relatively stable. I think high oil prices are due to the factors I mentioned. I think politicians like to look for scapegoats in times when commodity prices are soaring because it gets them votes. Nothing hits the average tax-payers pocket like expensive commodities and so a good way to curry favour is to start pointing fingers and you don't point fingers at the constituents... I also don't think the schedule is that well-hedged until 2012. The long-term contracts (more than 1 year) are not very liquid (meaning not highly traded) and if there was that much hedging demand (until 2012) it would be easy to see that kind of activity. I do think producers have a well-defined production schedule though.
I'm the ocean. I'm a giant undertow.
-
73Zeppelin wrote:
If I speculate the oil market, I never take possession of oil.
No. But you have a binding agreement of someone, to sell you a fixed amount of oil for a fixed price at a fixed date. The oil may come from whereever.
73Zeppelin wrote:
unless, of course, you think communism is a "good" thing
Are you talking about the communism as the utopia written by Marx, the one implemented in the Soviet union, the GDR or Kampuchea, the one implemeted in modern China or the one defined by the US Republicans (e.g. anything not being vicious capitalism)?
Let's think the unthinkable, let's do the undoable, let's prepare to grapple with the ineffable itself, and see if we may not eff it after all.
Douglas Adams, "Dirk Gently's Holistic Detective Agency"jhwurmbach wrote:
Are you talking about the communism as the utopia written by Marx, the one implemented in the Soviet union, the GDR or Kampuchea, the one implemeted in modern China or the one defined by the US Republicans (e.g. anything not being vicious capitalism)?
I like the underlined one. :-D I'll have to remember that one. As far as communism goes, any kind of centrally planned economy where the state dictates the distribution of wealth is a bad, bad idea. That's why there are few communist countries left (although part of China's success is it's open-mindedness towards capital markets) in the world and the "successful" countries are the ones that embrace capital markets. I don't believe communism is a viable ideology - communist states are short-lived.
I'm the ocean. I'm a giant undertow.