Will Stopping Oil Speculators Save Our Economy?

• Report this Comment On July 09, 2009, at 4:26 PM, trmaines wrote:

  GS and other traders/speculators stand to make out huge with all the volatility in the market(huge being way up or way down). If oil, for instance, stays at $60 per barrel, there is not much money to be made. If oil swings between 30 and 70 (or 150) per barrel you could make huge profits the likes of which have not been seen. On the way up and the way down. Especially if you have inside information or could manipulate the trading and supplies. This goes the same for other commodities and equities. Good thing GS, MS and none of the others would ever do this. It is simply heavy risk taking and risk management, as the article says. No we don’t need more regulation.

• Report this Comment On July 10, 2009, at 3:45 AM, StockBeast wrote:

  When will Wall St clue in to the reason the price of oil hitting $144/brl ?

  Muslim and other nations that could not openly fund the Iraq war drove up the price of oil to fund the Iraqi economy. And it worked.

  the BULL .. about speculators only explains about 8% of the price jump. Most of the price jump is muslim nations getting back to funding the Iraqi economy after they tried to drop oil prices for the 2008 presidential election.

  http://www.zoniereport.com/wp-content/uploads/2009/04/726px-...

  The oil market is being manipulated most by foreign Govts.

• Report this Comment On July 10, 2009, at 10:13 AM, socratestoday wrote:

  I disagree with the column. Alan Greenspan says that the speculators were a positive influence on the recent oil spike. The price of oil can never deviate long from the dictate of supply and demand. If speculators force the price higher sooner they save the market from an even higher price overshoot later. The margin for the production of oil compared to consumption had been razor thin for several years leading up to last year. In part that is because producers remembered $12/barrel not so long ago and avoided jumping into increased exploration investment. Also, it became obvious last year that even $4 gasoline caused consumers to reduce consumption very little. The inelasticity of the market requires large price swings to keep supply matched to demand. The artificial interventions of governments like OPEC and Russia increase the volatility of this already volatile market. Aside, even at $150/barrel oil is cheaper than the green alternatives.

• Report this Comment On July 10, 2009, at 7:10 PM, Gadzmo wrote:

  Since I own an OIL ETF I think I will sit this one out...that being said, do ALL the speculators get together and agree on which direction to drive the market? Up? Down? Sideways?

  Isn't everyone just out for themselves and doing whatever they can to make a buck?

  Isn't the market a little too big now to be so obviously manipulated?

  I wonder...

• Report this Comment On July 10, 2009, at 7:51 PM, Tomtherailnut wrote:

  Supply and demand will damp out any speculation effects, but the almost perfectly inelastic market for oil makes it the speculator's playground. I sincerely doubt adding a level of government intervention to the mix will have any effect beyond INCREASING the potential for market swings, and hence, more speculation.

  Please - give us information, not regulation!

• Report this Comment On July 10, 2009, at 8:41 PM, ecloud wrote:

  Volatility is good for short-term traders. :-)

  As for the greater good, if volatility got worse, maybe the speculators were part of the problem, or maybe not. The most positive theory is that they smooth out the spikes - especially, hopefully they sell when the prices are high, so the supply increases to meet demand even though perhaps no extra oil was actually being produced right then. (But to have something to sell they have to buy sometime, too. We are not so interested in the case when they buy at a low price, because smoothing out the high-price spikes is more useful for the "greater good" than propping up the low-price spikes.) The most negative aspect I can think of is that people are irrational... often when prices are rising, traders will feel the need to "get in" while they still can, because they don't know how high the price is going to go. But there must be some statistics somewhere... when prices are going up fast, which are the speculators doing more of, buying or selling? (You could look at all the transactions, assume that known oil companies are buying because they need the extra supply, and everyone else who's buying is a speculator, or something.) If more of the speculators are selling than buying during a high-price crisis, then it should be a help overall, right? And if most of them are buying instead, they are going to get punished for that when the prices fall later.

  But oil is just being traded like other commodities right? So if oil speculators are bad, is commodity trading in general bad for the "greater good"?

• Report this Comment On July 10, 2009, at 9:47 PM, sakima49777 wrote:

  That wild speculation occurs is certainly evident. I doubt it contributes to market liquidity.

  There is a really simple way to curb financial speculation in comoddities. If you cannot take delivery of the physical future, you cannot buy a futures contract. Effectively limits contract holders to legitimate users or those owning / leasing / renting storage. Sure help build a lot of new oil storage tanks or establish a morket for idle oil tankers.

• Report this Comment On July 11, 2009, at 9:10 AM, MKArch wrote:

  Amen brother, $148 to $34 to $70+ to sub $60 says it all. The "It's all demand" oil theory just went down to the ash pit of history on top of "The rest of the world is decoupled from the U.S. econony".

  To the posts referencing inelastic demand, did you guys go into hibernation for the last 6 months and miss the stories about oil sitting in tankers on the ocean because there is no place to store it on land? OPEC repeatedly cutting supply due to lack of demand?

  It's pretty simple let the companies that actually produce and use oil buy and sell it and anyone who wants to invest in oil can buy and sell the stocks of these companies. Nough said!

• Report this Comment On July 11, 2009, at 12:06 PM, dontwin wrote:

  If it is true as I read that during the $140 oil, oil contracts were ten times the available oil. This isn;t speculation, it is GAMBLING and I don't like it!

• Report this Comment On July 11, 2009, at 5:57 PM, ejeckert wrote:

  If an individual wants to "gamble" by putting money in hedge funds, derivatives or other imaginary schemes to hopefully make money, fine. But if that individual puts his money into a bank, mortgage, insurance or financial investment company, that organization should not be permitted to "gamble" with his money. they should be limited to their business plan.

• Report this Comment On July 11, 2009, at 6:00 PM, Dannysea wrote:

  Have to agree with Gadzmo and also socratestoday. Stockbeast trusts the Muslims not; have to agree with that, also. but then Gadzmo already states each seeks their own gain. I know I do; okay to a point. But I look at the big pic af supply and demand. Will we need oil in future? Yes. Is the inner scope of this favorable to going-green countries, or the world needs at large? Again, yes; the world is a hungry bear for oil, both now and for the next 10+ years--probably closer to 25 years before cheap alternatives at available worldwide. Barring this administration taking away any value in oil as investment, it is a good winner for a personal investment. (There is that self-gain again!)

  Second, looking for investments and I think of this runaway gov't spending; and how can I tap into that? Talk about $$ to be made with the fever-pitch spending of all levels of gov't!!!

  Sorry Tomtherailnut; when has the govt been forthcoming on info.

• Report this Comment On July 13, 2009, at 12:23 AM, woodnut100 wrote:

  Instead of government control consider making it a requirement that people who buy oil actually take delivery and people who sell oil actually own the oil and have it in their storage when they sell.

  That would seem to me to take a lot of the speculators out of the market and put the companies that are serious about oil back in charge of prices.

  Speculation is killing all of us as investors in all markets.

• Report this Comment On July 13, 2009, at 2:34 PM, teejk wrote:

  When oil hit $140, even the Saudi's said current supply/demand should only support $65. Problem we had is that we didn't know who "they" were. I think the federal gov't should set up an oiler trader with a few billion, let him/her trade for a few weeks to establish as legit, then pull the plug in one trade. We'll find the culprits by the splats on the sidewalks as "they" dive out of their windows.

  As usual, just my opinion.

• Report this Comment On July 13, 2009, at 8:52 PM, thisislabor wrote:

  I think personally we need to let the a free market stay free.

  If oil jumps to 150 again and becomes a regular occurrence we'll start to see (over the long term) diversification away from our dependence on foreign oil. it is the expensive way, but it is also the natural, and also the cheapest way.

  let the market correct itself. don't be stupid.

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