Quote:
Originally Posted by SilverTurtle
I think we all agree that doing away with oil futures would go a long way towards lowering the price of fuel... because speculation is just silly... its as close to gambling as you can get in the stock market... and really has no business being there.
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Speak for yourself. Only people who don't know what oil futures are think that would help. Let me give everyone a brief overview of the process: when an investor ("speculator") buys an oil future they are essentially betting on what direction the value of oil will go from the time they buy the future to the time the future matures. The future matures when it is sold from the investor to someone who takes delivery of the oil (refineries, etc). By buying a future, the investor is betting the price of oil will go up. By not buying the future immediately, the refinery is betting the price will go down. Because the investor takes possession of no oil, they cannot take it off the market and therefore they have no impact on the price. So if oil costs $130 a barrel now, and their future matures in 1 month, and in 1 month oil costs $135 a barrel, they earn money at the expense of the people who didn't buy earlier. If the price goes down, they lose to the people who held off. Yes they do benefit from rising oil prices, but they don't cause rising oil profits. This is not a case of
post hoc ergo propter hoc and that is the real misunderstanding. For reference consider the onion market. They have no futures because it was falsely believed that futures were raising the price. Laws were passed banning onion futures, and recently onion prices have risen faster than oil prices. Another way to think of it (though this is a weak analogy) is like stock in a company- by buying stock you are not raising the revenue of that company, but instead are betting that revenue will increase (or whatever other factor causes the stock price to rise).
Also to the people who say innovation is good, but we should demand unfairly cheap oil in the meantime, my argument is that we haven't made much energy progress in the past few decades because gas was so artificially cheap. If gas dropped to $1 a gallon tomorrow (heck even $3 a gallon) would anyone care about alternative fuels, efficiency, or any of that? Heck no. The Volt would be scrapped, the genius pioneers working to create new, clean, sustainable energy mediums would be sent to the poor house, and our freeways would be jammed solid with soccer moms and lone commuters driving Hummer H12s the size of extra-wide semis. Then gas would creep back up to market levels again, and all the sheep would be screaming bloody murder and we'll repeat this whole idiotic process all over again. Or we could just deal with a few uncomfortable years, make reasonable adaptations, and then reap the rewards of our new smarter energy projects, sustaining us on a much more long-term basis.