Oil Prices: Speculation or supply and demand?

[Felch]

Originally posted by Victor Galis
Yeah, I imagine that if you chose to define as "civilized" things which cause life not to be nasty, brutish, and short, regulating pollution would be quite civilized.

Why am I not shocked that you're a Hobbes fan?

I was always more of a Calvin kind of guy myself.

[Kidlicious]

Originally posted by Felch


That depends on how you define "free." I'd say that it is a mostly free market, but it is disrupted by every government I can think of. Subsidies and corporate welfare are not what the free market is about.

Free market means no one controls the price. Everyone should know what free market is.

[Kidlicious]

Originally posted by Victor Galis


Yeah, I imagine that if you chose to define as "civilized" things which cause life not to be nasty, brutish, and short, regulating pollution would be quite civilized.

[rmsharpe]

Originally posted by Kidicious


That depends on how you define "civilized."

Well, not having to poop in the woods would be one indicator.

[Victor Galis]

Originally posted by Kidicious


Free market means no one controls the price. Everyone should know what free market is.

Everyone should also know that "free" markets are a myth invented by neoclassical economists to keep the math simple.

[Zkribbler]

That depends on how you define "civilized."

The hallmark of civilization is cities.
The French word for city is "ville."
It is from this word that "villian" is derived.

FACT!

In man's evilution, he's created the city
And the motor traffic rumble.
But give me half a chance and I'll be takin' off me clothes
And living in the jungle.

...the Kinks

[RGBVideo]

Originally posted by Maniac


Unfortunately this only works if not everyone does it. Apparently if all the world used nuclear power for their electricity needs, all known uranium reserves would be exhausted in two hundred years.

You're correct!

edit: beaten like a single woman on a somali street

[Blaupanzer]

DP

[Blaupanzer]

Civilization's hallmark is "man-made." Today most things are machine-made, even the machines that make the machines that make the supposedly "man-made" stuff.

Behaving in a civilized manner is an entirely other etymology for "civilization." It is possible to "be civilized" in a wild place when referring to behaviour. Similarly, people can be quite "uncivilized" in a built up area, such as in war.

Oil prices, on the other hand, are mostly the product of supply and demand. Long-term sustainment of artificially high prices is very difficult for speculators who must avoid taking delivery on the futures contracts they used to create the speculative high price in the first place.

[Vanguard]

Originally posted by Blaupanzer

Oil prices, on the other hand, are mostly the product of supply and demand. Long-term sustainment of artificially high prices is very difficult for speculators who must avoid taking delivery on the futures contracts they used to create the speculative high price in the first place.

Yeah, that can be a real pain. I remember once getting caught long in soybeans and I had to take delivery of 50,000 bushels. I've still got a huge pile of 'em out behind the house.

[BlackCat]

Originally posted by VJ

You're correct!

edit: beaten like a single woman on a somali street

I hope that your edit means that you agree that Maniac's claim is false.

[RGBVideo]

it is fixed

[ramseya]

Well I see the conversation has shifted but to get back on the original point of whether speculation is to blame for oil price inflation or not, I think it's useful to look at a recent article in Fortune about a commodity with no derivatives: onions.

http://money.cnn.com/2008/06/27/news/economy/The_onion_conundrum_Birger.fortune/index.htm

a quote:

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

The article doesn't state any reasons for this volatility but I would venture that it is due to the lack of the other primary use of futures besides speculation; that is, hedging. Remember, futures exist for commodity producers and those with a financial interest in the commodity to minimize risk by essentially locking in a price. This feature of derivatives provides a stabilizing effect on prices. By outlawing futures trading in onions, onion prices are as volatile as the weather.

Onions and oil are different but this example shows the pitfalls of scapegoating the financial markets for price inflation or volatility. That this is even an issue is largely due to Washington's inability to convince the American people to consume less, a habit which isn't helped by the fact that oil has been cheaper in the past and likely will be temporarily cheaper in the future as supply increases, which only will result in more gas guzzling. I'm not familiar with the research but I suspect that oil exhibits high price inelasticity of demand at most prices, but is fairly elastic at lower prices. I think that would explain the apparent habit of increasing gas consumption (buying SUV's, greater economic growth, more trips, etc.) during periods of lower prices. It's a hell of a rut that would require a grass roots movement to get out of.

Speculation isn't to blame. The American driver is.

[notyoueither]

... or the Chinese and Indian driver, or factory, as the case may be.

I know it sucks, but the USA is not really the cause and cure of all ills. Sorry to break it to you.

[Kidlicious]

Originally posted by rmsharpe

Well, not having to poop in the woods would be one indicator.

Pooping in the woods is just fine. Not having to be subjected to lying and manipulation would be a better indicator.