well i don't know how much iran uncertainty is priced into oil as it stands now. it could be a good $20 bucks or so. also the world econ is still growing there has still not been any significant demand destruction. like i have said before i do feel like we are at a topping point, however the thing keeping oil up is the iran question and continued dollar weakness with zero signs of potential strength for at least another half year. if the fed would have come out and raised rates last meeting and said that they would continue to look to fight inflation then that would have actually been a nice catalyst for oil to drop. as it stands now there are simply no reasons for oil to drop. hell if we drop our dumb corn ethanol subsidy then oil and most commodities will crash. but that is just wishful thinking on my part... anyhow...one day the market will turn and oil will pullback. where is pulls back to is how we will find out how strong oil really is. i've seen these sorts of trends in stocks many times and usually when they do finally crack after something negative changing in the fundamental situation then they have mean pullbacks that erases months of gains in a few days. a very recent example would be to look at what happened to coal and steel stocks the past few days when coal prices plummeted in europe and asia. stocks in that space are x, nue, stld, rs, aks, pcx, aci, btu, mee, fdg, cnx, and so on. look their charts up on yahoo finance and you will see what i am talking about.
That isn't what I said and you know it. Oil futures are a hedge against inflation because they are tied to an actual physical (albeit yet to be produced) product. Being that it is tied to an actual product (oil), it is somewhat hedged against the rigors that inflation can inflict upon stock trading. The number of people putting money in stocks goes down. The price goes down. Those same people put that money in oil futures. More demand for futures...price goes up. Once people feel bullish about stocks, they will take money out of oil futures and into stocks. Bubble go pop. New bubble in stock sector de jour is created.
Speculation is not a reason nor a cause of escalating oil prices. Speculation is a by-product of the crap situation we have put ourselves in... Two problems that have lead to this: 1.There is limited supply and increasing demand. King coal and Queen oil have made us complacent and vulnerable. It is only recently that due attention has started to be focused on alternatives. 2. The FED royally screwed us and intensified the problem. The weak dollar is real folks!! check the correlation. I dont understand why people cant grasp that oil is bought in dollar and in order to keep the world demand in check OPEC must raise prices in order to meet global demand... Think about it if oil prices stay low in dollar terms than the EURO zone areas will demand and consume much much more because it is much cheaper....I am only comparing the Euro zone with the US, but you can do the same for any area where the dollar is weaker relative to their currency ( SA, Asia, ect..)
Because of these two problems the speculator is justified in his reasoning that the price will only increase. As the old saying goes "dont blame the player blame the game" The problem is not speculation but rather the environment...
when i was in china just 2 weeks ago, i found out the gas is slightly cheaper than here. when i left, the government annouced a 17% increase which would put the price about the same as here. just for reference.
Basic math would tell you that the price of oil increase compared to inflation and consumption do not match. Considering in the last 4 years or so, the price of oil has increased nearly 400%. Inflation nor consumption, together, even come close to that number.
yes but speculators live within this environment...they are a byproduct of an understanding that demand can only grow while supply will at best stay the same... They also live in an environment where everytime there is a bubble burst the fed drops rates... They realize that their money will only drop in value and they use oil as a hedge against the dollar... dont treat the symptoms but instead the causes...
the only way they are going to truly force oil prices up is by physically taking oil out of the market. you have to buy it and have it delivered. oil has NEVER been a hedge against inflation. just because it is running up now does not mean it is a hedge against inflation. further stocks have usually been viewed as a long term hedge against inflation. to the 2nd part i just don't even know how to respond. your views are pretty unenlightened to put it nicely. i don't think you understand what a derivative really is or how the market really works. i don't think you really care about figuring it out so i am not even going to take the time to try to explain it.
that would be a great way to kill liquidity in the oil market and force people to other exchanges. i think i stopped listening after that guy said funds are buying oil contracts and NOT SELLING. he acts like people just starting driving up oil when the market started breaking down. does anyone even realize that oil ISN'T THE ONLY COMMODITY SKYROCKETING? why are the other commodities skyrocketing? bueller...bueller...
heres the thing....arent there a ton of different theories involved in economics.. like people will differ on what should be done to do so and so....i'm the first to admit..i have no f'ing clue about any of this stuff..i actually read this part of the forum to try to gather bits and pieces especially when it comes to gas prices and whats causing them. but it seems people differ on what exactly is causing it..but people post as if thats the fact or reason...couldnt it be a combination of a lot of things? from what i gather weak dollar, limited supply, increased demand from china and india are basically what i know that are causing it...now we have people saying speculators driving the price up....i think some just feel its the oil companies screwing everyone over..jacking prices because of natural disasters...the war..etc..on top of it no refineries built..basically one big collusion screwing everyone. i know a lot of people downplay that..with good reason...but couldnt it be a mix of all those things...some bigger than others?
The argument that more regulation would dry up liquidity has its flaws. The us stock market is plenty regulated and it is the largest exchange in the world. I mean why doesn't everyone trade in some other exchange.
BS. Commodities have ALWAYS been a hedge against inflation. Usually it is gold and other precious metals, but oil is no different. You don't know that commodities are historically a hedge against inflation, yet somehow my views are unenlightened. You are a funny guy.
A 20% increase in demand can result in a tripling of price. It's not a linear curve. I don't think you understand the commodities market very well.
Some commodites can be used in inflationary times. Gold and silver like you mentioned. But all other commodities are generally not use - not for actually buying them. Why? Because the carrying cost is too high. Do you know how much it costs to pay someone to store a barrel of oil? Or deliver it to your backyard? Poor hedge there. What is a hedge against inflation is the futures market - but that's not specific to commodites.....any type of future (including an "option") can be used as a hedge.
What is being traded day in and day out are futures. I don't think anybody ever put their money in oil expecting a few hundred barrels to be delivered to their driveway.
there's actually two markets. a futures market and a spot market. the spot market is for those who actually want the oil, the future markets are those who are making hedges and your beloved speculators. However, the futures market doesn't impact the price of oil very much. Pay attention to the spot market. That's what's causing the price increase. The future's market right now is reacting to the spot market, not the otherway around.
I have been following this thread very closely I have to agree with you here. Some things said in this thread just don't make sense.
