Why US Dollars rised over teh last day?

[Kidlicious]

Originally posted by Oerdin
What I don't understand is how this speculation drives up oil prices beyond the very short term because there are still only some many companies with the facilities to take possession of large quantities of oil. Wouldn't the end demand still be fixed depending upon industrial needs?

Consumers have expectations too even though they have actual use for oil. Every bubble has a real basis in supply and demand. However, when prices trend in one direction for so long people start to ignore the risk/benefit of price decreases. Consumer expectations are reniforced by the expectations of speculators. What you have in this case is a disequilibrium price. Instead of making things stable, as KH is claiming, this makes prices more volitile.

[Kidlicious]

Originally posted by KrazyHorse
And yes, given that oil demand is strongly dependent on something as fickle as overall economic growth, that it has an extremely low price elasticity of demand, that ~50% of the oil supply is controlled by a cartel and that much of the rest comes to us from delightful places like Russia, I consider 90% price swings (on the up side, of course) to be a miracle of stability.

And what about the price coming down even faster as was predicted by several people. How is that so despite there is a very small decrease in demand if any?

[KrazyHorse]

Originally posted by Kidicious
Consumers have expectations too even though they have actual use for oil. Every bubble has a real basis in supply and demand. However, when prices trend in one direction for so long people start to ignore the risk/benefit of price decreases. Consumer expectations are reniforced by the expectations of speculators. What you have in this case is a disequilibrium price. Instead of making things stable, as KH is claiming, this makes prices more volitile.

In other words, you know better than everybody else does what the price should be.

Congratulations! I'm sure there are many financial firms that would be willing to pay you hugs sums of cash for your prognostications!

[KrazyHorse]

Originally posted by Kidicious


And what about the price coming down even faster as was predicted by several people. How is that so despite there is a very small decrease in demand if any?

"As was predicted by several people"

You can get several people to predict anything. If these people were able to predict better than others what the actual spot price will be in the future then they can make a killing on the futures exchange while making the prices more stable for everybody else.

Why are they so selfish as to not provide us, via the futures market, the benefit of their wisdom (while turning a profit at the same time)?

Selfish commie bastard.

[Kuciwalker]

Kid could be a billionaire

[Kidlicious]

Originally posted by KrazyHorse


In other words, you know better than everybody else does what the price should be.

Congratulations! I'm sure there are many financial firms that would be willing to pay you hugs sums of cash for your prognostications!

I said exactly the opposite of what you claim I said. It's amazing how you can be so wrong.

[KrazyHorse]

Originally posted by Kidicious


I said exactly the opposite of what you claim I said

No, you didn't. You're simply unable to think through the implications of your own nonsense.

[Aeson]

Originally posted by KrazyHorse
If oil futures increased dramatically above spot prices then I could:

1) borrow money at a fixed interest rate
2) buy oil in the spot market today, paying somebody a fixed storage fee
3) sell oil in the futures market
4) pay off storage and interest charges with money I get from delivery of oil

For clarity's sake...

2 should include "raising the price of oil in the spot market". And 3 should include "lowering the price of oil in the futures market". Which is to say, that it's a two way street. A gap would close from both ends. Speculation in futures certainly can affect spot prices. Generally not as much as if there were no futures at all (thus all speculation directly affecting spot prices), since there are other costs involved in closing the gap, meaning a spread is possible to maintain to some extent.

I agree it doesn't even have to happen to keep things "honest". Since suppliers can change their asking price to "price it in", as can futures traders "price it in", without anyone having to actually perform the arbitrage.

Which I think points to a problem of equating "futures" to "speculation". The speculation is there regardless of whether futures or options exist, and as you say futures and options are not just for speculating. (At least not how the term is commonly used... it's certainly a form of speculation to hedge/cover a position as well as to be naked... just different forms of speculation.)

That said, it's obvious that speculation has and will continue to drive prices (up and down) to some extent. And manias/panics do happen in commodities markets (as any market) in part because of the inaccuracies inherent to speculation. I would certainly say that a significant part of the commodity boom was due to speculation. To which extent speculation rather than "fundamentals" (which are rather nebulous and essentially just a form of speculation themselves) is probably impossible to know.

And I'll just add... it's not necessarily a bad thing that speculation can drive prices. In fact, without any form of speculation prices could never be set.

[Kidlicious]

Originally posted by KrazyHorse


"As was predicted by several people"

You can get several people to predict anything. If these people were able to predict better than others what the actual spot price will be in the future then they can make a killing on the futures exchange while making the prices more stable for everybody else.

Why are they so selfish as to not provide us, via the futures market, the benefit of their wisdom (while turning a profit at the same time)?

Selfish commie bastard.

Again, you fail to understand what I'm saying. It should be very clear that I said that several people predicted that the price of oil would come down faster than it went up. How you got what you did from that I don't know?

[KrazyHorse]

Aeson

Yeah, technically speculation IS price setting. If you're fully hedged then you don't care what the price is.

I just don't understand the fascination that some people have with speculators. Why is it that a company whose job it is to explore, develop and manage oilfields should also be in the business of predicting future global demand?

One would think that oil companies would simply want to hedge their effective price as much as possible. Short oil as far into the future as they can, give themselves more revenue certainty. Instead, many of them are still majority exposed to oil price fluctuations. Doesn't make very much sense to me.

[DanS]

By the way, does anybody have a link to oil futures quotes? I can't find one on Yahoo! Finance.

[KrazyHorse]

Originally posted by Kidicious


Again, you fail to understand what I'm saying. It should be very clear that I said that several people predicted that the price of oil would come down faster than it went up. How you got what you did from that I don't know?

And how you don't understand that this is an appropriable insight I don't know.

[KrazyHorse]

Originally posted by DanS
By the way, does anybody have a link to oil futures quotes? I can't find one on Yahoo! Finance.

Nope. Tried NYMEX:CL (which AFAIK is the proper symbol) but yahoo didn't accept it

[KrazyHorse]

Originally posted by DanS
By the way, does anybody have a link to oil futures quotes? I can't find one on Yahoo! Finance.

We're back at strike price, huh Dan...with almost 2.5 years left to go...

[Kidlicious]

Originally posted by KrazyHorse


And how you don't understand that this is an appropriable insight I don't know.

hint: I asked you why the price falls faster than it rises a few posts back.