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Speculation costs everyone, take a stand

GasBuddy Blog -- Hopefully everyone will be able to respond the same way to this post: stop speculation now! Speculation hurts many people, including individuals, businesses, and organizations, and leaves many speculators at the receiving end of the deal.

Speculation hurts just about everyone but those who do it. It hurts gas stations when they are forced to raise prices and make little money on gasoline. It hurts other parts of the petroleum industry, so who's making the money? Traders and banks who pour billions of investment dollars into oil to try and reap a short or long term harvest.

Right now, its happening at an alarming rate again. Oil prices are being pushed higher not by fundamentals, but by speculators, hoping to get a huge...

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Submitted Jan 07, 2010 By: PD

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OHMS Champion Author Orange County Posts:11,247 Points:1,332,350 Joined:May 2005	Message Posted: Jan 26, 2010 10:24:15 PM Ignore OHMS Report Abuse I took a stand once in DC/ but they made me put it back. Here's a little love from my heart gbs
ScottE Champion Author Los Angeles Posts:4,208 Points:1,900,495 Joined:May 2002	Message Posted: Jan 22, 2010 2:42:15 PM Ignore ScottE Report Abuse Yes DaveDC, you need some host names for us Haters of speculators to get your message.
whitemiata Champion Author Albany Posts:7,579 Points:1,661,600 Joined:Mar 2005	Message Posted: Jan 22, 2010 8:41:30 AM Ignore whitemiata Report Abuse daveDC: the URLs you posted appeared to be lacking hostnames. are those links off the gasbuddy site? or some other website? we would appreciate clarification...
Martinman Champion Author Mississippi Posts:12,484 Points:1,734,095 Joined:Sep 2005	Message Posted: Jan 22, 2010 8:19:43 AM Ignore Martinman Report Abuse Hypocrit-of-the-day bump!
daveDC Rookie Author Maryland Posts:1 Points:320 Joined:Jan 2010	Message Posted: Jan 17, 2010 9:44:51 AM Ignore daveDC Report Abuse Speculation, per se, is not a problem. It is even necessary to provide liquidity and help the price discovery function. The problem is EXCESSIVE speculation. When speculators control 5% of a market, that is not a problem. When they control 95% it is a problem. The deregulation of the commodity futures markets in the 90's, especially with the Commodity Futures Modernization Act of 2000, removed limits and regulations on speculators in these important markets. This allowed massive inflows of capital in to relatively small commodity markets pushing prices higher than supply and demand issues would have (and driving them down further than they would have when investors pulled their money out in mass when the crash started). A host of studies and reports from respected institutions like Princeton, Yale, U of Chicago, Citigroup, Deutsche Bank, the IMF, IEA, FERC and more have been written detailing the problem of excessive speculation in the commodity markets. A good list of some of the reports is at /?p=661 Commodity indexes are especially problematic because they buy and hold for long periods, thus removing, not adding, liquidity. Decisions to buy or sell are also made, not on supply and demand issues, but on portfolio management reasons. A good piece on the dangers of passive investments (like commodity indexes) is at /wp-content/uploads/2010/01/Dangers-of-Passive-Investment.pdf Both these sites do a good job of explaining the issue: - a more introductory site, with 7 minute animated video and background pieces - a little more technical, but with great resources like responses to commonly raised objections to what I am saying here, an indepth backgrounder that does a great job of explaining how commodity markets work and what happened with the deregulation. also, has some good introductory pieces.
whitemiata Champion Author Albany Posts:7,579 Points:1,661,600 Joined:Mar 2005	Message Posted: Jan 15, 2010 10:16:38 AM Ignore whitemiata Report Abuse there are some strong opinions here and a lot of disagreements. Does anyone have objective studies or data that would help us reach a consensus? or is this topic too politically charged to have any objective data on the subject?
tgolf Champion Author Washington Posts:1,325 Points:338,270 Joined:Nov 2008	Message Posted: Jan 14, 2010 6:17:04 PM Ignore tgolf Report Abuse I totally DISagree with ncgasrebel. "If you can't beat'em, then joined. Buy the stocks of these companies or options on these stocks and capitalize on this run if you think it will be sustained." WTF !!! I joined them long ago as a 'part' of a stock portfolio, but that was even before the speculators took over. Joining them still doesn't make it right. The issue is that there are no rules in place anymore and all greed will at some point hopefully stop. I hope not like the housing , finance issue....
nissan_maxima09 Veteran Author Lancaster Posts:303 Points:65,020 Joined:Dec 2009	Message Posted: Jan 14, 2010 8:22:05 AM Ignore nissan_maxima09 Report Abuse I agree totally with ncgasrebel. Thanks for an intelligent and thoughtful commentary on this complex issue.
gasokie Champion Author Oklahoma Posts:2,687 Points:1,045,515 Joined:May 2007	Message Posted: Jan 13, 2010 5:01:15 PM Ignore gasokie Report Abuse And what do you replace a free market with? The government set the price? By committee? Free market forces including speculators is the worse thing in the world except for every other thing that has ever been tried.
OHMS Champion Author Orange County Posts:11,247 Points:1,332,350 Joined:May 2005	Message Posted: Jan 11, 2010 3:10:33 PM Ignore OHMS Report Abuse In closing he share everyone's frustration with these prices, that's why I joined. But there's an old saying... "If you can't beat'em, then join'em. Buy the stocks of these companies or options on these stocks and capitalize on this run if you think it will be sustained.
highdesertman Champion Author Albuquerque Posts:1,317 Points:1,385,820 Joined:Mar 2005	Message Posted: Jan 10, 2010 5:11:19 PM Ignore highdesertman Report Abuse I agree totally with ncgasrebel. Thanks for an intelligent and thoughtful commentary on this complex issue.
honda0105 Champion Author Tallahassee Posts:15,932 Points:1,242,175 Joined:Nov 2008	Message Posted: Jan 10, 2010 10:16:16 AM Ignore honda0105 Report Abuse greed rules the world.
honda0105 Champion Author Tallahassee Posts:15,932 Points:1,242,175 Joined:Nov 2008	Message Posted: Jan 10, 2010 10:07:33 AM Ignore honda0105 Report Abuse too bad most speculators drive prices up, not down.
ncgasrebel Champion Author North Carolina Posts:1,419 Points:276,240 Joined:Jan 2010	Message Posted: Jan 9, 2010 11:28:47 PM Ignore ncgasrebel Report Abuse I respectfully disagree with your article in it's entirety. If you eliminate the futures market as mechanism for price risk management by the commercials (those in the oil business), they will offset that risk by wider margins which get passed on to the consumer in the form of higher prices. In the futures market every trade must have both a buyer and seller. The commercial traders are hedgers looking to manage price risk. They make money on the physical commodity but lose in the futures or vice versa. The result is a zero net gain for them. It's true that the speculators are looking to make money, but they are essential to liquidity in the market. The assume part of the risk that the commercials want to eliminate by taking the opposite side of the trade. Markets do not always adhere to fundamentals in the short term. True market equilibriums only exist in economists' text books. Prices at any given time reflect the "perceived" fundamentals and how it may be about to change. That information is constantly changing. Fear and greed also play a major role in short term price swings but they are generally short lived. Lastly, the total open interest (the amount of the commodity represented by outstanding trades) for the futures contracts is generally small in comparison to total amount of the physical commodity available. What this means is that the commercials who control the physical commodity are the true heavy hitters in this market. If the small specs run the prices too high the commercials will reciprocate by selling the hell out of the rally and eventually pushing it back down. I share everyone's frustration with these prices, that's why I joined. But there's an old saying... "If you can't beat'em, then join'em. Buy the stocks of these companies or options on these stocks and capitalize on this run if you think it will be sustained.
honda0105 Champion Author Tallahassee Posts:15,932 Points:1,242,175 Joined:Nov 2008	Message Posted: Jan 9, 2010 8:03:04 PM Ignore honda0105 Report Abuse well, we, the posters on this board, have said that for a long time. Pig Oil and Specu-traitors. Greed is the life force that flows through their veins. What more is there to blog?
Schwartzmdja Champion Author Oklahoma City Posts:6,425 Points:1,271,175 Joined:Mar 2008	Message Posted: Jan 9, 2010 7:15:00 PM Ignore Schwartzmdja Report Abuse I agree with the article
honda0105 Champion Author Tallahassee Posts:15,932 Points:1,242,175 Joined:Nov 2008	Message Posted: Jan 9, 2010 1:27:11 PM Ignore honda0105 Report Abuse investmentdr: only IF they drive prices down. Isn't the point of speculation though to drive prices UP?
Pucked Champion Author Fort Worth Posts:1,091 Points:210,780 Joined:Jun 2009	Message Posted: Jan 9, 2010 1:16:50 PM Ignore Pucked Report Abuse Drill here and drill now!!!!!!!!!
TJC47 Champion Author Indianapolis Posts:4,947 Points:943,945 Joined:May 2008	Message Posted: Jan 9, 2010 12:57:01 PM Ignore TJC47 Report Abuse We need to hang the speculators.
PathfinderSC Champion Author South Carolina Posts:7,676 Points:1,465,815 Joined:Mar 2008	Message Posted: Jan 9, 2010 12:47:21 PM Ignore PathfinderSC Report Abuse Everyone needs to pull to gather to get this economy up, Not those that are trying to destroy it. [Edited by: PathfinderSC at 1/9/2010 12:47:59 PM EST]
arinkrat17 Champion Author Twin Cities Posts:4,500 Points:967,475 Joined:Aug 2009	Message Posted: Jan 9, 2010 12:22:34 PM Ignore arinkrat17 Report Abuse speculators will reverse the recovery of this economy it will drag it more down.
Michaelsz06 Champion Author Phoenix Posts:6,057 Points:1,211,660 Joined:Jul 2008	Message Posted: Jan 9, 2010 11:59:40 AM Ignore Michaelsz06 Report Abuse Speculation of Oil markets needs to be outlawed or regulated. Just like they regulate the price of Electricity that comes in your home and the natural gas also..
honda0105 Champion Author Tallahassee Posts:15,932 Points:1,242,175 Joined:Nov 2008	Message Posted: Jan 9, 2010 11:53:55 AM Ignore honda0105 Report Abuse between Specu-Traitors, Pig Oil, Pig Bank and Unions, we'll see the economy going down, down, down, and down.
Tnerbeel Champion Author Houston Posts:6,896 Points:1,384,835 Joined:Mar 2007	Message Posted: Jan 9, 2010 11:52:37 AM Ignore Tnerbeel Report Abuse Commodity speculation may need some regulation [maybe not] but to stop it entirely is to stifle the free markets. I don't like the fact that they may be driving the price of oil well above what normal supply and demand would do but this is not the solution.
smoketown Champion Author Cincinnati Posts:4,491 Points:1,027,525 Joined:Feb 2008	Message Posted: Jan 9, 2010 11:47:12 AM Ignore smoketown Report Abuse Speculators crying wolf....
sdslim Champion Author Florida Posts:1,337 Points:1,412,600 Joined:Feb 2007	Message Posted: Jan 9, 2010 11:43:53 AM Ignore sdslim Report Abuse Get rich quick, maybe.
investmentdr Champion Author Cleveland Posts:2,330 Points:1,097,010 Joined:Sep 2008	Message Posted: Jan 9, 2010 11:42:30 AM Ignore investmentdr Report Abuse "Speculation costs everyone," except when the speculators are driving prices down. It cuts both ways. Net effect = 0.
EXTREMESNOW Champion Author Medford Posts:7,564 Points:1,553,440 Joined:Jul 2006	Message Posted: Jan 9, 2010 11:40:18 AM Ignore EXTREMESNOW Report Abuse Seems speculators are going to be the downfall of us all.
148366 Champion Author Spokane Posts:3,646 Points:1,440,375 Joined:Apr 2007	Message Posted: Jan 9, 2010 11:37:57 AM Ignore 148366 Report Abuse I agree but those in power to stop it will not cut the purse strings that keeps them in office.
Cruiser340 Champion Author Grand Rapids Posts:10,819 Points:2,426,940 Joined:May 2004	Message Posted: Jan 9, 2010 11:37:27 AM Ignore Cruiser340 Report Abuse speculation was the cause of the price increases the past few years, nothing real, just hope to rip our hard earned money from our pockets to fuel our vehicles the take us to work and play.
Bestworld Veteran Author San Jose Posts:390 Points:104,990 Joined:Feb 2007	Message Posted: Jan 9, 2010 11:37:11 AM Ignore Bestworld Report Abuse Again, I must place the blame for increased prices on the oil producers, refiners, distributors and some price gouging gas stations. Speculators only bet on the future pricing of oil and gas. They do not cause the prices to increase or decrease. Oil producers, refiners etc. do the pricing, pretty much at their whim and fancy. Let's not misplace the blame but instead, keep the focus on the real culprits of corporate greed.
connbrown Champion Author Corpus Christi Posts:1,517 Points:361,175 Joined:Apr 2009	Message Posted: Jan 9, 2010 11:36:40 AM Ignore connbrown Report Abuse i wonder.
nascar9 All-Star Author Tacoma Posts:689 Points:290,110 Joined:May 2008	Message Posted: Jan 9, 2010 11:34:34 AM Ignore nascar9 Report Abuse I have a friend that runs a gas station and he makes a penny a gallon no matter what the price is.
Tundralimited2009 Champion Author Dallas Posts:34,713 Points:1,127,800 Joined:Feb 2009	Message Posted: Jan 9, 2010 11:33:43 AM Ignore Tundralimited2009 Report Abuse Traders are just trhat people trying to make a living as well.....
gas_too_high Champion Author Columbus Posts:8,914 Points:1,577,860 Joined:Aug 2005	Message Posted: Jan 9, 2010 11:33:33 AM Ignore gas_too_high Report Abuse Before we rail against speculation, we need to recognize that speculators play a productive role in commodities markets, assuming risks and allowing commodities suppliers stability in the prices they will receive. Overeager speculators can create bubbles, but the key is how to regulate them, without driving them away altogether? GTH
oldiesman Champion Author New York Posts:4,711 Points:1,858,780 Joined:May 2006	Message Posted: Jan 9, 2010 11:32:29 AM Ignore oldiesman Report Abuse Remember most gas stations don't set price they are told what to charge.most of them like the big names set the prices as they see fit.these stations are franchises and make thier money on repairs etc.
jb107 Champion Author New Jersey Posts:7,718 Points:2,255,375 Joined:Sep 2005	Message Posted: Jan 9, 2010 11:29:17 AM Ignore jb107 Report Abuse Speculation hurts everyone. Hopefully someday they will all make a bad investment and loose it all.
REVLAW Champion Author San Antonio Posts:8,548 Points:1,640,140 Joined:Jul 2007	Message Posted: Jan 9, 2010 11:26:21 AM Ignore REVLAW Report Abuse No argument here PD. But it's the weak democratic will and an inept president that allow this to persist.
threewheeler Champion Author Seattle Posts:2,377 Points:319,005 Joined:Jun 2008	Message Posted: Jan 9, 2010 11:23:33 AM Ignore threewheeler Report Abuse It costs the little people, you and me
NorthglennBill Champion Author Denver Posts:5,675 Points:1,115,220 Joined:Oct 2008	Message Posted: Jan 9, 2010 11:23:22 AM Ignore NorthglennBill Report Abuse There is only one way to really beat the speculators and the is to make oil worth less by switching to alternate fuels.
CISA Champion Author Orange County Posts:4,782 Points:1,168,185 Joined:Dec 2006	Message Posted: Jan 9, 2010 11:22:21 AM Ignore CISA Report Abuse for every buy there's a seller. so what IS speculation? the high frequency traders, BTW, provide liquidity for us small fry. without them volume would be down 90% and we'd pay more to buy and get less when we sell.
jwduke1 Champion Author Iowa Posts:14,350 Points:2,821,670 Joined:Apr 2004	Message Posted: Jan 9, 2010 11:21:58 AM Ignore jwduke1 Report Abuse I agree BNSF733! Hang'em high!
BNSF733 Champion Author Chicago Posts:6,555 Points:1,459,375 Joined:Jun 2004	Message Posted: Jan 9, 2010 11:11:39 AM Ignore BNSF733 Report Abuse Hang the speculators high at high noon! We don't need them!
Terrapinone Champion Author Baltimore Posts:3,166 Points:1,607,495 Joined:May 2004	Message Posted: Jan 9, 2010 11:10:56 AM Ignore Terrapinone Report Abuse Traders, speculators, and banks deserve a special place in hell. They're just trying to make a living -- RIGHT!!!
FuelBarge Champion Author Long Island Posts:7,321 Points:1,709,265 Joined:Aug 2005	Message Posted: Jan 9, 2010 11:10:09 AM Ignore FuelBarge Report Abuse Is there really a solution?
lowerpetroprice Champion Author New Hampshire Posts:6,805 Points:1,360,430 Joined:Jul 2008	Message Posted: Jan 9, 2010 11:09:12 AM Ignore lowerpetroprice Report Abuse Like the article says, call your representatives and put a stp to these high prices.
14of45SSR Champion Author Saskatchewan Posts:2,370 Points:900,390 Joined:Dec 2008	Message Posted: Jan 9, 2010 11:07:37 AM Ignore 14of45SSR Report Abuse hmmm...
bbreff Champion Author Atlanta Posts:8,117 Points:2,222,865 Joined:Jun 2005	Message Posted: Jan 9, 2010 11:07:33 AM Ignore bbreff Report Abuse Everyone except the speculators. They make a killing.
traindude Champion Author Virginia Beach Posts:5,616 Points:1,248,745 Joined:Jun 2007	Message Posted: Jan 9, 2010 10:54:57 AM Ignore traindude Report Abuse Stop the insanity. regulate & enforce the speculators......
ncclyde Champion Author Charlotte Posts:13,301 Points:2,062,450 Joined:Dec 2005	Message Posted: Jan 9, 2010 8:32:57 AM Ignore ncclyde Report Abuse "It will be to Late by the time the next Election comes.... The Damage will have been done !!!" The damage has been done for well over 50 years now, and will continue to happen, as long as the Fed. gov. retains and continues to gain as much power and control over our lives as it does.