




I find this story disturbing on several levels:



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RE: Missed the point
By InsaneGain on 5/31/2007 1:29:18 PM , Rating: 1
From what I hear it's the massive multi-billion $ hedge funds that greatly magnify price fluctuations and create the incredible volatility in commodity markets such as gasoline. Billions franticly flow in or out of a given commodity based on the smallest bit of information or even rumours and the price fluctuates accordingly. I work at a company that uses copper for cables, and I therefore follow copper prices. After decades of relative stability, copper prices fluctuate up to 5% daily which makes it extremely risky to enter into any kind of contract with a customer, and of course the speculators love it. How is it logical that something as fundamental as copper fluctuate 5% in one day or 54% in 3 months? The supply is relatively stable and predictable and so is global demand. I believe that the increased volatility is hurting business and consumers, and speculation should be banned in commodities and only producers and end users should be able to buy and sell commodity future contracts.

RE: Missed the point
By masher2 (blog) on 5/31/2007 2:08:43 PM , Rating: 3
Before you lobby against futures speculation, consider the situation before we evolved a futures market. One piece of bad news could and would raise the price of a commodity by 500% or more, literally overnight. In comparison, the 'volatility' of today is a pale shade.

If you ban speculation, then you reduce liquidity...and that prevents the market from working properly. Remember this. Anytime a speculator guesses wrongly and improperly winds up raising the price of a commodity, he pays for it by losing his shirt. If he's guessed right, then he's done the end consumer a favor, by signalling demand and future price changes early, thereby allowing an easier, more gradual adaption to new conditions.

RE: Missed the point
By Ringold on 5/31/2007 6:14:50 PM , Rating: 2
Additionally.. prices arent set, if I understand it correctly, until the commodity market for any given month moves on to the next month. If gas stations raise prices today based on futures contract price changes today it's not due to any direct cost being passed on yet, though it could reflect an attempt on their part to somehow manage their price such that they don't run out ahead of their next shipment or the likes.

And beyond the whole discussion, once it was known, or becomes known, that the story was false then it ceases to be incorporated in to the price of oil. Everything from global security concerns, weather forecasts and political developments impacts the price of oil and it's seems strange to me to think we can even speculate later in the same day of trading why a price move actually occured. Was it that, or did another terrorist strike occur in Nigeria? Who knows? The 'market' knows, but we sure don't.


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