Idiot drivel. Oh you mean "functional market" as in cartel. OPEC. Collusion. Price targets er price fixing. 1973. Embargoes. Gas lines. $30 a barrel crude when global GDP was a tenth of what it is today. Or maybe when you mention " well-entrenched pricing practices" you're lamenting those fun filled day's of monopoly. Rockefeller, Getty, Standard Oil. Imperialism. Yes I would ALWAYS prefer a free market to your "Already functional market with well-entrenched pricing practices."
Why not let the government just own all the oil fields? Obama could follow the lead of his hero Hugo Chavez. How about grains? Prices have run up there as well. Undoubtedly more evil speculators at work. Ban futures trading of grain, in fact why not let the government own all the farms? It worked so well for the old Soviet Union. The scary thing is these Obama morons actually believe this stuff.
It's not OPEC, it's the lack of regulations which has allowed market manipulation, ever since the commodities markets have been deregulated they were subject to manipulation. This is exactly what enron did when california deregulated. They manipulated the market increasing power by 3X. The same thing is happening again.
Not even close to a suitable analogy. Any producer who so desires can short NYMEX and deliver. To a large long attempting a squeeze delivery is kryptonite. If there's not enough deliveries then the move is bona fide. If the move is legit based on shortages of deliverable product the the causation of the move isn't speculation. This has already been discussed amply on this board. If traders were ârollingâ you'd see it in the spreads. If futures were in their own little world you'd see it in the basis. And if prices were disconnected from demand you'd see sudden sharp drops in consumption. None of those symptoms are occurring.
No, not OPEC. "If the only players were oil producers and refiners, the market would be well-behaved and would be far more responsive to consumer demand. It used to be that prices would be determined by a balance between spot prices (shipments of crude oil that are on the way to refiners but, for whatever reason, become available for sale), and the price refiners can get for their total product slate on the wholesale market. Spot prices would be determined by looking at the recent prices paid for shipments as reported in a couple of industry newsletters, such as Platts Oilgram or Argus reports. The introduction and recent popularity of trading crude oil and refined product futures changed the market. Here, traders who have no possible way of receiving or refining crude oil purchase contracts and hold them to trade on price fluctuations, at a profit, and before delivery. In theory, the futures market provides a trading ground where a willing buyer and seller agree on a price and the price is instantly public, thereby setting a marker for the industry. Unfortunately, this market was simply overlaid on top of an already functional market with well-entrenched pricing practices. It is the duplication of systems that provides fertile ground for speculative games. First, speculation in this market is very expensive, because oil is traded in 1,000-bbl contracts. It is a game fit only for investors with lots of money and willing to take large risks, primarily wealthy traders and those operating high-risk investment and hedge funds. As it turns out, several players of this ilk entered the energy market during the brief Enron era, where they learned the tricks of the trade. The California energy crises provided a special training ground for savvy energy commodities traders who quickly learned how to work the information system. Specifically, they learned that they could drive up natural gas prices incrementally by purchasing one natural gas spot market contract and submitting the trade to one of the journals that collects and publishes market trade prices. At the time, there was no method of validation, so the trade price was published. In the meantime, the same investors could be holding several natural gas futures contracts. The price of the futures would increase on the report of the spot trade price that was reported. Since it was only one contract, the investor could then sell the spot contract at market value, even at a loss, not report the sale and reap the benefit of the rise in the futures market resulting from the report. The utilities that purchase natural gas depended on the prices for spot trades reported in the journals to accurately reflect what others (utilities) were paying for natural gas. In fact, it was common to write contracts between suppliers and utilities to reference certain prices in reputable journals as benchmarks for contract valuation on a day-by-day basis. Using this system, futures prices could be driven to lofty heights in a very short period. The opportunity to pull off a similar run up in prices still exists in the all too trusting oil markets. In this situation, there is no reason for oil companies, or foreign producers, to get involved in driving prices up. All they have to do is sit back and sell oil at the prices created by investors. For months now, major oil companies and even OPEC members have pointed out that prices are being set in the futures markets by speculators. However, producers should note that the entire process described above can be reversed, and the speculators can make money on puts as they drive prices down, leaving producers holding the bag. There are producers and refiners out there selling and buying crude oil, in part, based on prices set by speculators in the futures market. Each time a trade is made in that market, refiners and producers note the price, up or down. This becomes the price against which spot pricing is weighed, i.e., a buyer in the spot market looks at the current price in the futures market and reasons "if I have to purchase oil today at market price, the futures price is the amount established in the current market," and weighs this price against the most recently reported spot price in the preferred journal. Thus, the futures price and spot price are used as a measure to begin negotiations for a spot market delivery." _______________________________________________________________ This was a quote from a person who knows a lot more than you do. http://www.worldoil.com/magazine/MAGAZINE_DETAIL.asp?ART_ID=2765&MONTH_YEAR=Dec-2005 "George has 29 years experience in analyzing oil markets, beginning with exceptional training in the oil movements and economics department of a major oil company, followed by stints with a chemical company, the California Energy Commission, and the Department of Defense. George worked for many years as an independent technical consultant and expert withness in high profile energy and environmental cases from 1993 through 2002, finally burning out on a final, very complex investigation into the California Energy Crisis. Education includes a B.A. in Communications from Eckerd College, a B.S. in Petroleum Engineering from Louisiana Tech U., an MS in Engineering from LaSalle U. and a JD (emphasis in international law) from UOP McGeorge School of Law". http://oil-gasoline.typepad.com/
Well Obama is a smart politician. If he says the futures market is fair then will you think he will get elected? Especially when John McCain is crying that only he cares about cash strapped Americans? Oil Market can't really be regulated, I mean who is to set a price for the market?
Walter- you're a crackpot. You are posting in a trading forum, without even the slightest bit of knowledge of capital markets. You are going to use the words of an oil scientist to explain the workings of a open market structure. Don't waste your time. I'm sure you're really proud of your cutting and pasting, but really, go find some other avenue for your creativity- I'd suggest flower arrangement or something. Most of the posters here have let media create a mania about oil prices. The fact that it comes in front of an election tells only amplifies the fact. Explain one thing to me- how is it that NOBODY thought to "manipulate" the oil market until today??? If OPEC had the power to move prices to $140/barrel, why did they wait until 2008 to do that??? Don't bother with the usual small-minded conspiracy theories (George Bush, Dick Cheney, Phil Grahmm, ect). Spouting nonsense like that in this forum only shows one's ignorance. If the price is actually being manipulated in a way that is against our laws, then throw the book at the offenders. If trading being done on the ICE is affecting the markets here, then ICE should be compelled to be brought into compliance with CFTC regs.