Oil and commodities are a global market. What you suggest would do nothing but send the trade to other countries. It amazes me that someone who calls themselves a trader would call for outlawing trading. I guess if we followed your logic we should have outlawed margin on stocks back in the late 1990s.
OPEC has the oil but refuses to increase the quote. However, OPEC are in desserts. Don't have to eat? Good, I gallon of gas for my one lb of rice. Grains, and other agricultural products are underpriced compared to crude oil. Let those arabians pay the fair price for their food.
Raising (aside from normal increases) or eliminating margins is ABSOLUTELY RIDICULOUS. Do you have any idea what eliminating margin trading would do to liquidity? You wanna talk about high prices and quickly!!! We should all be thankful there are speculators. We help to mitigate prices by taking the other side of someone else's trade. I am long when they are short and vice versa. Imagine the fragmentation of prices if there were no speculators! Gas $2.50 on Monday, $6.76 today, back to $1.25 by Saturday. The more people that participate=greater liquidity=smoother price action=less likelyhood one group can manipulate a market for an extended period of time. I do sincerely hope that the OP started this thread just to ruffle some feathers and doesn't actually believe what he/she suggested is truly a solution.
Travellingtrader's remarks opening this thread are close to Joe Lieberman's Senate hearing remarks TODAY --------- Lieberman is suggesting that commodities speculation be outlawed because of the wild price rises, notably in oil, which just hit 133 a barrel this afternoon, right? I've been following the wild upward price explosions on small-cap oil stocks all day (not to my profit: I stopped out with QTWW, but some people are making fortunes!). One stock went from $8 to $27 in ten days, another from $9 to $43 in ten days! And the grain commodities went up a lot today as well. I'd say we have a situation here, and TT's opening thread idea is an interesting one. Margin is a lot of the problem with SEVERAL of the major financial issues of the day, incl. the credit crunch. And certainly with the wild commodities speculation going on now daily.
Excellent Commentary All .............................................................................. http://economictimes.indiatimes.com...t_oil_futures_on_fire/articleshow/3057682.cms This is just a simple example of sudden upward price pressure....and how detached paper can be from actual demand.... Price discovery....of what ? Paper commodity contracts.... Actual commodity contracts ? Not in this example.... ........................................................................................ An even simpler view would be to note that any commodity group where a several year norm would represent $70 billion....and then move sharply upward to $240 billion on a one sided market premise....is headed for a fall.... ............................................................................. It is rather illusory....the difference between paper and actuals....
The airlines need to lock in their fuel costs for the future. If they can't do it on margin then you force them to pay full price for oil to be delivered in say , 2 or 3 years from now. That does not make sense. They are better just to buy what they need everyday....problem is the suppliers can't guess the demand day by day...so prices will be unstable, lead to shortages. The distillers need to sell futures to lock in their selling price. Then they know their future revenue to run their business wisely.
haven't read all the responses but elimination of margin would cause prices to skyrocket, imo short sellers wouldn't (couldn't) afford to play the game either. now there is precedent for liqidation only market like the Hunt silver hayride of '80 politicians getting involved is not good news
This assumes that every person driving a motor vehicle will not only trade, but trade profitably. Thinking that eliminating margin trading speculators will have any major impact on oil prices is too simplistic. Assuming that every person on the planet will successfully trade oil futures to offset the price at the pump is ludicrous.
Crude Oil is going up because of future supply issues, not becuase of speculation. Killing the messengers by eliminating margin would do nothing to stop this except decrease the transparency of the market. It isn't the speculators that are in control, it isn't the oil companies, it is the fundamentals. This market is screaming at the world that we are running out of oil and not enough people are hearing it. This is how markets work. 5yr