Community Chat

[Qwackertoo]

On 2/4/2015 gardenman said:

I've long advocated a big company taking oil out of the commodity market and just selling it at cost with a small profit added in. A company like Walmart could lease their own wells, build a refinery and distribution system and remove the volatility from pricing. They'd have known set costs and could keep their prices at the same level pretty much all of the time. Oil companies make pretty much the same money no matter the sticker price, but the speculators are the ones who make (and sometimes lose) the big money buying and selling futures. The price of commodities has little to do with how much it costs to get it and more to do with how much the speculators are willing to bid up the price. If the Saudis or others decided to drop the price way down then Walmart (or whoever) could buy it on the open market as long as it cost less to buy it then extract it themselves, but then when the price rose again they could just restart their operations and hold prices in check.

Take away the market volatility and make the price of oil solely related to what it costs to find/produce/distribute it and let the speculators move on to other items. Those companies that excel at finding, producing and distributing can find a huge market advantage as they can undercut the price of those companies not as efficient.

I believe production level is far more manipulative as to pricing than speculators are to crude oil pricing.

Here is an interesting article on speculation as to crude oil from 2012.

excerpt:

Sometimes excessive speculation is equated with market manipulation. For example, it has been asserted that financial traders are herding the market into positions from which they can profit, resulting in excessively high oil prices in the spot market. It is important to stress that market manipulation and speculation are economically distinct phenomena. The increased financialization of oil markets does not by itself mean that market manipulation is on the rise, and there is no widespread evidence of market manipulation in oil futures markets.

link to full article:

"Speculation in Oil Markets? What Have We Learned?"

http://economistsview.typepad.com/economistsview/2012/04/speculation-in-oil-markets-what-have-we-lea...

edit to clean up link title I hope

[Madisson]

I was looking at the price of air fares the other day. The next day I went to book, and the price had gone up $300 overnight!

[SydneyH]

On 2/4/2015 croemer said:

On 2/4/2015 Marmalade said:

The prices stay down just long enough to tease us and then back up they go. It's nothing short of thievery!

Just when we were catching a break.

It's always a temporary lull, than bang, pricing skyrockets....