60 Minutes: Oil Prices Manipulated

The thread title is misleading. That link doesn't say the oil commodities market was manipulated.

There was definitely a bubble in the oil futures market. It definitely popped. It's actually swung too far in the opposite direction on the way down, and as soon as deflation fears die down, the price will begin to rise again. No one thinks twice about it when the price goes way down, though. Where are the calls for regulation now?

You need speculators to create a futures market. And that speculation means that oil prices will never be purely tied to the supply of oil and the worldwide demand. Why is this shocking to anyone? When oil starts to increase in price again, a major reason will be that investors will be looking to it as an inflation hedge. Those people will be investors, not end users. In other words, speculators. And the run up in price will won't be caused by a shift in supply and demand for oil, although those are the factors that determine long-term prices.

If you want commodity prices to be tied purely to supply and demand at any given moment -- and not as a long-term proposition, as they generally are -- then you can't have futures markets. Futures market require people who are investing, as well as people who use the commodity. There is no future's market without investors--or speculators.

When that article pointed out that the price of oil jumped $25 in one day, and that couldn't have been tied to supply and demand, it's like saying when the Dow has a huge run-up in one day there is something not right because all those companies didn't suddenly become way more profitable overnight.

No one thinks twice about that, though, nor is there anything suspicious about it. Markets react for zillions of reasons in the short-term. Their efficiencies are shown in the longer term, not on a day by day, or sometimes even a month-by-month basis.

Everyone is focused on oil, because they feel it when the go to the gas tank, but lots of markets behaved similarly. The S&P 500 lost 38 percent in 2008, with some big spikes and a huge sell off at the end of the year. Speculators make up the equity markets also. It's the nature of investing.

 

I was wrong, Boom... I didn't predict the worst financial crisis in living memory.

At the time I posted that you were posting over and over about manipulation and posting muddled things about speculators that made no sense. The were A implies Z posts, with A and Z having nothing to do with each other.

The same speculators that were the boogy men last summer are the ones who drove the price down, though. And just as the market got too heated too soon, it has gone lower now than the change in the demand-supply scenario given the recession warrants. Markets move in both directions, is the point, and there is no evidence of any manipulation.

And yeah, I was wrong in that post, no less wrong than the last time you quoted it. I didn't predict a meltdown in the world's credit markets creating a worldwide recession and taking the energy market with it.