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(AP)   The National Institute of Researching Things We Already Knew has found a link between oil prices and speculation. Really   (ap.google.com) divider line 12
    More: PSA  
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258 clicks; posted to Business » on 10 Sep 2008 at 2:45 PM (6 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



12 Comments   (+0 »)
   

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2008-09-10 01:06:12 PM  
Well smack my ass a call me Sally. Ain't that a thing?
 
2008-09-10 01:18:55 PM  
Ric Romero should scoop this.
 
2008-09-10 02:51:52 PM  
In other news, if your parents didn't have any children, chances are you won't either.
 
2008-09-10 03:32:03 PM  
Speculators buying oil futures has no effect on the price you pay at the pump. They need to sell the oil before delivery, creating net demand of zero.

Speculators can and have influenced the price of oil futures (oil for delivery in several months), but that shouldn't affect spot prices if the speculator sells to a refiner prior to expiry of the futures contract.

The question is, why do pump prices go up immediately when futures prices wont affect the price of oil for refineries for months, if ever?
 
2008-09-10 03:51:35 PM  
The question is, why do pump prices go up immediately when futures prices wont affect the price of oil for refineries for months, if ever?

Because people hear the media telling them the price of oil went up today and see the price at the local station went up and assume that the one had an immediate impact on the other. And by people I mean idiots.
 
2008-09-10 03:54:59 PM  
Debeo Summa Credo: Speculators buying oil futures has no effect on the price you pay at the pump. They need to sell the oil before delivery, creating net demand of zero.

Speculators can and have influenced the price of oil futures (oil for delivery in several months), but that shouldn't affect spot prices if the speculator sells to a refiner prior to expiry of the futures contract.

The question is, why do pump prices go up immediately when futures prices wont affect the price of oil for refineries for months, if ever?


Your comments confuse me a bit.. but to answer your last part, a presumed increase in future price, leads to increase now, so they can purchase the next, more expensive tank. So if I am a Gas station owner and i think my next tank of gas will be $1,200, i'll raise prices as needed. Or so is the claim

The first half of your comment, makes no sense to me. If i buy oil futures, even if i dont intend to take recpeipt of the goods, i will affect the prices. Assuming that no demand changes occur, price will still increase because of transactiosn taken, and becasue i'm not goign to sell my futures to a refinery at the same cost i bought them, i'm going to want to sell them for more, or at a profit..

Middlemen raise costs.
 
2008-09-10 04:08:22 PM  
Debeo Summa Credo: Speculators buying oil futures has no effect on the price you pay at the pump. They need to sell the oil before delivery, creating net demand of zero.

Speculators can and have influenced the price of oil futures (oil for delivery in several months), but that shouldn't affect spot prices if the speculator sells to a refiner prior to expiry of the futures contract.

The question is, why do pump prices go up immediately when futures prices wont affect the price of oil for refineries for months, if ever?


You know absolutely nothing about pricing futures contracts, so stop spreading your ignorant guesses.
 
2008-09-10 04:09:05 PM  
Iblis824: i'm going to want to sell them for more, or at a profit..

Middlemen raise costs.


But you aren't a middle man, you are a speculator. You will, by definition, sell it at the highest price possible. But, you and every other speculator are selling your futures contract prior to expiry because you can't take delivery of the oil (your a hedge fund and not a refiner). So the price will necessarily fall when you well.

These guys aren't classic middle men like a distributor. They just buy a piece of paper that entitles them to x thousand barrels of oil on August 21st. They sell that piece of paper to a refiner prior to August 21st because they don't have anywhere to put x thousand barrels of oil.

And you affect the futures price of oil. I can buy every November oil contract on the market and drive the price to $200 per barrel, but come November I'm going to be pretty farked when I dump all those contracts on the market prior to expiry.
 
2008-09-10 04:25:58 PM  
Debeo Summa Credo: Iblis824: i'm going to want to sell them for more, or at a profit..

Middlemen raise costs.

But you aren't a middle man, you are a speculator. You will, by definition, sell it at the highest price possible. But, you and every other speculator are selling your futures contract prior to expiry because you can't take delivery of the oil (your a hedge fund and not a refiner). So the price will necessarily fall when you well.

These guys aren't classic middle men like a distributor. They just buy a piece of paper that entitles them to x thousand barrels of oil on August 21st. They sell that piece of paper to a refiner prior to August 21st because they don't have anywhere to put x thousand barrels of oil.

And you affect the futures price of oil. I can buy every November oil contract on the market and drive the price to $200 per barrel, but come November I'm going to be pretty farked when I dump all those contracts on the market prior to expiry.


Indeed, thats a possibility. However, you bought every contract, and as such, the market will pay what it needs to get the oil.
 
2008-09-10 04:35:18 PM  
Sooner01: You know absolutely nothing about pricing futures contracts, so stop spreading your ignorant guesses.

Please enlighten me, by all means. If I'm missing something, I'll be glad to be educated.
 
2008-09-10 04:37:19 PM  
Debeo Summa Credo: Sooner01: You know absolutely nothing about pricing futures contracts, so stop spreading your ignorant guesses.

Please enlighten me, by all means. If I'm missing something, I'll be glad to be educated.


http://en.wikipedia.org/wiki/Futures_contract
 
2008-09-10 04:37:50 PM  
Iblis824: Indeed, thats a possibility. However, you bought every contract, and as such, the market will pay what it needs to get the oil.

Yes, theoretically one could corner the market if you bought every contract and refiners had nowhere else to get oil. But then it would be a game of chicken with the refiners shutting down while I scramble for storage capacity until we come to an equilibrium price.
 
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