So when are we going to stop allowing casinos to determine the price of gas and food?

Discussion in 'Economics' started by travelingtrader, Jun 6, 2008.

  1. bkveen3

    bkveen3

    Dakota Shale Oil's marginal cost gets higher every time someone posts on it. It started at 40 then i saw 60 now you say 90. Which is it? And where did you get your number from?
     
    #31     Jun 7, 2008
  2. I rather a casino with market participants determine the price of gas and food than the government.

    Because with a casino there will never be a shortgage. Anything could be bought for the right price.

    What we should do is also have the casino (or computer) determine the price of U.S. Dollars without government intervention. Let's face it. Anyone saving their money has been fucked.
     
    #32     Jun 7, 2008
  3. Its probably 60 ... Remember, I pulled it out of my ass.
     
    #33     Jun 7, 2008
  4. A casino is fine as long as consumers and producers are the only ones invited.

    When the speculators come in they screw everything up.
     
    #34     Jun 7, 2008
  5. Speculation can result in a profit, loss, or break-even. Speculators who longed crude have been proven right and are now reaping the rewards of their risk. Other speculators such as half the idiots on ET calling a top on crude since 80, have been taking huge white candle sticks up the ass, as stock turder would say.

    People are also confusing speculation and manipulation. As far as I'm concerned crude oil is undervalued until supply = demand. Right now demand is exceeding supply on the free market by 10k barrels a day. Supply iin this instance is not to be confused with a nation's proven oil reserves. When supply on the market available for immediate purchase exceeds demand by 10k barrels or more, I'll expect $10 moves to the down side.
     
    #35     Jun 8, 2008
  6. well now that oil is so expensive, i expect the proven oil reserves around the world to increase.

    as for high gas prices provoking a fundamental social change, it's happening. gm announced it is making a strategic, permanent shift from suvs to smaller, more fuel-efficient vehicles.
     
    #36     Jun 8, 2008
  7. Banjo

    Banjo

  8. The speculators are not right. There are just so many more of them and they all want to be long.

    There is no relationship whatsoever between the actual economic value of oil and what happens at NYMEX and ICE. People that think there is are fools.

    Current moves have nothing to do with supply and demand. They have to do with too many speculators wanting to be long and many large institutions deciding to invest in commodities (long only of course) for the first time.

    Basically these speculators and funds are acting as middlemen, interrupting the flow of supply between producers and consumers, massively jacking up the price in the process. Remove the middlemen and prices will collapse quickly.
     
    #38     Jun 8, 2008
  9. Act now to prick the oil price bubble

    By Meghnad Desai

    Published: June 5 2008 19:21 | Last updated: June 5 2008 19:21

    Between February and May of this year the oil price went from below $90 to $128 a barrel, a monthly growth of 9 per cent. If the rise continued at this rate, it would mean an unprecedented doubling in price every eight months. In recent days, after the price briefly touched a high of $135, there has been a bout of profit-taking. Although the price has now fallen it has not yet dropped much below $125.

    The latest price rise has baffled many. What has happened to supply and demand to cause such a steep and sudden price rise? Gordon Brown, the UK prime minister, said last week that “the cause is clear: growing demand and too little supply”. China and India are buying more oil. Costs of exploration and extraction are going up. Nigeria and Venezuela are causing anxieties about supply. But these factors are not new. Nothing has happened in the real oil economy to justify such a sharp and steep rise in its price.

    There is a growing feeling that the latest sharp upsurge in the price of oil may be a speculative bubble rather than an outcome of market fundamentals. The US Commodity Futures Trading Commission indicated last week that there may be “system risk” and George Soros, the veteran investor, in testimony on Capitol Hill on Tuesday, warned that commodity index funds, which treat oil as an asset rather than a commodity to be bought and sold for use, are creating a bubble.

    Bubbles come to an end eventually but there is no guarantee that this will happen soon. The global economy is likely to be forced into a serious crisis if we do not explore the possibility that this is a bubble that needs to be burst quickly. The market can then resume its trend, depending on whatever the fundamentals dictate.

    Much of the rise in oil price is the result of activity on the New York Mercantile Exchange, the energy exchange. This is activity by index funds and pension funds that are investing in oil futures, not for direct use but as financial assets for profit. That contrasts with activity by oil producers and consumers who buy and sell to smooth out fluctuations in price and delivery.

    These financial institutions – index funds and pension funds – are neither buying oil nor selling it. They are passive investors in commodities. They have invested $260bn (€169bn, £133bn) in commodity markets, compared with $13bn just five years ago. Much of this money is in oil. The Goldman Sachs Commodity Index is heavily weighted by oil – 78 per cent compared with less than 2 per cent for precious metals.

    The point is that this paper market is not driven by the pressures on demand and supply but entirely by price expectations. An underlying situation – which may well indicate a medium-run rise in oil price – is being exacerbated by the bolstering of expectations that prices will rise even faster. It is this extra layer of price rise that is driving money into even the farther future contracts. There are futures contracts being bought and sold for 2016 at $138 – only astrologers pretend that they can forecast that far ahead.

    How large is the speculator activity? The total open interest – the number of open or outstanding contracts for which an individual is obliged to the exchange because that individual has not yet made an actual contract delivery – in the 2008 contracts on May 21 was 849.472 contracts, which equals 849m barrels, or nearly 10 times the daily crude oil production. The daily volume in the 2008 contracts on May 21 was 657.391 contracts, equivalent to 657m barrels or nearly 8 times the daily crude oil production.

    This is a problem that requires immediate action. The best way to counter speculation is to make it less profitable. Step one is to protect the regular traders in the real oil economy (those who intend to close their positions by making or taking delivery of oil) and charge them a lower margin than those who have no intention of plying the oil trade. The purely financial traders must be made to pay a proper price for their speculation. This can be done simply by increasing the margin that they have to put down to trade as open interest, from the current 7 per cent to about 50 per cent.

    It is up to the Group of Eight leading industrialised nations leaders to urge Nymex to implement this policy. It is in tune with free market logic and at the same time it makes oil speculation less profitable. There is no need for western governments to go down on their knees to Arab oil sheikhs, or to ration oil to the increasingly cash-strapped and angry consumers.

    Lord Desai is emeritus professor of economics at the London School of _Economics and a Labour peer

    Copyright The Financial Times Limited 2008

    http://www.ft.com/cms/s/0/3b4930d8-3301-11dd-8a25-0000779fd2ac.html
     
    #39     Jun 8, 2008
  10. whine whine whine. Maybe they should stop speculation in the stock market, too, if you don't intend to invest in the company for at least 30 years?

    There are those that make money on one side, and then there are the whiners that scream manipulation everytime the market goes against them.
     
    #40     Jun 9, 2008