There might be a need for regulation, but Congress isn't going to be able to do anything about it. Oil (like all commodities) is traded globally, so making it harder for traders here isn't going to stop them from trading in London or Dubai.
What is you point? That opec, the us goverment, big oil ceo's are all a bunch of liars when they say that oil should not be this high? Should I believe a message board poster or people who control oil?
well you are in the media side of the economic world so you have probably seen rick santelli before. you would know he is an extremely intelligent commentator who is almost always right when discussing the action in the market. he is a member of the cme and cbot. he knows what he is talking about with respect to the oil speculation discussion. the video is basically him going against a fund manager who is putting forth the regular speculator arguments. santelli explains how there are no distortions in price between the cash value and contract value on the last day of the contracts. it's not a boring video to watch. it's pretty funny actually. take 5 min and check it out. he does a much better job explaining than i can.
**** me you won't even watch the video i posted. i read whatever is presented to me even if it is contrary to what i believe. you won't do a damn thing. what a joke.
You should give up. You've got a couple of guys arguing about the effect of speculating, big whoop. I'm still waiting for you to show me how supply and demand creates record oil prices that result in record profits.
While oil prices aren't necessarily a result of speculation, it certainly is a factor. I think I heard this morning that the commodities trading board said speculators hold somewhere around 75% of oil futures contracts today compared to 35-40% in 2000. So if they holding that much, it's certainly going to put upward price pressure there. I don't have any experience with commodities trading, so maybe a market expert can weigh in here. I don't think you need to forbid people from speculating - but I don't see a problem with raising margin requirements (from 5%? is that right?) With the level of volatility in these prices today, you probably want a higher margin requirement anyway. That doesn't limit the pure ability to speculate - but it limits the absurd volumes that any given person can speculate.
lol i know. i just have this weakness for people like him when i can't extricate myself from the situation. time to get some coffee.
....http://www.cnbc.com/id/15840232?video=753754816&play=1 lol i'll just keep posting it until someone looks.
I did watch the video it had one yelling that if you don't take delivery that the contract goes worthless. Some other people arguing with him.
So what's the difference between hedge funds trying to buy oil before it hits $200 a barrel and a futures trader?
Geez. I listened to that twice and the only conclusion I came to was that none of these people know the answer, although the shouting guy certainly thought he did. However, the rest of the panel either disagreed or couldn't fathom his answer. To me, the best answer is to stop the 5% speculation and make speculators put up 50%.
You might be right about all of this, but if oil prices continue to go higher America will go down. We a have trillions of dollars spent on roads. We probably have as many cars as people. We have massive debt on the governmental as well as the personal level. Saudi probably can just buy America. Without cheap oil we might be headed to a long economic slump.
So you response is basically that Rick Santelli is the final word and the only person that understands the futures markets and settlement of contracts? That all the other professionals that are involved in the market and say that speculators ARE having an impact simply don't understand the market they make their livelihoods in?
I like that idea, this market as it is now sounds an awful lot like what was happeining in the 20s right before the stock market crash.
There is some truth to this but you also have to remember that a lot of oil (don't know the percentage) is not sold through the spot or futures market. They are sold through long term contracts to the big oil companies. That is why exxon is making 10 billion a quarter. They are charging customers prices based on the spot price but in reality are getting oil at much lower prices. Speculation isn't the only reason but it is a contributing factor to the run up in prices.
Its easy to lay blame on speculators, but as robbie has pointed out, its not that simple. Unlike housing, stocks, or other assets where people take delivery, in this case, there is no delivery. All these guys buying futures with the expectation that oil will rise are going to sell those same futures closer to the strike date...therefore, when Air Langhi posts an article saying futures buyers are the largest buyers of oil, well guess what they are also now the largest sellers of oil. If speculators were taking delivery of oil and storing it somewhere, then you could make a case that the market is being cornered since in that case oil is being taken out of the supplier and users and instead being put in a 3rd party's hands. Ultimately, we are sticking our head in the sand if we believe that this will drop gas down to $2. The reality is that the weak dollar and supply/demand dynamics are dictating this. The world has shown its willing to pay $130 a barrel for oil, so thats what the going price is. If supply increases or demand decreases, all these guys are going to still keep on pumping b/c they are addicted to the cash they get for their oil...and prices will come down. Finally, as someone pointed out, you can change whatever margin requirements you want, but ultimately, you can't stop people from trading overseas or on other markets. What's to stop Fund A from talking to Fund B about betting on the price of oil? And since neither one is going to take delivery, how is this relevant to what Valero pays for oil from Exxon?
8 years ago speculators were in the minority now they are the majority. Speculators are people who will have no intention of taking delivery. Refineries and Airline companies aren't speculators.
The function of speculators is to absorb risk, which has upside and downside exposure. If you ban speculators, hedgers will have a hard time finding a market to buy up their risk. Risk requires a return. The riskier a project is, the more return it requires. If speculators can't take the risk, commodity owners will have to take the risk instead and still require that return. I don't see how eliminating speculators will reduce the need for return by whoever inherits the risk, so I don't see how it can reduce prices. If anything, it reduces efficiency and increases prices. However, if there is market manipulation by speculators, that's a different animal. Certainly, if there is some way in which manipulation is occuring, we need to stop it. If we can't stop it without outlawing speculators, than so be it, though that isn't a very elegant solution.
