May 12, 201412 yr They are dumping all their money into oil as a safe bet. They dumped a ton of money into natural gas this past winter when they knew the winter was going to be abnormal. Keep in mind, these inventors are not actually buying or selling any oil or gas, they are entering into contracts with another party would give them the right to buy or sell a fixed amount of the commodity (oil in this case) and a certain period in the future at a fixed price.
May 12, 201412 yr Keep in mind' date=' these inventors are not actually buying or selling any oil or gas, they are entering into contracts with another party would give them the right to buy or sell a fixed amount of the commodity (oil in this case) and a certain period in the future at a fixed price.[/quote'] That is correct but Wall Street banks are not subject to the same regulations that limit positions in the commodities investments.
May 12, 201412 yr They are dumping all their money into oil as a safe bet. They dumped a ton of money into natural gas this past winter when they knew the winter was going to be abnormal. That would be fine if we were talking about stocks. Stock prices can and do go up on momentum. A futures contract is a zero-sum situation. If you buy a contract for a set price at a set time for a specified game there is an opposite contract being sold to someone. So there's a "winner" and a "loser." It's not like stocks. That's why I don't put much into speculators driving up prices very much. Someone is betting the exact opposite of the guy you're saying is raising the price.
May 12, 201412 yr We all have the right to be played for a fool. Go back and look at the gold panic of 1869 or what Enron did to California in 2000 with the artificial energy shortage. California at one point was keeping Enron in business, their CEO now is or was in jail. I don't fully blame speculators but they're manipulating the prices somewhat. Don't just look at energy look at food prices. Financial institutions now make up 61% of wheat futures. It's all about short term gain by big investors. The CFMA of 2000.
May 12, 201412 yr We all have the right to be played for a fool. Go back and look at the gold panic of 1869 or what Enron did to California in 2000 with the artificial energy shortage. California at one point was keeping Enron in business, their CEO now is or was in jail. I don't fully blame speculators but they're manipulating the prices somewhat. Don't just look at energy look at food prices. Financial institutions now make up 61% of wheat futures. It's all about short term gain by big investors. The CFMA of 2000. Not sure if I am the fool you refer to but..... You reference the energy shortage (artificial or not). That's still a supply/demand issue , correct? Is some of the price due to futures contracts? Yes. I just do not see any evidence to say it is having much of an impact like I read your posts to be suggesting. And you still didn't address the "zero sum" aspect of futures contracts. Why is it only the side of the contract that is betting on prices rising that is causing the issue?
May 12, 201412 yr Not sure if I am the fool you refer to but..... You reference the energy shortage (artificial or not). That's still a supply/demand issue ' date=' correct? Is some of the price due to futures contracts? Yes. I just do not see any evidence to say it is having much of an impact like I read your posts to be suggesting. And you still didn't address the "zero sum" aspect of futures contracts. Why is it only the side of the contract that is betting on prices rising that is causing the issue?[/quote'] No of course not you specifically, I think we are all manipulated at times. The entire state of CA was for a while. Ever since the CFMA these hedge fund investors, Wall Street bankers are able to invest whatever they want into commodities it's not regulated the same way. They use to bet on grain, then mortgage investments but we see how that went and now oil. US oil reserves are at an all time high. There is no supply and demand logic. It's an artificial market they bet on driving up prices. How about we lock them into contracts longer and or limit how much they can buy? Let's see how much they bet on then. They failed in betting on mortgage securities and other big investments and now been on oil something that were allegedly "short on." Although I've never seen a gas station empty.
May 13, 201412 yr I guess. I just always wonder if all the blame on speculation and derivatives really has anything to do with the gas prices we see. I always assumed the risk and reward of derivatives stays primarily between the buyer and the seller of the derivative not so much with the market as a whole. Oil may be high risk and high reward but if you look at the profit margins (margins, not total profits divide net income into total sales) it seems to often fall between 8-12 percent which is pretty steady so maybe not so high risk/high reward. Sorry if the original point reply (my post, #26) was unclear. I take it to mean that you use 'profit margins' to include losses from things like dry holes, non-productive wells, sunk costs on production such as research and development that has failed, etc.? Is that correct?
May 13, 201412 yr Sorry if the original point reply (my post, #26) was unclear. I take it to mean that you use 'profit margins' to include losses from things like dry holes, non-productive wells, sunk costs on production such as research and development that has failed, etc.? Is that correct? I used their published financial statements per Smart Money which I would assume would include all expenses.
May 28, 201412 yr Author Why Oil Refiners Really Want to Keep This Regulation in Place The reason for the discrepancy is speculation.
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