[renterclint]

“The oil price can be thought of as a composite signal, resulting from a speculative signal superimposed over a fundamental signal. If we can determine the magnitude and sign of the speculative signal at each time, we can ascertain whether speculation was the main driver of the latest price rise or not.”

arraya, I have never claimed to be a mental giant, but this passage you just posted makes my head hurt! I think I got my signals transposed rather than superimposed…

Does the COT address the swaps & other derivatives that are directly related to the commodities futures? It sounds like there is a lot of activity going on with virtually no oversight.

And btw, I think you are right on the $$ about demand forever outstripping supply. As China, India, & other companies continue to develop & the foreign middle-class grows, demand will be out of control. Oil reserves are finite. It is definitely time to plan for our long-term energy future.

But I disagree that the current state of commodity speculation is irrelevant minutia. It is a current problem that if addressed directly could provide economic relief regarding energy prices & likely food prices as well.

[renterclint]

Thanks jficquette.

EconProf,

I get your point about how every buyer has a seller – but that might be oversimplifying things a bit. With each of these selling events there are market implications. It seems that when sales get exagerated or over-applified by rampant speculation, these individual sales events become aggregated into an entire market movement where not just speculators lose, but the true industry-related hedgers who are attempting to mitigate their business risk fall on the losing end of an over-inflated market.

I do not think this needs to be a political issue. Regardless of what politicians are saying or what their motives are, there are real instances where unregulated speculation has distorted commodity markets & the unassuming end-consumer gets hurt in the process.

See this article for example:
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/20/AR2007102001203.html
This article illustrates how one hedge fund manipulated the natural gas market. As an entire market was artificially manipulated, utility companies had to continue to operate & hedge their risks. In the process utilities paid too much for energy & we consumers were left paying a higher bill.

I’m not saying supply & demand is not the main issue, and I agree that we should open more refineries & drill domestically. Encouranging conservation is great too. But there appears to be a real issue here with this speculation, and it seems wrong to brush it away like it’s some sort of political ploy.

Unfortunately, as commodities & other investments have gotten increasingly complex with swaps & derivatives as well as over-the-counter & new alternative foreign trading markets popping up, simply closing a US regulatory loophole probably will not fix the speculative impact for the long-haul.

[renterclint]

Thanks jficquette.

EconProf,

I get your point about how every buyer has a seller – but that might be oversimplifying things a bit. With each of these selling events there are market implications. It seems that when sales get exagerated or over-applified by rampant speculation, these individual sales events become aggregated into an entire market movement where not just speculators lose, but the true industry-related hedgers who are attempting to mitigate their business risk fall on the losing end of an over-inflated market.

I do not think this needs to be a political issue. Regardless of what politicians are saying or what their motives are, there are real instances where unregulated speculation has distorted commodity markets & the unassuming end-consumer gets hurt in the process.

See this article for example:
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/20/AR2007102001203.html
This article illustrates how one hedge fund manipulated the natural gas market. As an entire market was artificially manipulated, utility companies had to continue to operate & hedge their risks. In the process utilities paid too much for energy & we consumers were left paying a higher bill.

I’m not saying supply & demand is not the main issue, and I agree that we should open more refineries & drill domestically. Encouranging conservation is great too. But there appears to be a real issue here with this speculation, and it seems wrong to brush it away like it’s some sort of political ploy.

Unfortunately, as commodities & other investments have gotten increasingly complex with swaps & derivatives as well as over-the-counter & new alternative foreign trading markets popping up, simply closing a US regulatory loophole probably will not fix the speculative impact for the long-haul.

[renterclint]

Thanks jficquette.

EconProf,

I get your point about how every buyer has a seller – but that might be oversimplifying things a bit. With each of these selling events there are market implications. It seems that when sales get exagerated or over-applified by rampant speculation, these individual sales events become aggregated into an entire market movement where not just speculators lose, but the true industry-related hedgers who are attempting to mitigate their business risk fall on the losing end of an over-inflated market.

I do not think this needs to be a political issue. Regardless of what politicians are saying or what their motives are, there are real instances where unregulated speculation has distorted commodity markets & the unassuming end-consumer gets hurt in the process.

See this article for example:
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/20/AR2007102001203.html
This article illustrates how one hedge fund manipulated the natural gas market. As an entire market was artificially manipulated, utility companies had to continue to operate & hedge their risks. In the process utilities paid too much for energy & we consumers were left paying a higher bill.

I’m not saying supply & demand is not the main issue, and I agree that we should open more refineries & drill domestically. Encouranging conservation is great too. But there appears to be a real issue here with this speculation, and it seems wrong to brush it away like it’s some sort of political ploy.

Unfortunately, as commodities & other investments have gotten increasingly complex with swaps & derivatives as well as over-the-counter & new alternative foreign trading markets popping up, simply closing a US regulatory loophole probably will not fix the speculative impact for the long-haul.

[renterclint]

Thanks jficquette.

EconProf,

I get your point about how every buyer has a seller – but that might be oversimplifying things a bit. With each of these selling events there are market implications. It seems that when sales get exagerated or over-applified by rampant speculation, these individual sales events become aggregated into an entire market movement where not just speculators lose, but the true industry-related hedgers who are attempting to mitigate their business risk fall on the losing end of an over-inflated market.

I do not think this needs to be a political issue. Regardless of what politicians are saying or what their motives are, there are real instances where unregulated speculation has distorted commodity markets & the unassuming end-consumer gets hurt in the process.

See this article for example:
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/20/AR2007102001203.html
This article illustrates how one hedge fund manipulated the natural gas market. As an entire market was artificially manipulated, utility companies had to continue to operate & hedge their risks. In the process utilities paid too much for energy & we consumers were left paying a higher bill.

I’m not saying supply & demand is not the main issue, and I agree that we should open more refineries & drill domestically. Encouranging conservation is great too. But there appears to be a real issue here with this speculation, and it seems wrong to brush it away like it’s some sort of political ploy.

Unfortunately, as commodities & other investments have gotten increasingly complex with swaps & derivatives as well as over-the-counter & new alternative foreign trading markets popping up, simply closing a US regulatory loophole probably will not fix the speculative impact for the long-haul.

[renterclint]

Thanks jficquette.

EconProf,

I get your point about how every buyer has a seller – but that might be oversimplifying things a bit. With each of these selling events there are market implications. It seems that when sales get exagerated or over-applified by rampant speculation, these individual sales events become aggregated into an entire market movement where not just speculators lose, but the true industry-related hedgers who are attempting to mitigate their business risk fall on the losing end of an over-inflated market.

I do not think this needs to be a political issue. Regardless of what politicians are saying or what their motives are, there are real instances where unregulated speculation has distorted commodity markets & the unassuming end-consumer gets hurt in the process.

See this article for example:
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/20/AR2007102001203.html
This article illustrates how one hedge fund manipulated the natural gas market. As an entire market was artificially manipulated, utility companies had to continue to operate & hedge their risks. In the process utilities paid too much for energy & we consumers were left paying a higher bill.

I’m not saying supply & demand is not the main issue, and I agree that we should open more refineries & drill domestically. Encouranging conservation is great too. But there appears to be a real issue here with this speculation, and it seems wrong to brush it away like it’s some sort of political ploy.

Unfortunately, as commodities & other investments have gotten increasingly complex with swaps & derivatives as well as over-the-counter & new alternative foreign trading markets popping up, simply closing a US regulatory loophole probably will not fix the speculative impact for the long-haul.

[renterclint]

It seems like NYMEX has been playing with the margin requirements a lot lately. This would squeeze out the little guys because they have to throw in more cash to increase their equity position, but would this really discourage major hedge funds and the like who may not be so deeply leveraged?

Do you happen to have a link to info about the proposed non-industry limits?

Thanks.

[renterclint]

It seems like NYMEX has been playing with the margin requirements a lot lately. This would squeeze out the little guys because they have to throw in more cash to increase their equity position, but would this really discourage major hedge funds and the like who may not be so deeply leveraged?

Do you happen to have a link to info about the proposed non-industry limits?

Thanks.

[renterclint]

It seems like NYMEX has been playing with the margin requirements a lot lately. This would squeeze out the little guys because they have to throw in more cash to increase their equity position, but would this really discourage major hedge funds and the like who may not be so deeply leveraged?

Do you happen to have a link to info about the proposed non-industry limits?

Thanks.

[renterclint]

It seems like NYMEX has been playing with the margin requirements a lot lately. This would squeeze out the little guys because they have to throw in more cash to increase their equity position, but would this really discourage major hedge funds and the like who may not be so deeply leveraged?

Do you happen to have a link to info about the proposed non-industry limits?

Thanks.

[renterclint]

It seems like NYMEX has been playing with the margin requirements a lot lately. This would squeeze out the little guys because they have to throw in more cash to increase their equity position, but would this really discourage major hedge funds and the like who may not be so deeply leveraged?

Do you happen to have a link to info about the proposed non-industry limits?

Thanks.

[renterclint]

Boy, if there are two words that shouldn’t be next to each other they’re “massive” & “tax”. Okay, maybe “explosive” & “Diarrhea” are worse combination.

I suppose a huge tax could drive down the price. But it seems keeping over-speculation in check serves not only to possibly lower oil prices, but regulating this activity would also maybe dampen price volatility as well.

Let’s do both: drill domestically & close the speculative loop hole. Not sure how I feel about a new gas tax. That wouldn’t be fair to the working poor. We really need to focus any new taxation on the rich instead.

[renterclint]

Boy, if there are two words that shouldn’t be next to each other they’re “massive” & “tax”. Okay, maybe “explosive” & “Diarrhea” are worse combination.

I suppose a huge tax could drive down the price. But it seems keeping over-speculation in check serves not only to possibly lower oil prices, but regulating this activity would also maybe dampen price volatility as well.

Let’s do both: drill domestically & close the speculative loop hole. Not sure how I feel about a new gas tax. That wouldn’t be fair to the working poor. We really need to focus any new taxation on the rich instead.

[renterclint]

Boy, if there are two words that shouldn’t be next to each other they’re “massive” & “tax”. Okay, maybe “explosive” & “Diarrhea” are worse combination.

I suppose a huge tax could drive down the price. But it seems keeping over-speculation in check serves not only to possibly lower oil prices, but regulating this activity would also maybe dampen price volatility as well.

Let’s do both: drill domestically & close the speculative loop hole. Not sure how I feel about a new gas tax. That wouldn’t be fair to the working poor. We really need to focus any new taxation on the rich instead.

[renterclint]

Boy, if there are two words that shouldn’t be next to each other they’re “massive” & “tax”. Okay, maybe “explosive” & “Diarrhea” are worse combination.

I suppose a huge tax could drive down the price. But it seems keeping over-speculation in check serves not only to possibly lower oil prices, but regulating this activity would also maybe dampen price volatility as well.

Let’s do both: drill domestically & close the speculative loop hole. Not sure how I feel about a new gas tax. That wouldn’t be fair to the working poor. We really need to focus any new taxation on the rich instead.

[Author]

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