Thank the Wall Street speculators for high gas prices

Boom_70 · Feb 22, 2012

Boom_70 said:

The Big Ragu said:

Boom_70 said:

No doubt Ragu is taking up his warm up and limbering up his fingers to respond.
Click to expand...

As someone said, if you think it's that easy, or you're so sure about how the game is rigged, knock yourself out trying to buy and sell oil. You might learn a hard lesson.

Speculation isn't a game of driving up prices on people. You can earn money just as easily when oil prices are declining as you can when they are going up. So it's not like people have a natural vested stake in the price of anything going up. Volatility makes money. Not upward prices.

There isn't anyone big enough to rig the oil market. You want to talk silver? OK. But not oil. And if you think I am wrong, go out investigate and offer the proof. You'll find out how silly the idea is.

There are a gazillion factors that contribute to the price of oil--in supply (which is declining, by the way) and demand. That piece was simplistic and wrong.

If you want to find a culprit (for why a bunch of commodities have seen their prices go up, not just oil), the first place you should be looking is the U.S. Federal Reserve. Oil is globally traded in dollars. And Ben Bernanke and his clown cabal have been doing everything they can to shit all over the dollar, devaluing it with a perma-policy of zero interest rates and several rounds of quantitative easing. It has been a feckless attempt to drive economic growth (and has not succeeded), and also to inflate away the debt our last two presidents have been piling up.

With that comes consequences. I've posted about it a lot. It makes everything cost more. You pay for their shenanigans with inflation. And that begins with anything that is traded in dollars. It's why I have had that gold thread going, and it applies to oil, as well.

Take a look at a multiyear chart of the US Dollar Index (which measures the value of our currency against a basket of other currencies). It offers all the answers anyone needs about why any commodity that is traded in dollars has gotten more expensive -- and will continue to if we stay on this course.

If you want to do simplistic analysis, that is way more on target.
Click to expand...

The Saudi's disagree with you:

http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-saudis-often-warned.html
Click to expand...

http://articles.latimes.com/2011/may/25/business/la-fiw-oil-traders-20110525

U.S. sues oil traders for price manipulation
The Commodity Futures Trading Commission accuses two well-known traders and two trading firms owned by Norwegian billionaire John Fredriksen of making $50 million by squeezing markets in 2008.

Armchair_QB · Feb 22, 2012

Maybe somebody should start shooting oil speculators.

The Big Ragu · Feb 22, 2012

Boom_70 said:

Boom_70 said:

The Big Ragu said:

Boom_70 said:

No doubt Ragu is taking up his warm up and limbering up his fingers to respond.
Click to expand...

As someone said, if you think it's that easy, or you're so sure about how the game is rigged, knock yourself out trying to buy and sell oil. You might learn a hard lesson.

Speculation isn't a game of driving up prices on people. You can earn money just as easily when oil prices are declining as you can when they are going up. So it's not like people have a natural vested stake in the price of anything going up. Volatility makes money. Not upward prices.

There isn't anyone big enough to rig the oil market. You want to talk silver? OK. But not oil. And if you think I am wrong, go out investigate and offer the proof. You'll find out how silly the idea is.

There are a gazillion factors that contribute to the price of oil--in supply (which is declining, by the way) and demand. That piece was simplistic and wrong.

If you want to find a culprit (for why a bunch of commodities have seen their prices go up, not just oil), the first place you should be looking is the U.S. Federal Reserve. Oil is globally traded in dollars. And Ben Bernanke and his clown cabal have been doing everything they can to shit all over the dollar, devaluing it with a perma-policy of zero interest rates and several rounds of quantitative easing. It has been a feckless attempt to drive economic growth (and has not succeeded), and also to inflate away the debt our last two presidents have been piling up.

With that comes consequences. I've posted about it a lot. It makes everything cost more. You pay for their shenanigans with inflation. And that begins with anything that is traded in dollars. It's why I have had that gold thread going, and it applies to oil, as well.

Take a look at a multiyear chart of the US Dollar Index (which measures the value of our currency against a basket of other currencies). It offers all the answers anyone needs about why any commodity that is traded in dollars has gotten more expensive -- and will continue to if we stay on this course.

If you want to do simplistic analysis, that is way more on target.
Click to expand...

The Saudi's disagree with you:

http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-saudis-often-warned.html
Click to expand...

http://articles.latimes.com/2011/may/25/business/la-fiw-oil-traders-20110525

U.S. sues oil traders for price manipulation
The Commodity Futures Trading Commission accuses two well-known traders and two trading firms owned by Norwegian billionaire John Fredriksen of making $50 million by squeezing markets in 2008.
Click to expand...

Right when Obama was out scapegoating the "speculators" the CFTC embarks on something they have zero chance of proving in a court of law. They made a headline. The president got to seem like he was doing something to control the price of gas.

And the price data doesn't back up their claims against the defendents -- a small problem.

seekingalpha.com/article/272439-the-case-against-arcadia-is-that-the-best-cftc-can-do

Pirrong sums it up:

Corner manipulation cases are hard: The CFTC has never won one. Trade impact manipulation cases in which it is alleged that buying or selling created false perceptions of demand are even harder to analyze and prove. Thus, just based on the nature of the allegation alone, the CFTC has filed a very challenging case. When one looks at the evidence the CFTC presents in its complaint, the odds become even higher. For the January episode in particular, the most straightforward interpretation of the evidence cuts squarely against the allegations. This will be a very difficult case for the agency to win.

There’s another lesson here that has been lost in all of the hue and cry over the filing of the complaint. CFTC has been examining the oil market with a fine tooth comb going back to 2005 if memory serves. If this is the best case they can find after all that, the oil market must be pretty damn clean.
Click to expand...

But they did make a headline.

LongTimeListener · Feb 22, 2012

Couldn't that also just say a CFTC/oil speculation case is incredibly difficult to make because the thing is so complex and there are so many places to bury the data, to say nothing of the many jurisdictions involved and their different subpoena/evidence rules? I mean, the courts and the SEC still haven't proved that anyone did anything wrong in the mortgage mess when you get right down to it.

The case could just be hiding in plain sight

Boom_70 · Feb 22, 2012

If speculative money is thrown at the oil futures market it will rise. Right now 70 % of market is made up of speculators.

Simple answer would be to limit market to hedgers. The price of oil would come down $40 in no time.

dixiehack · Feb 22, 2012

Or we could go with the short answer, which is that the Iranians have been making with the crazy talk.

The Big Ragu · Feb 22, 2012

Boom_70 said:

If speculative money is thrown at the oil futures market it will rise. Right now 70 % of market is made up of speculators.

Simple answer would be to limit market to hedgers. The price of oil would come down $40 in no time.
Click to expand...

1) Speculators don't all march in lock step. 99 percent of the market could be filled with people trying to make a buck, and there would be no trades unless there was one person buying and one person selling.
2) You can't limit a futures market to hedgers. The whole point is that the hedgers need speculators. Or else you just have a spot market. If you limited any market to hedgers, you'd drive the price through the roof, and oil would only be available on a cash basis.
3) The baseline for oil is about $100 a barrel. And it will be heading higher over time. Supply is limited and depleting and there have been no new reserves in ages. Sorry to burst your unrealistic bubble, but unless you find some new reserves and/or find a way to decrease worldwide demand, $40 a barrel oil only exists where unicorns live.

Armchair_QB · Feb 22, 2012

Would be interesting to know what the cost of gallon of gas was when oil was at $104 a few years ago.

Seems like the pump price is a hell of a lot higher in relationship to the per barrel cost right now.

franklin lincoln · Feb 22, 2012

micropolitan guy said:

Because it's not about supply and demand. Plenty of supply, consumption is down, lots of gas in reserve, and yet prices continue to rise because the Wall Street thieves, the same people who brought you the Great Depression and the recent recession, are allowed to operate unchecked.

http://www.joplinglobe.com/dailybusiness/x560583319/In-absence-of-demand-oil-prices-rise-points-to-speculation
Click to expand...

Gas doesn't sell at $3.57 unless people buy it at $3.57.

doctorquant · Feb 22, 2012

Boom_70 said:

The price of oil would come down $40 in no time.
Click to expand...

You got some analysis to back that up?

YankeeFan · Feb 22, 2012

You don't need a ton of money to open a retail commodities trading account.

If it's so easy, jump in.

Bubbler · Feb 22, 2012

franklin lincoln said:

micropolitan guy said:

Because it's not about supply and demand. Plenty of supply, consumption is down, lots of gas in reserve, and yet prices continue to rise because the Wall Street thieves, the same people who brought you the Great Depression and the recent recession, are allowed to operate unchecked.

http://www.joplinglobe.com/dailybusiness/x560583319/In-absence-of-demand-oil-prices-rise-points-to-speculation
Click to expand...

Gas doesn't sell at $3.57 unless people buy it at $3.57.
Click to expand...

Yes. Because people can just stop buying gas and stop going to work, etc.

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Thank the Wall Street speculators for high gas prices

Boom_70 Well-Known Member

Armchair_QB Well-Known Member

The Big Ragu Moderator Staff Member

LongTimeListener Well-Known Member

Boom_70 Well-Known Member

dixiehack Well-Known Member

The Big Ragu Moderator Staff Member

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Thank the Wall Street speculators for high gas prices

Boom_70 Well-Known Member

Armchair_QB Well-Known Member

The Big Ragu Moderator Staff Member

LongTimeListener Well-Known Member

Boom_70 Well-Known Member

dixiehack Well-Known Member

The Big Ragu Moderator Staff Member

Armchair_QB Well-Known Member

franklin lincoln Member

doctorquant Well-Known Member

YankeeFan Well-Known Member

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