Just Curious...

I don't discount that it matters in some respect, but I would say it matters no more than any of the factors I listed previously which are more contrived reasons for the rises/changes to oil.

Also, here is a brief history of oil prices from 1947 to present which also highlights some conflicts and political reasons for the rise in oil prices. Please note I am not posting this solely to say these were the only reasons for the rises/changes in oil prices, but more so to show you over the course of the past x number of years, inflation has not been the sole or main factor in the changes in oil prices.

http://www.wtrg.com/oil_graphs/oilprice1947.gif

inlet13 wrote:

Depending on measures, inflation could be considered to be up 8%:

http://www.cbsnews.com/8301-505144_162- ... you-think/

...this is pervasive and shows it's liquidity driven.




My point: MONETARY POLICY MATTERS.

FiveB247x wrote:

I don't discount that it matters in some respect, but I would say it matters no more than any of the factors I listed previously which are more contrived reasons for the rises/changes to oil.

Also, here is a brief history of oil prices from 1947 to present which also highlights some conflicts and political reasons for the rise in oil prices. Please note I am not posting this solely to say these were the only reasons for the rises/changes in oil prices, but more so to show you over the course of the past x number of years, inflation has not been the sole or main factor in the changes in oil prices.

http://www.wtrg.com/oil_graphs/oilprice1947.gif

inlet13 wrote:

Depending on measures, inflation could be considered to be up 8%:

http://www.cbsnews.com/8301-505144_162- ... you-think/

...this is pervasive and shows it's liquidity driven.




My point: MONETARY POLICY MATTERS.

By definition inflation is a rise in prices, so it doesn't make sense to say it doesn't matter here. That said, your link doesn't work. Also, I don't know "what the other factors you listed" are. I can't find them. For all I know, I will agree that those factors matter.

My issue is in regards to the distaste for speculation. People think speculation is bad when prices rise, but good when they decline (they rarely actually say it's good or have reports on the news when this happens, they are just happy the price is low). It's retarded. Speculation, here, is based on price "expectations". So, my point is supply and demand matters now for the market (clearly), but in terms of speculation it's not supply and demand right now (for speculators), it's supply and demand down the line.

But, I digress.

FiveB247x wrote:

The other factors I was referring too was the political, social and economic variables that are always ongoing and more used as an excuse than a direct reason for adjustments to the price.

As for speculation, it works great if it is solely based on supply and demand, but in this instance it is not. Watch the brief story about it on 60 minutes (I posted above) as they discuss it directly. Speculation and the "free market" can lead to price gauging, speculation and bubbles like we saw on many internet stocks in the 90's. The oil market is very contrived and not based on supply and demand solely by any means, but instead uses a variety of gauges to make adjustments.

inlet13 wrote:

By definition inflation is a rise in prices, so it doesn't make sense to say it doesn't matter here. That said, your link doesn't work. Also, I don't know "what the other factors you listed" are. I can't find them. For all I know, I will agree that those factors matter.

My issue is in regards to the distaste for speculation. People think speculation is bad when prices rise, but good when they decline (they rarely actually say it's good or have reports on the news when this happens, they are just happy the price is low). It's retarded. Speculation, here, is based on price "expectations". So, my point is supply and demand matters now for the market (clearly), but in terms of speculation it's not supply and demand right now (for speculators), it's supply and demand down the line.

But, I digress.

The video basically reiterated what I was saying about speculation. Watch the first 10 seconds, he’s saying that the price of gas fell “faster” than it rose. That’s speculation at work too, but never really gets media play. Like I said, speculation definitely could increase volatility, but in my opinion, it’s very questionable that it’s the reason for “sustained” increases in the price of gas. It simply adds to volatility as more investors try to gauge where prices are going.

Sticking with the 60 minutes piece, the issue was the price was rising (going into the 2008 election – that’s why McCain picked Palin btw) then crashed as the host says ”with the stock market” (the Lehman collapse). Both were bubbles. But, it’s not really fundamentally the speculators causing the bubble IMHO, but rather macroeconomic fundamentals finally becoming clear to everyone within the economy. IN my opinion, the speculators just try to make money given their view of the environment. When the environment changes, they change their investment. I believe the Fed controls that environment. For example, the price of gas crashed right after (or around the same time as) the stock market did. Why? Well, because speculators knew that the economy was heading into recession (hence demand for oil would retrench). Why did it increase prior to that? Because there were bubbles building throughout the economy from the cheap money the Fed was pumping into it. This thanks to our friend Alan Greenspan keeping rates low since the early 2000s. As the interest rates were kept low, velocity and money supply increase… increasing real GDP, and seemingly appearing that demand was high. But, when players realized it was all a bubble, they bailed on the investment, and the price (stock market or gas) collapsed.

I don’t see anything at all stunning from the video. Basically, they point a wagging finger at speculation and say they cause this! They are also incorrectly stating it doesn’t have to do with supply and demand (in my opinion because I don't agree with their semantics). I respond, I guess you can make that “semantical” argument that the basic "fundeamentals" of supply and demand did not cause the rises or declines (key word fundamentals). But, in my opinion, the reality is their wrong unless we know exactly what they mean by "fundamentals". It is supply and demand in my opinion because I think investors buying oil is just like us buying it at the pump (we're all demand). The “fundamental” semantical argument they could make is saying speculators are NOT part of demand. Once again, if that’s what they meant, I'd need to look at the data, but I may agree... unfortunately though this is a pointless semantival argument.

Listen to the video again and watch the words they use. They use "actual" demand or demand "fundamentals", basically trying to hedge out speculators from part of demand. But, I’d say they are part of demand and due to that they cause price increases because they increase demand for oil. But, they also cause price decreases. Basically, they are part of demand.

The confusion is summarized with the misconception that demand "expectations" should not matter in the current price. Expectations do matter when it comes to prices because they influence demand. We can be upset all we want about that when we see high prices, but it's just a reality and always will be.

This charade is silly though. People get all up in arms about speculators (demand) and oil companies (supply) when the prices rise; and when they fall, they go back to not caring. My point is it’s either ok all along or not ok (in my opinion it’s fine all along). We can’t have it both ways.