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is it really worth it?
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is it really worth it?

  #21 (permalink)
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Silvester17 View Post

There are starving children because gamers drive up food prices, the global economy will once again slipping into recession because the same gamers play on the oil market.

REALLY?!!!

"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
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  #22 (permalink)
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Peak oil primer and links | Energy Bulletin

Take your Pips, go out and Live.
Luke.
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  #23 (permalink)
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"There are starving children because gamers drive up food prices, the global economy will once again slipping into recession because the same gamers play on the oil market."


rtrade View Post
REALLY?!!!

I agree, this is nonsense. Food prices are not being gamed up. These simplistic statements are just nonsense. There are so many different cases.

-> the European Union heavily subsidizes food, so food is too cheap and local farmers in the third world are going out of business
-> the use of corn for producing ethanol has driven corn prices up, so Mexican were rioting, because they could no longer afford their tortillas

Both cases have in common that developing countries rely on food imports, as they have abandoned local production for other crops. There is nothing being gamed or manipulated. It is more or less each country following its own path, which - due to growing interdependence - has unwanted side effects.

Things are not black and white, there are no evil gamers, but there is a growing population and limited resources, and an ever increasing hunger for energy, as some countries, led by the US, are not making sufficient efforts to cope with the limitation of resources.

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  #24 (permalink)
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Fat Tails View Post
"There are starving children because gamers drive up food prices, the global economy will once again slipping into recession because the same gamers play on the oil market."



I agree, this is nonsense. Food prices are not being gamed up. These simplistic statements are just nonsense. There are so many different cases.

-> the European Union heavily subsidizes food, so food is too cheap and local farmers in the third world are going out of business
-> the use of corn for producing ethanol has driven corn prices up, so Mexican were rioting, because they could no longer afford their tortillas

Both cases have in common that developing countries rely on food imports, as they have abandoned local production for other crops. There is nothing being gamed or manipulated. It is more or less each country following its own path, which - due to growing interdependence - has unwanted side effects.

Things are not black and white, there are no evil gamers, but there is a growing population and limited resources, and an ever increasing hunger for energy, as some countries, led by the US, are not making sufficient efforts to cope with the limitation of resources.

I think you're missing the point. absolutely no nonsense. higher oil prices do have an impact on food prices. a simple example: it costs more to deliver the bread and milk, because of higher gas prices. and the retailer will put those extra costs on their product. and unfortunately that's a fact.

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  #25 (permalink)
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Failed Policies not Gamed Prices



Interesting source. Peak oil is reality. Oil prices need to be high to justify investment into alternative energy supplies. A few years ago, when crude was hovering around $ 10 / bbl, none of the large companies was interested to invest into further exploration of deep sea or shale oil.

The age of oil is simply coming to an end. A couple of years ago, I have been interested in this subject and reading a number of publications that showed how things would evolve in future, for example

.> A.B. Lovins, E.K.Datta: Winning the Oil Endgame
-> Richard Heinberg; The Party is Over
-> Paul Roberts: The End of Oil

There is plenty of natural gas, it is cleaner and easy to recover. It is also a better raw material to manufacture clean fuels. The path for substituting oil is easy

-> 1/3 economies
-> 1/3 substitution with natural gas
-> 1/3 substitution with regenerative energy supplies

Of course this needs a transformation of the industry. It does not make sense to drive vehicles that are 16 times the weight of the person transported. Think of this nonsense, you want to transport 90 kg and you use a vehicle with a weight of 1,500 kg to achieve it.

The US is importing about 340,000,000 bbl of crude per month. At current prices this comes at a cost of $ 34 billion per month or around $ 400 billion per year. Deduct the exports of oil products, and you will find an oil-related trade deficit of over $ 300 billion per year!

This is just a waste of money for a country that has all the resources it needs. Take that money, reduce energy consumption and develop alternative energy supplies. This is feasible and has long been shown. It is just bad policy making and ignorance, which has prevented the start of the necessary transition to a new energy age.

One should be grateful that oil is expensive, this is a major facilitator to invest in alternative energies.

Just compare (source US Energy Information Administration):


Compare Oil Imports (per day in million barrels)

Oil imports US 1995: 7.89 -> 2009 9.67 ( + 23%)

Oil imports Japan 1995: 5.71 -> 2009 4.29 ( - 26%)

Oil imports Germany 1995: 2.65 -> 2009 2.20 ( - 17%)


Compare Oil Products Consumption

Oil consumption US 1995: 17.72 -> 2009 18.77 ( + 9%)

Oil consumption Japan 1995: 5.69 -> 2009 4.37 ( - 23%)

Oil consumption Germany 1995: 2.88 -> 2009 2.44 ( - 15% )


What, if higher fuel prices just reflected rapid growth in the developing world and a failed energy policy in the US during the last 15 years?

Nobody is gaming the prices.

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  #26 (permalink)
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Food and Spiderman

Food prices are certainly trending.

Everybody has made some interesting points that are right on the mark.

I don't think there are any conspiracies going on. (other than the way many governments measure inflation) I'm sure phd. level economists can match up many cause and effect situations happening. The domino effect is incredible. e.g. How much of the recent middle east uprising can be attributed to higher food prices?

I will say this though: Although Bernanke recently disassociated himself with the responsibility I suspect debasing the world's reserve currency via Quantitative Easing has at least a little something to do with rising world food prices. Add to that the inverse relationship between the U.S. dollar and oil. Like they say in the Spiderman movie: "With great power, comes great responsibility."

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  #27 (permalink)
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Is it really worth it?

I think blaming it on speculators is not right.

In the long term average price of a commodity matters more than intra-day highs or lows. One should look at supply-demand more carefully than just production numbers... The recent price rise is not only because of problems in Libya, but

  1. Egypt crisis and the freedom of movement of Oil from Suez canal
  2. Rapidly increasing "domestic" oil consumption patterns from emerging economies of India and China.
  3. Threat to existing oil refineries across UAE and middle east (Saudi protests might not make it to news that frequently but a speculator knows not to hang around a position and later get caught on the wrong side)
  4. Libya's Gaddafi influential "political clout" is far reaching and he knows where to strike and when to... to tackle the threat to his rule. NATO strikes will only add fuel to the existing fire.
  5. Japan's semi-nuclear shut down will tilt its energy demand from other sources of energy (which will mean more oil & coal to begin with)
  6. < Rising input prices > Probably the biggest factor for refineries. A big headache for major manufacturing industries throughout the world.
  7. Exponentially increasing "World Human population" and the spread of "Consumerism". (If you can understand this then you might be accepting the fact the oil prices are still low compared to what they ought to be)
I can only sum up some of the factors and there are a whole lot of other factors which are a cause of concern.

I am probably thinking oil to be around 120 and away from 100-odd levels it currently is around.

I can be wrong in analysis some where, but doesn't mean I am big enough to manipulate entire market to move with my move. No one really can.

All prices are fair prices, all moves are fair moves.

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  #28 (permalink)
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The only reason a price is a price is because there's some guy that want to pay that price for it.

That's it.

The current oil price is the maximum price that somebody wants to pay for it.

That's it.

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  #29 (permalink)
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MetalTrade View Post
The only reason a price is a price is because there's some guy that want to pay that price for it.

That's it.

The current oil price is the maximum price that somebody wants to pay for it.

That's it.

Agreed, but the point of speculation is that he's willing to pay that price, not because that is its value today, but because he's anticipating a future increase in price and he's trying to lock in his purchase now and save money.

Conversely, the speculator that's willing to sell to him at that price, is doing so because A) He's convinced that prices will not rise further B) He's already made acceptible profit and the risk associated with holding it further is to great for his tolerance or C) He's convinced prices will actually fall.

The whole concept of speculation is muddled sometimes. Simply put, a speculator purchases/sells goods, not with the intent to use them, but only on the basis of an anticipated movement in price (value) and the opportunity to make money off it.

If you buy a home for example, and never intend to "use" it to live in and expect to simply sell it shortly after for a profit. He is the noun version of a "speculator."

Consumers who actually use the purchased goods for their intended use can actually speculate (verb usage) on the timing of their puchase or sale in order to maximize their value.

Strangely, people tend to loathe "speculators" and blame those individuals for the collective "speculation" that ocurrs, and like I said earlier, MUCH of it happens by people actually using the commodity (i.e. oil companies, airlines, governments, etc).

I actually happen to believe that "speculators" provide the liquidity necessary for consumers to "speculate." Imagine if there was no volume in the market and you were in fear of rising prices....you might wish to buy at $100, but can't find anyone to sell you the item for less than $110. The "speculator" provides the bridge between and takes risks in order to collect the profit and sale on the other end. Some would argue that swings would be muted/lessoned if there were no "speculators" in between because lags in liquidity would ease the frenzy via expecation disparity separated by time (i.e. I think prices will go up, but I'm not willing to pay $100, I'll wait and if the seller digs in...then over time, the frenzy is cooled and the market eases back to normalcy).

The point I was trying to make earlier is that through the actual physical reality of the market, we can cool speculation. In a very efficient market, this happens naturally. Firms that can, take advantage of anticipation/speculation and provide either less or more production to an already properly supplied market and it moves the price back (or eases the trend).

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  #30 (permalink)
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RM99 View Post
but the point of speculation is that he's willing to pay that price, not because that is its value today, but because he's anticipating a future increase in price and he's trying to lock in his purchase now and save money.

you are thinking of hedgers ... they(and their companies) are willing to pay the price of oil because they need to ensure their operating costs (for their business) remain as constant as possible.. so they will go out and buy all the contracts they can and lock in todays price if they are forecasting higher prices down the road based on market and fundamental values... at the time of exercise or delivery if the price is lower, they lost (but that was already taken into account within their operations) if the price was higher, their operations continue without interruption..

speculators (no matter on what commodity) are traders who trade to profit from information they have about where future prices are heading. True speculators are well informed (regardless of how they get that info, lawful or not) and act on information based on intrinsic values, and that is what allows them to at times predict future prices better than any other traders.

In the short term btw, speculators dont necessarily always win, given market value might be in disconnect from fundamentals in the short term, but long term they do tend to win quite often.

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