Is the market pricing of oil a scam?

A

AutoMate

Just throwing this out there as a question(s) of curiosity.

Do you think that the futures market for oil creates an artificial pricing? Is it truly an efficient market place whereby we all benefit by the market pricing mechanism? Or, is it just one big scam cooked up by us capitalists to take money out of the hands of the 'unwashed masses'? If the people who produce the stuff were responsible for pricing it at the point of delivery without a global market pricing mechanism (futures markets), would prices likely be higher, or lower?

I have no opinion one way or another but would like to see what kind of responses a thread like this brings. Traders, scholars, know-it-alls, crackpots, conspiracy theororists, bring it on! I'd like to hear as many different opinions as I can.

Auto
 
Well lets take a look..can middle eastern countries with hundreds of billions of dollars buy long oil futures positions with so called private trade groups (they are based in the ME and EU) as they wish..ah, YES!

BTW, your own government here knows this too..and looks the other direction. Funny too..some of the american and eu traders that trade for these groups have been here on ET at times.
 
OPEC does not want oil this high. The development of alternative energies is looking mighty attractive with oil at 90 or 100.

Gasoline has already been watered down 10% by ethanol.
 
You don't get the game..our governments control the laws that will or will not enable new energy facilitation..this is why it is not really happening (just token actions for the "perception" of a change).
 
Quote from The Kin2:

OPEC does not want oil this high. The development of alternative energies is looking mighty attractive with oil at 90 or 100.

Gasoline has already been watered down 10% by ethanol.
More...

Good point. Oil prices will stabilize when consumers are beginning to look at substitution of energy products. This will occur when marginal costs begin to be attractive for the usage of alternative energies.

Nevertheless energy industry is not the only one commercial consumer of oil related products. The chemical industry plays also a crucial part.

By the way : chemical industry in Europe and elsewhere already beginning to complain about high oil prices...Eating into margins....
 
In my opinion the crude bubble is the result of massive amounts of investment capital seeking a high return, and does not actually reflect oil price fundamentals. The market got moving this summer, broke old highs, the dollar began to fall, geopolitical concerns flared up here and there, commodities became a very hot sector once again, and everything lined up to create the beginning of a big rally. Fundamental traders began selling as we went up to new highs, and when we kept going up they were forced out, further feeding the rally. While I do not think oil is or was worth $90 a barrel, or even $80 for more than a brief spike period, everything lined up at once to create a massive bull market that gained incredible momentum and has been in the interest of participants to perpetuate. If all of the speculative length deems it necessary to rush for the exits at once we could have a nasty reversal on our hands, but for the moment the bull market appears to be intact. That said, I think eventually the market will get re-acquainted with reality and a hefty correction should be in order.
 
Quote from TradEStar:

Well lets take a look..can middle eastern countries with hundreds of billions of dollars buy long oil futures positions with so called private trade groups (they are based in the ME and EU) as they wish..ah, YES!

BTW, your own government here knows this too..and looks the other direction. Funny too..some of the american and eu traders that trade for these groups have been here on ET at times.
More...

What's your point? Do you the regulators to change the rules so that NYMEX and ICE products can only be traded by US based traders and entities?

Crude and refined products are global markets. If the trades aren't executed by US based traders on the NYMEX, ICE or in the "US" OTC market, the same transactions could/would still occur in another country. The US govt has little ability to control oil trading and if they decide to increase regulations, the liquidity will eventually leave the US.
 
Quote from TradEStar:

You don't get the game..our governments control the laws that will or will not enable new energy facilitation..this is why it is not really happening (just token actions for the "perception" of a change).
More...

Your argument is completely false. Traditional energies aren't yet expensive enough for the "alternatives" to become true economic substitutes when you exclude the tax incentives/subsidies. Oh, and those incentives/subsidies are being instituted by the govt, although not because it's economically in the best interest of the American consumer/tax payer but that's neither here nor there.

The "change" won't begin in the US until energy prices are high enough to cause the average American to change their consumption habits i.e. taking public transit, walking, riding a bike, carpooling, driving more fuel efficient vehicles, wearing a sweater in the house instead of cranking up the heat, etc.
 
If someone's trying to manipulate the market by buying long oil futures, they're doing a pretty bad job of it. Have you seen the backwardation?
 
You must log in or register to reply here.
Back
Top