Yeah...speculation has nothing to do with oil prices..
09-10-2008, 02:55 PM
#1
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Yeah...speculation has nothing to do with oil prices..
Interesting what happens when you have 10x the investors trying to buy a commodity with a fairly static supply...
http://news.yahoo.com/story//ap/2008...il_speculation
http://news.yahoo.com/story//ap/2008...il_speculation
WASHINGTON – Speculation by large investors — and not supply and demand for oil — were a primary reason for the surge in oil prices during the first half of the year and the more recent price declines, an independent study concluded Wednesday.
The report by Masters Capital Management said investors poured $60 billion into oil futures markets during the first five months of the year as oil prices soared from $95 a barrel in January to $145 a barrel by July.
Since then, these investors have withdrawn $39 billion from those markets as prices have retreated dramatically, the report said. Oil traded at about $102 a barrel Wednesday on the New York Mercantile Exchange.
"We have clear evidence the fund flow pushed prices up and the fund flow pushed prices down," said Michael Masters of Masters Capital Management, calling the amount of money moving into oil futures markets by large institutional investors in the early part of the year "way off the scale."
Masters said its analysis shows investors "began a massive stampede for the exits" on July 15 and that this caused the price decline.
"These large financial players have become the primary source of the dramatic and damaging volatility seen in oil prices," concluded the report.
The report was released Wednesday by House and Senate sponsors of bills to put additional curbs on oil market speculation and comes in advance of a report on oil market speculation expected possibly this week by the Commodities Futures Trading Commission. The commission regulates commodity markets.
Sen. Maria Cantwell, D-Wash., a sponsor of an anti-speculation bill, said the Masters report challenges CFTC claims to date that supply and demand forces — and not excessive speculation — has driven up oil prices.
"This analysis illustrates that when oil speculators poured large amounts of speculative money into oil markets, prices skyrocketed just as they were hoping ... And when the speculative money got pulled out, prices tumbled," she said.
Sen. Byron Dorgan, D-N.D., said he wants to know "how oil speculators were able to drive prices up and down while the CFTC was asleep at the switch."
An interagency task force, led by the CFTC, concluded in an interim report last July that "fundamental supply and demand factors" influence the oil markets and that the data "does not support the proposition that speculative activity has systematically driven changes in oil prices."
Senate critics of the regulatory agency charged that report was based in flawed evidence.
"The CFTC has its head in the sand," said Rep. Bart Stupak, D-Mich., chairman of the House Energy and Commerce investigations subcommittee.
Stupak said the Masters report shows that that oil prices soared when speculators poured money into future markets even as the federal Energy Information Administration was forecasting supply would exceed demand.
Congress for months has been considering various measures aimed at curbing oil market speculation, but those efforts have been thwarted amid disputes over other energy issues from taxing oil companies to new offshore drilling.
Legislation before the Senate would put limits on the amount of oil certain traders, interested only in speculation, would be allowed to purchase in futures markets and give new authorities and staff to the CFTC to regulate oil markets.
The report by Masters Capital Management said investors poured $60 billion into oil futures markets during the first five months of the year as oil prices soared from $95 a barrel in January to $145 a barrel by July.
Since then, these investors have withdrawn $39 billion from those markets as prices have retreated dramatically, the report said. Oil traded at about $102 a barrel Wednesday on the New York Mercantile Exchange.
"We have clear evidence the fund flow pushed prices up and the fund flow pushed prices down," said Michael Masters of Masters Capital Management, calling the amount of money moving into oil futures markets by large institutional investors in the early part of the year "way off the scale."
Masters said its analysis shows investors "began a massive stampede for the exits" on July 15 and that this caused the price decline.
"These large financial players have become the primary source of the dramatic and damaging volatility seen in oil prices," concluded the report.
The report was released Wednesday by House and Senate sponsors of bills to put additional curbs on oil market speculation and comes in advance of a report on oil market speculation expected possibly this week by the Commodities Futures Trading Commission. The commission regulates commodity markets.
Sen. Maria Cantwell, D-Wash., a sponsor of an anti-speculation bill, said the Masters report challenges CFTC claims to date that supply and demand forces — and not excessive speculation — has driven up oil prices.
"This analysis illustrates that when oil speculators poured large amounts of speculative money into oil markets, prices skyrocketed just as they were hoping ... And when the speculative money got pulled out, prices tumbled," she said.
Sen. Byron Dorgan, D-N.D., said he wants to know "how oil speculators were able to drive prices up and down while the CFTC was asleep at the switch."
An interagency task force, led by the CFTC, concluded in an interim report last July that "fundamental supply and demand factors" influence the oil markets and that the data "does not support the proposition that speculative activity has systematically driven changes in oil prices."
Senate critics of the regulatory agency charged that report was based in flawed evidence.
"The CFTC has its head in the sand," said Rep. Bart Stupak, D-Mich., chairman of the House Energy and Commerce investigations subcommittee.
Stupak said the Masters report shows that that oil prices soared when speculators poured money into future markets even as the federal Energy Information Administration was forecasting supply would exceed demand.
Congress for months has been considering various measures aimed at curbing oil market speculation, but those efforts have been thwarted amid disputes over other energy issues from taxing oil companies to new offshore drilling.
Legislation before the Senate would put limits on the amount of oil certain traders, interested only in speculation, would be allowed to purchase in futures markets and give new authorities and staff to the CFTC to regulate oil markets.
09-10-2008, 02:58 PM
#2
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I was writing the same post and link in the other thread while you were doing this one!
https://www.camaroz28.com/forums/sho...&postcount=200
Let the naysayers come out against this!
https://www.camaroz28.com/forums/sho...&postcount=200
Let the naysayers come out against this!
09-10-2008, 03:11 PM
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My only question would be doesn't someone have to take delivery of this oil eventually? And when that day comes the speculators either have to store the oil or sell it at market rates. If the price goes too high demand drops and you get a glut of supply. Where is this speculation glut being stored?
09-10-2008, 03:33 PM
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They have been having to sell it before delivery and loosing their *** as the market goes down. That is why they have been pulling their funds from the oil market.
My only question would be doesn't someone have to take delivery of this oil eventually? And when that day comes the speculators either have to store the oil or sell it at market rates. If the price goes too high demand drops and you get a glut of supply. Where is this speculation glut being stored?
09-10-2008, 04:01 PM
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Sure, now. But before as prices were going up they would buy and sell even higher. We still bought just as much oil at $130 this summer as we did when it was only $50 a year ago. The end consumer was still willing to pay that high price or there is a lot of hidden oil somewhere that couldn't be sold at $130+.
09-10-2008, 04:14 PM
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Oil is not your typical supply/demand thing. If oil goes up, sure you may drive a little less...but you don't use less plastics. You don't turn the A/C back a few degrees. You don't buy product from the local farmers market instead of the product from the grocery store that has been flown and trucked in from all over the world. While demand will ease over time with high prices, it would not happen as fast as a normal commodity.
The reason the price of oil went up is because there was not enough oil futures to supply the demand of investors who would looking to buy it and turn it for a buck. The actual supply of oil was enough for world usage.
The reason the price of oil went up is because there was not enough oil futures to supply the demand of investors who would looking to buy it and turn it for a buck. The actual supply of oil was enough for world usage.
Sure, now. But before as prices were going up they would buy and sell even higher. We still bought just as much oil at $130 this summer as we did when it was only $50 a year ago. The end consumer was still willing to pay that high price or there is a lot of hidden oil somewhere that couldn't be sold at $130+.
Last edited by formula79; 09-10-2008 at 04:19 PM.
09-10-2008, 05:13 PM
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$60B in five months sounds like a lot, but let's look at what it is in the grand scheme of things. At 75 million barrels a day, the world spends $7.8B each day on oil (assuming a price of $105/barrel). Over a period of five months, that's $1.18 trillion. $60B ain't much in this context.
Even at $105/barrel, the pricing indicates that oil supplies aren't exactly overrunning the demand. To ignore this does a disservice to the work that lies ahead, but I suspose that some people would be much more comfortable if conservation, additional petroleum production, and alternative fuel development weren't necessary.
BTW, oil usage is prodominately for transportation uses. Take away cars and trucks, and you're not talking about a whole lot of consumption. I've posted the number here previously and I probably won't take the time to look the stuff up again for those who aren't interested in data.
Even at $105/barrel, the pricing indicates that oil supplies aren't exactly overrunning the demand. To ignore this does a disservice to the work that lies ahead, but I suspose that some people would be much more comfortable if conservation, additional petroleum production, and alternative fuel development weren't necessary.
BTW, oil usage is prodominately for transportation uses. Take away cars and trucks, and you're not talking about a whole lot of consumption. I've posted the number here previously and I probably won't take the time to look the stuff up again for those who aren't interested in data.
Last edited by Eric Bryant; 09-10-2008 at 05:20 PM.
09-10-2008, 05:20 PM
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When the media and banks conspire together and throw up a figure of $200/bbl, which is essentially just a figment of one's imagination... it's likely to bring in the investors looking to make easy profits.
Remember, the media and banks are owned by the 'same entities'. The markets are clearly being manipulated.
Remember, the media and banks are owned by the 'same entities'. The markets are clearly being manipulated.
09-10-2008, 11:08 PM
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If you introduce $60 billion dollars in specultive investment funds into any commodity market that has static supply you are gonna see a price spike.
We can argue this all day long however, the fact that prices spiked as the $60 billion poured in, and reduced as $39 billion was pulled out is plenty of evidence. Again...while people bitch about oil prices...how many people actually make a meaningfull change to their driving habits.
We can argue this all day long however, the fact that prices spiked as the $60 billion poured in, and reduced as $39 billion was pulled out is plenty of evidence. Again...while people bitch about oil prices...how many people actually make a meaningfull change to their driving habits.
$60B in five months sounds like a lot, but let's look at what it is in the grand scheme of things. At 75 million barrels a day, the world spends $7.8B each day on oil (assuming a price of $105/barrel). Over a period of five months, that's $1.18 trillion. $60B ain't much in this context.
Even at $105/barrel, the pricing indicates that oil supplies aren't exactly overrunning the demand. To ignore this does a disservice to the work that lies ahead, but I suspose that some people would be much more comfortable if conservation, additional petroleum production, and alternative fuel development weren't necessary.
BTW, oil usage is prodominately for transportation uses. Take away cars and trucks, and you're not talking about a whole lot of consumption. I've posted the number here previously and I probably won't take the time to look the stuff up again for those who aren't interested in data.
Even at $105/barrel, the pricing indicates that oil supplies aren't exactly overrunning the demand. To ignore this does a disservice to the work that lies ahead, but I suspose that some people would be much more comfortable if conservation, additional petroleum production, and alternative fuel development weren't necessary.
BTW, oil usage is prodominately for transportation uses. Take away cars and trucks, and you're not talking about a whole lot of consumption. I've posted the number here previously and I probably won't take the time to look the stuff up again for those who aren't interested in data.
09-10-2008, 11:53 PM
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09-11-2008, 12:50 AM
#11
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The problem with the amount of money that came into oil, is that the speculation and manipulation had to continue, or the speculators would lose their asses. Thus, once it started going up, the market had to use any excuse to keep building it up, so the speculators could cover their buys.
This is why you are seeing companies, and hedge funds, going bankrupt, or into severe financial difficulty, since the price dropped.
You just cannot sustain an artificially inflated price indefinitally.
SemGroup LP lost 3.2 Billion dollars, in oil, in 1 day. They declared BK. They were one of the largest delivery companies of propane, in the nation, through their SemStream subsidiary. There are now all kinds of lawsuits, and may be possible indictments due to their non disclosure of the size of their hedging. The AZ Corp Comm is even looking at possibly sueing them. Semstream is the main supplier for propane in my town of Payson, and my husbands company is the one who delivers to them (my husband is the resident driver).
It probably seemed like an easy way to make some fast money................ but they got burned bad. This is turning into a mini Enron.
Yes I have changed my driving habits. I watch how I drive, and do not get on the gas much. I am no longer in a hurry. We do not go down to the Valley to visit relatives, or go shopping either (77 miles away). We are basically a one vehicle family, as my husband only drives to where he can park his truck (hazmat) once a week. Basically, I go through about 1 tank of gas a month now.
This is why you are seeing companies, and hedge funds, going bankrupt, or into severe financial difficulty, since the price dropped.
You just cannot sustain an artificially inflated price indefinitally.
SemGroup LP lost 3.2 Billion dollars, in oil, in 1 day. They declared BK. They were one of the largest delivery companies of propane, in the nation, through their SemStream subsidiary. There are now all kinds of lawsuits, and may be possible indictments due to their non disclosure of the size of their hedging. The AZ Corp Comm is even looking at possibly sueing them. Semstream is the main supplier for propane in my town of Payson, and my husbands company is the one who delivers to them (my husband is the resident driver).
It probably seemed like an easy way to make some fast money................ but they got burned bad. This is turning into a mini Enron.
Yes I have changed my driving habits. I watch how I drive, and do not get on the gas much. I am no longer in a hurry. We do not go down to the Valley to visit relatives, or go shopping either (77 miles away). We are basically a one vehicle family, as my husband only drives to where he can park his truck (hazmat) once a week. Basically, I go through about 1 tank of gas a month now.
09-11-2008, 07:29 AM
#12
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Just filled-up the '93 4-banger yesterday - $47 and 38mpg. Good for 2 more weeks!
Just bought a 91 4-banger for the wife Saturday night (so she'd stop trying to hork mine). Paid $700 for it with 81k miles, 2nd owner, and drove it 55 miles home no problem. Probably going to sell a 94 V6 car (25-28mpg) to make room. Planned trips into town for groceries and eating out at the same time. Staying home more nights. Heck, commuting 50 miles each way was also a huge part of my desire for a job change last year - now I commute 6.
Also, have more plans to take my 4-cyl cars to 50mpg or beyond if the gas spike returns... after all, I am a mechanical engineer who plays with cars.
We are also changing our habits around the house. Recycling more. Watching hot water usage. Looking at a solar hot water system right now in fact. Potentially looking at solar heat supplement too - but that's a pretty big investment right now.
All of this, yet I am one of the people who can "afford" the higher gas prices.
Doing it because it's the right thing to do.
I'd say there are more people making changes out here than you give credit for.
09-11-2008, 09:51 AM
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$60B in five months sounds like a lot, but let's look at what it is in the grand scheme of things. At 75 million barrels a day, the world spends $7.8B each day on oil (assuming a price of $105/barrel). Over a period of five months, that's $1.18 trillion. $60B ain't much in this context.
Even at $105/barrel, the pricing indicates that oil supplies aren't exactly overrunning the demand. To ignore this does a disservice to the work that lies ahead, but I suspose that some people would be much more comfortable if conservation, additional petroleum production, and alternative fuel development weren't necessary.
BTW, oil usage is prodominately for transportation uses. Take away cars and trucks, and you're not talking about a whole lot of consumption. I've posted the number here previously and I probably won't take the time to look the stuff up again for those who aren't interested in data.
Even at $105/barrel, the pricing indicates that oil supplies aren't exactly overrunning the demand. To ignore this does a disservice to the work that lies ahead, but I suspose that some people would be much more comfortable if conservation, additional petroleum production, and alternative fuel development weren't necessary.
BTW, oil usage is prodominately for transportation uses. Take away cars and trucks, and you're not talking about a whole lot of consumption. I've posted the number here previously and I probably won't take the time to look the stuff up again for those who aren't interested in data.
09-11-2008, 12:21 PM
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But then when delivery time comes they have to sell them to those that actually want the oil (demand). The Demand was willing to pay those prices. If people said "sorry that is too much" and walked away then where did the oil go? Oil has been over $100 for 6 months and we are burning every last drop. Who is holding the speculation glut if one exists?
09-11-2008, 12:25 PM
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It was a paper glut, not an actual physical one.
Basically, they were buying and selling the same oil futures, over and over. Futures being the key word.
To put it in simple terms, it was pure pricing manipulation, at its worst.
Basically, they were buying and selling the same oil futures, over and over. Futures being the key word.
To put it in simple terms, it was pure pricing manipulation, at its worst.