[quote=EconProf]For every speculator who profited from the runup in oil prices, there was a seller. IOW, one speculator gained, another lost the same dollar amount.
That is why the politicians’ rant against “speculation” is simply a feint to divert our attention from the supply and demand fundamentals that have driven the price up. Those same politicians could favorably impact supply and demand via drilling, encouraging conservation, and other politically painful measures if they had the integrity to do so. [/quote]
Actually its not true that for every seller there is a buyer. For every contract sold their is one bought but one party could sell 1000 contracts to 1000 buyers.
This is how markets are worked over. Russian takes the money they get from Europe and buy oil futures with it. They don’t have to worry about delivery because they are also the shippers.
We send about $1.3 Trillion to oil producing countries yearly and a lot of that money ends up being used to buy more oil futures.
Another factor is the Wall Street firms are huge into oil contracts to offset the hits on sub prime. In fact, GS is rumoured to have over $80 billion in long positions in Oil. JP Morgan has leased storage facilites at the port of New York to actually accept delivery of oil.
Banks, and Wall Street firms are taking the free fed money and piling into commodities with it.
This is what happens when you have the fed and government manipulating the system. It will always create an excess in some other area.
