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>Usually when you see people blaming speculators it's someone trying to cover up ineptitude or corruption by picking an easy target.< I lived through the Calif

>Usually when you see people blaming speculators it's someone trying to cover up ineptitude or corruption by picking an easy target.< I lived through the California energy crisis and there was no crisis. It was a gigantic manipulation. Videos of energy traders laughing their butts off at grandmothers dying of heatstroke. Oil doesn't need to jump into the hundreds every time someone screams in the Middle East. Analysts in every profession know the whims of their markets. Some of the movements are reality based, some are based on perceptions. Commodity trading (specifically oil) is highly profitable. It can be hacked by the people who know the ins and outs. They'll never tell you, but it can. Most everything can be hacked in some way. I highly doubt the few who are able to profit from the ignorance of millions will confess that some troubles in the Middle East don't significantly impact the supply chain. Or that the price of oil shouldn't jump as wildly as it does. Or even that the oil price seems to reflect the greed of traders chasing historical highs. Not buying it.

cturner 16y ago
I don't know about the Californian energy crisis, but maybe this is an example of a situation where the players are in alignment. Spikes in oil prices can be caused by panic in an industry. For example, if I ran an airliner maybe I'd seek to lock in fuel prices via forward trades. There's a risk I'd pay a high premium for the period, but I'd judge that as being bettter than the risk that I'd go out of business. And spikes can be caused by speculators. But my point was that in liquid markets things will revert to a mean that is backed by whatever the real demand is. Pushing prices up by buying and holding oil is not in itself a business model.
- danssig 16y ago
  >For example, if I ran an airliner maybe I'd seek to lock in fuel prices via forward trades. I was under the impression that airlines are already always buying fuel via futures regardless for planning purposes.
dantheman 16y ago
In california you had traders turning off power plants so that energy had to be purchased from other places at higher price. That is not speculating, that is blatant abuse and lack of properly written contracts. They exploited a loophole in a newly created market, this would eventually be fixed as the contracts would have provisions so that what they were doing would be prohobited.

cturner 16y ago

I don't know about the Californian energy crisis, but maybe this is an example of a situation where the players are in alignment. Spikes in oil prices can be caused by panic in an industry. For example, if I ran an airliner maybe I'd seek to lock in fuel prices via forward trades. There's a risk I'd pay a high premium for the period, but I'd judge that as being bettter than the risk that I'd go out of business. And spikes can be caused by speculators. But my point was that in liquid markets things will revert to a mean that is backed by whatever the real demand is. Pushing prices up by buying and holding oil is not in itself a business model.

danssig 16y ago
>For example, if I ran an airliner maybe I'd seek to lock in fuel prices via forward trades. I was under the impression that airlines are already always buying fuel via futures regardless for planning purposes.

dantheman 16y ago

In california you had traders turning off power plants so that energy had to be purchased from other places at higher price. That is not speculating, that is blatant abuse and lack of properly written contracts. They exploited a loophole in a newly created market, this would eventually be fixed as the contracts would have provisions so that what they were doing would be prohobited.