Oil and Gas prices big Drop!!

the obvious observation is that we are paying more for fuel and it seemingly is because of the speculators. this morning oil was down a bit until goldman came out with a report that the declins is short term and the future holds higher prices. the oil price instantly went back up a bit.

on a positive note, my local station went down by .12c per gallon today from 4.29 to 4.17, which is a bargain here. $4.69 at the local marina.....
 
Hypothetical: it's day 5 of a Lybian type situation, news reports indicate a major shipping port for oil is under siege.

A The management of a trucking company, speculates, buys oil futures because they need to know their raw material costs to bid future jobs

B The management of a roofing manufacturing company, speculates, buys oil futures because they need to know their raw material costs to bid future jobs

C. A hedge fund buys oil futures on speculation thinking the price may be higher in the future if things get worse. Investors in the fund include a guy investing retirement funds, a pension fund, and an insurance fund.

D. A private hedge fund owned by a group of billionaires invests in oil hoping to profit if things get worse.

Did any of these do anything wrong? Immoral? Illegal?
 
Gas has been $4.20 here in CT for about 2 weeks. What we really need to do is have Seal Team 6 go after all the tankers that are at anchor filled with oil that is waiting for enough trading by the speculators between the different groups ans seize them. These guys are using the tankers as storage facilities until the price is right or has been traded several times to make their millions. I think the G20 nations group has the right idea

http://www.bloomberg.com/news/2011-...-u-n-in-proposal-for-g-20-opec-agreement.html
 
MonacoMike said:
Hypothetical: it's day 5 of a Lybian type situation, news reports indicate a major shipping port for oil is under siege.

A The management of a trucking company, speculates, buys oil futures because they need to know their raw material costs to bid future jobs

B The management of a roofing manufacturing company, speculates, buys oil futures because they need to know their raw material costs to bid future jobs

C. A hedge fund buys oil futures on speculation thinking the price may be higher in the future if things get worse. Investors in the fund include a guy investing retirement funds, a pension fund, and an insurance fund.

D. A private hedge fund owned by a group of billionaires invests in oil hoping to profit if things get worse.

Did any of these do anything wrong? Immoral? Illegal?
Click to expand...

So if I buy oil futures to protect myself from future gas price increases, where exactly do I pull up to have those futures pumped into my tank? Trading oil futures is vastly different from buying oil.

If I pretend for a second that your example isn't completely ridiculous...
In both cases A and B, business people are buying raw materials to support their livelihood. We call them consumers. If they have the cash (or credit) that allows them to purchase in advance of their needs, more power to them. This however is not how business typically operates. Ever heard of Just In Time Inventory? There is no value added by C & D, we call them vultures.
 
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1stSeaRay said:
So if I buy oil futures to protect myself from future gas price increases, where exactly do I pull up to have those futures pumped into my tank? Trading oil futures is vastly different from buying oil.

If I pretend for a second that your example isn't completely ridiculous...
In both cases A and B, business people are buying raw materials to support their livelihood. We call them consumers. If they have the cash (or credit) that allows them to purchase in advance of their needs, more power to them. This however is not how business typically operates. Ever heard of Just In Time Inventory? There is no value added by C & D, we call them vultures.
Click to expand...

WRONG, you are confusing purchase with delivery. Most decent sized business by their commodities on the futures market to control the price and availability.. Just as most farmers sell their crop before they plant it. If you read the article I posted it explains the value speculators add to the market. Besides, if Obama and Dems blame speculators they can't be that bad.
 
Ka1oxd said:
Gas has been $4.20 here in CT for about 2 weeks. What we really need to do is have Seal Team 6 go after all the tankers that are at anchor filled with oil that is waiting for enough trading by the speculators between the different groups ans seize them. These guys are using the tankers as storage facilities until the price is right or has been traded several times to make their millions. I think the G20 nations group has the right idea


http://www.bloomberg.com/news/2011-...-u-n-in-proposal-for-g-20-opec-agreement.html
Click to expand...

Wow this does run against type. Socialist countries and their allies in the US want to control energy prices and direct the us to more efficient energy sources. Shocking! They want to use the distrust of speculators to take over a mostly free market.
 
1stSeaRay said:
So if I buy oil futures to protect myself from future gas price increases, where exactly do I pull up to have those futures pumped into my tank? Trading oil futures is vastly different from buying oil.

If I pretend for a second that your example isn't completely ridiculous...
In both cases A and B, business people are buying raw materials to support their livelihood. We call them consumers. If they have the cash (or credit) that allows them to purchase in advance of their needs, more power to them. This however is not how business typically operates. Ever heard of Just In Time Inventory? There is no value added by C & D, we call them vultures.
Click to expand...


Sorry, the trucking company example is very credible. I once worked at transportation equipment leasing and rental company that had a trucking subsidiary. We not only regularly purchased oil futures, we also even invested in oil exploration and drilling. The exploration part worked out very badly, but the futures activity continued for as long as the company owned the trucking operation. This isn't unique, most of my ocean carrier clients have operations that purchase futures as a hedge for their bunker purchases.


I also read a research paper a couple weeks ago that noted China is number 2 behind the US in the volume of imported oil it purchases on an annual basis. It also made the point that China would surpass the the US in a very short time period (I think less than 5 years) and become the world's largest importer of oil.

Henry
 
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the tanker must have shown up at my local fuel dock....4.69 yesterday, 4.99 today... or is it that a weekend generates more sales then a weekday?
sorry for being cynical, but?????
 
Henry Boyd said:
Sorry, the trucking company example is very credible. I once worked at transportation equipment leasing and rental company that had a trucking subsidiary. We not only regularly purchased oil futures, we also even invested in oil exploration and drilling. The exploration part worked out very badly, but the futures activity continued for as long as the company owned the trucking operation. This isn't unique, most of my ocean carrier clients have operations that purchase futures as a hedge for their bunker purchases.


I also read a research paper a couple weeks ago that noted China is number 2 behind the US in the volume of imported oil it purchases on an annual basis. It also made the point that China would surpass the the US in a very short time period (I think less than 5 years) and become the world's largest importer of oil.

Henry
Click to expand...

Thanks Henry, I stand corrected. Those consumers whose business depends on the price of oil do buy oil futures, however these people are hedging, and actually take delivery....for this reason, they only hedge on what they are actually going to consume. The difference between this, and speculating is VALUE ADDED....speculators only benefit themselves.
 
1stSeaRay said:
Thanks Henry, I stand corrected. Those consumers whose business depends on the price of oil do buy oil futures, however these people are hedging, and actually take delivery....for this reason, they only hedge on what they are actually going to consume. The difference between this, and speculating is VALUE ADDED....speculators only benefit themselves.
Click to expand...

1st, how do we know our benevolent trucking or roofing company won't hoard if supply is truly depleted but prices are held down by regulation? We as society want scarce resources put to highest and best use that benefit the most. I know you didn't like my previous hypothetical, but I'll try again. A toy company uses vast amounts of oil to make plastic toys. Profits are high they are flush with cash. Only users can buy oil by regulation so they can still get all the oil they want and can hoard away from other industries, such as food or heating, we as society may prefer to have that oil. This would not be abnormal behavior as the price is lower than the market since speculation is forbidden.

Since this is an end user society may not be able to persuade the toy company to sell their excess oil. Speculators are not end users and sell willingly when contract delivery is near or the price is good. This adds liquidity in the market for a scarce commodity thereby adding value to society. It also aids in lowering the market as well because speculators don't want delivery they have to sell.

Even though the toy company is a end user their actions can have the same affect as the speculator.

We are being sold a bill of goods by those that want control of the market: they want us to believe speculators are bad and we should let them run things. Look at the beliefs and opinions of most of the government class that call for this regulation. Are they free market or top down control people? That alone should tell us a lot.
 
rcmafgny said:
the tanker must have shown up at my local fuel dock....4.69 yesterday, 4.99 today... or is it that a weekend generates more sales then a weekday?
sorry for being cynical, but?????
Click to expand...

At least the tanker made it. In Alaska if the once a year barge doesn't make it it has to be flown in. Some places are now $13.50 a gallon!
 
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