4 ms·

Wait until you learn about OPEC and oil prices :-)

KingOfCoders 3y ago
Because they will change their mind? "demand and supply" OPEC is a cartel constraining supply to increase prices, it's not a free market but an example of "demand and supply" in it's most brutal form. OPEC prices are not about "gambling".
- jimbob45 3y ago
  OPEC has gambled several times in the last decade on future oil prices (and not always won).
  - KingOfCoders 3y ago
    In which way has OPEC gambled on future oil prices that moved prices? To my limited understanding this would involve buying oil futures.
    - deleted 3y ago
      [deleted]
    - jpgvm 3y ago
      You don't need to use derivatives to gamble, they control the supply but that control is a lagging control. Any decision they make is essentially a bet about where the oil market is going to move in several months. They are usually big enough that any move they make is going to set the tone but that isn't always the case. They need to make continual bets on the health of transports, changes in energy mix etc in order to move or keep the price in a favorable band for them. Misstep and the price of oil falls, cutting into their profits or push it too high and face demand destruction and shale extraction coming online because it's profitable at those higher prices, increasing competition and stifling volumes simultaneously.
rhaway84773 3y ago
I mean, that’s a straight up cartel. There’s nothing surprising about that. But the OP is confused about their comment about commodities in general. They are largely based on supply and demand, but most companies need to predict supply and demand months and years in advance because converting raw material into a sale to the end user is a multi month to multi year process, so a natural result is that the prices are based on speculation of supply and demand, months to years in advance.
- mr_toad 3y ago
  > the prices are based on speculation of supply and demand, months to years in advance. There’s also an element of speculation on speculation driving short term trends.
- tsimionescu 3y ago
  > They are largely based on supply and demand, but most companies need to predict supply and demand months and years in advance because converting raw material into a sale to the end user is a multi month to multi year process, so a natural result is that the prices are based on speculation of supply and demand, months to years in advance. But that practically means they are based on speculation about possible future supply and demand, and we are more or less taking it on faith that that speculation is correlated to actual supply and demand.
  - avianlyric 3y ago
    > But that practically means they are based on speculation about possible future supply and demand, and we are more or less taking it on faith that that speculation is correlated to actual supply and demand. This statement almost seems tautological. Of course prices are based on speculation about possible supply and demand, nobody has a crystal ball that can tell them “actual” supply and demand. In a competitive and liquid market, you expect prices to rapidly approach “optimal”, because otherwise there’s an opportunity there for someone make money out of the market inefficiency, buy correctly predicting when supply is high, and buying, then selling when supply is low. Which is exactly what future etc do, except without the need to actually move the physical commodity around.
xbmcuser 3y ago
Are they any different than the Isp and telcos in the states or Walmart, Amazon, Alphabet, Apple, Microsoft or payment service providers like mastercard and visa all of them work as cartels or monopolies. All these companies cost Americans more than when OPEC manipulate oil prices I think

Because they will change their mind? "demand and supply" OPEC is a cartel constraining supply to increase prices, it's not a free market but an example of "demand and supply" in it's most brutal form. OPEC prices are not about "gambling".

jimbob45 3y ago
OPEC has gambled several times in the last decade on future oil prices (and not always won).
- KingOfCoders 3y ago
  In which way has OPEC gambled on future oil prices that moved prices? To my limited understanding this would involve buying oil futures.
  - deleted 3y ago
    [deleted]
  - jpgvm 3y ago
    You don't need to use derivatives to gamble, they control the supply but that control is a lagging control. Any decision they make is essentially a bet about where the oil market is going to move in several months. They are usually big enough that any move they make is going to set the tone but that isn't always the case. They need to make continual bets on the health of transports, changes in energy mix etc in order to move or keep the price in a favorable band for them. Misstep and the price of oil falls, cutting into their profits or push it too high and face demand destruction and shale extraction coming online because it's profitable at those higher prices, increasing competition and stifling volumes simultaneously.

rhaway84773 3y ago

I mean, that’s a straight up cartel. There’s nothing surprising about that. But the OP is confused about their comment about commodities in general. They are largely based on supply and demand, but most companies need to predict supply and demand months and years in advance because converting raw material into a sale to the end user is a multi month to multi year process, so a natural result is that the prices are based on speculation of supply and demand, months to years in advance.

mr_toad 3y ago
> the prices are based on speculation of supply and demand, months to years in advance. There’s also an element of speculation on speculation driving short term trends.
tsimionescu 3y ago
> They are largely based on supply and demand, but most companies need to predict supply and demand months and years in advance because converting raw material into a sale to the end user is a multi month to multi year process, so a natural result is that the prices are based on speculation of supply and demand, months to years in advance. But that practically means they are based on speculation about possible future supply and demand, and we are more or less taking it on faith that that speculation is correlated to actual supply and demand.
- avianlyric 3y ago
  > But that practically means they are based on speculation about possible future supply and demand, and we are more or less taking it on faith that that speculation is correlated to actual supply and demand. This statement almost seems tautological. Of course prices are based on speculation about possible supply and demand, nobody has a crystal ball that can tell them “actual” supply and demand. In a competitive and liquid market, you expect prices to rapidly approach “optimal”, because otherwise there’s an opportunity there for someone make money out of the market inefficiency, buy correctly predicting when supply is high, and buying, then selling when supply is low. Which is exactly what future etc do, except without the need to actually move the physical commodity around.

xbmcuser 3y ago

Are they any different than the Isp and telcos in the states or Walmart, Amazon, Alphabet, Apple, Microsoft or payment service providers like mastercard and visa all of them work as cartels or monopolies. All these companies cost Americans more than when OPEC manipulate oil prices I think