Speculation on oil futures

[BetsyBio]

I recently Stumbled on this article on Speculation on oil futures

Opposing view: Burst the oil bubble - Yahoo! News

My questions why dont you hear anything about this in the media ?
And Has anyone in the forum heard much about Speculation on oil futures ?

Sure you hear of gas tax holidays,and Record oil profits. But you never really hear it described why the price is so high. Personally I am for high gas prices as it drives people towards alternatives.....Any thoughts

[Krieg]

You're not reading the right blogs. All the economics blogs are talking about speculation, if it is really the cause of high prices, etc.

OPEC is behind the high prices, BTW. Saudi production cuts last year, in particular.

[JJW]

Personally, I think some possible solutions to the problem would be to limit the amount of a transaction that can be leveraged, or to require proof that a certain percentage of the oil will actually be consumed by the purchaser.

The good news is that if its a bubble, it can't last forever. The bad news is that either way we (the consumers) lose.

[Shawn D.]

Not in the media? It's been on NPR, Fox News, ABC News, and Salon.com!

[MazdaMatt]

How about grounding a few USAF jets for a couple days. I figure one jet for one hour uses as much gas as one hypermiler for one year.

[tjts1]

Speculation happens on both sides of the trade. The more market participants you have (AKA speculators) the more accurately you can price the commodity. Blaming the speculators for high oil prices is like calling birth an STD. The fact of the matter is total world oil output has been flat since the first quarter of 2006 while oil consumption has increased relentlessly with the industrialization of China and India. We're not running out of oil. Demand is simply outrunning supply.
The "blame the speculators" BS shell game has to stop. Excluding people from the market won't magically make the price of oil go down. The problems of stagnant supply is much deeper than that.

[BetsyBio]

Wow, I did not think I would receive such great responses...

I will have to admit I don't watch much news. But I do vaguely remember hearing something on NPR about oil speculation. But mostly what I heard is the main problem is with oil future traders from the London stock exchange trading on US soil not being regulated by any one in the US. and also about the devaluation of the dollar causing the price to be high also.

Any thoughts anyone on London oil future trader not being regulated ? and the relation to the cost of gas and the falling dollar ?

Krieg: if you could point me towards some good blogs on the subject I would be very thank full

JJW: I think you are on to something with making them consume at least a little of what they buy. and also I think making them put down more collateral then 5% would change some things. ( anyone remember the great depression it was related to similar situation)

I think the consumers will lose in the short term but in the long term it will help because of a forced move towards Energy Efficiency.

MazdaMatt: Sounds like a good idea to me, But i think it kinda hard to ground jets when there is a War on terror going on

[Krieg]

EconLog: Library of Economics and Liberty

Marginal Revolution

Knowledge Problem

http://www.econbrowser.com/

[Krieg]

Look, every single energy crisis has been caused by the Saudis cutting production. The last energy crisis ended in 1986 when the Saudis increased production, leading to low prices that culminated in $10 a barrel oil in 1998.

So you know the Saudis cut production by 1M barrel per day last year. But you still think the runnup in prices is from "speculators"?

Look at OPEC and the national oil companies (NOT the multinationals like BP or Exxon, but the state owned oil companies like Saudi Aramco, etc.)

[BetsyBio]

Thanks for the Links Krieg I will have to give them all a good read.

I do agree with you that the current cost of gas Is related to Saudis cutting production. But I think that is only part of the reason for the Cost. Some other things I think add to the problem are...The falling value of the dollar (thats proven), Oil speculators ( accounts maybe for 30 or 40 dollars on the barrel),and Increase demand from India and china and our war on terror. I think all those factors all combined are causing the gas price hike.

But either Way like I said before The high price Is a good thing overall because it got Us all here on this website and at least it opened the discussion on Energy Efficiency and the need for sound energy policies in Washington.

Thanks again for the great links. And thanks for Enlightening me on some of these issue's.