What happens when this headline pops up on CNN one day ? I think a long time ago they also made it illegal to own gold.... so why not oil ? In my point of view that would cause the oil price to crash and the population would be happy that speculators finally get hurt. What do you think of a scenario like that ? How likely is it ?
interesting, and in my opinion it could happen. if somebody made a good case about it to the government and presented it properly......you never know. that would definitely pop this commodity bubble
Yep, its always the dirty rotten immoral speculators who hurt us all. It has nothing to do with the enviornMENTAL nutcases who have created a situation where its been impossible to build a new refinery in the United States in nearly 35 years.
There'd probably be a knee-jerk short term selloff in response to such an announcement, but ultimately it wouldn't help lower prices at all. Think about it: Nearly all oil futures speculation takes place in front month and near front month contracts. Say I buy a 100 lot of crude: I've 'driven up the price' a bit <i>today</i>, but I'm obviously going to dump the position before expiry, putting equal downward pressure on the market <i>that day</i>, which evens it all out. Those who take delivery of the oil for consumption purposes are removing supply from the market, causing higher prices... but speculators flipping in and out of short-term oil positions do not.
I know I'm going to piss some people off for saying this but imo the reason commodities can tend to get way out of line is because of obviously the supply demand fundamentals but to be perfectly honest those can only take a market so high or low. So what extends these selloffs or rallies? SPECULATORS!!!! They are the ones (especially the big funds) that have gobs of money and run to these products as a form of investment. This pushes prices far beyond what their fair value is. That headline could be a very real possibility, although I doubt it. Imo what they need to do is limit the amount of speculators in a particular market or at least limit the amount of positions you can have in a particular market. Futures were initially built for hedging purposes and not for speculating. Granted a certain amount of speculators are needed to ensure that the hedgers get decent fills on their orders. Just my opinion
If holding oil for speculative reason became illegal, I'll bet we'll have a huge selloff followed by a surge in demand as everything from airlines to power plants spend billions locking in a price. We're currently at 110, we didn't get their by speculation alone. And at times there are more short speculators than long which keep the price down, but no speculation is no speculation. We would also see oil shortages during hurricanes, war, or any other disaster which will interfer with the flow of oil. Let's face it, speculators are the ones which enforce the laws of supply and demand in this case. If a class 5 hurricane had a 20% chance of hitting the buk of the oil rigs in the GOM... and if there were no speculators... the price of oil would theoretically not change since speculation that the oil rigs would be destroyed would be illegal.
People that think speculators are a problem or the reason oil is at these prices don't understand the role of futures markets and how they work. They should grab a text book and start reading.