I'm Tired of All The Crap

[Claw]

Oil (commodity) speculation provides a service to those who manage costs for business. When one speculates on a price for a commodity they "bet" (gamble or risk) the price will be higher in the future than their offer (contract) on that date of the speculation. If it is, they have product below market value and can make additional money on the good "bet".
Their goal is more generally to control the cost of product out into the future (thus the terms Futures) so that the other areas of business can then be managed on that future cost. They can negotiate wages, prices and other contracts based on the cost of the Futures product which they have fixed by buying the futures contract.

Dodge is offering $2.99/gal gas for 3 years if you purchase their vehicle. If you buy that vehicle you have in effect bought a futures contract negotiated with Dodge. If the price of gas goes to $5/gal you really make out. But what if the price of fuel goes down to $2.50/gal? Dodge will still give you credit for your fuel puchases but still at the $2.99 price so then you lose or at least you don't get the benifit.

Absolutely Dodge has bought enough oil futures contracts to cover the expected fuel usage of this promotion. They knew before the promotion exactly what the promotion is going to cost. Participating in the futures markets provides them that knowledge.

Futures traders are our friend as they take the wild swings out of the commodities market. They just bet on the prices based on all the variables they put into their computer models.

Oil is like air or water or any other compound element. We are not going to run out. How we capture it is the thing that will change.

[Daniel Bernoulli]

[quote="Claw"]
Dodge is offering $2.99/gal gas for 3 years if you purchase their vehicle. If you buy that vehicle you have in effect bought a futures contract negotiated with Dodge. If the price of gas goes to $5/gal you really make out. But what if the price of fuel goes down to $2.50/gal? Dodge will still give you credit for your fuel puchases but still at the $2.99 price so then you lose or at least you don't get the benifit.

Futures traders are our friend as they take the wild swings out of the commodities market. They just bet on the prices based on all the variables they put into their computer models.[/quote]


Purchasers of Dodge vehicles are implicitly buying a call OPTION, not a long futures contract. Also, I am not convinced that futures traders always take the wild swings out of the commodities (spot/options/futures) markets. Indeed, there is precedent in this country of states banning futures trading because of undesirable effects on commodity spot prices.

Commodity traders act in ways which they believe are in their own best interests. Sometimes those actions are consistent with the best interests of the rest of us; sometimes those actions are not! I do not assume that speculators are acting as my friends.

[caseydog]

Oil (commodity) speculation provides a service to those who manage costs for business. When one speculates on a price for a commodity they "bet" (gamble or risk) the price will be higher in the future than their offer (contract) on that date of the speculation. If it is, they have product below market value and can make additional money on the good "bet".
Their goal is more generally to control the cost of product out into the future (thus the terms Futures) so that the other areas of business can then be managed on that future cost. They can negotiate wages, prices and other contracts based on the cost of the Futures product which they have fixed by buying the futures contract.

Dodge is offering $2.99/gal gas for 3 years if you purchase their vehicle. If you buy that vehicle you have in effect bought a futures contract negotiated with Dodge. If the price of gas goes to $5/gal you really make out. But what if the price of fuel goes down to $2.50/gal? Dodge will still give you credit for your fuel puchases but still at the $2.99 price so then you lose or at least you don't get the benifit.

Absolutely Dodge has bought enough oil futures contracts to cover the expected fuel usage of this promotion. They knew before the promotion exactly what the promotion is going to cost. Participating in the futures markets provides them that knowledge.

Futures traders are our friend as they take the wild swings out of the commodities market. They just bet on the prices based on all the variables they put into their computer models.

Oil is like air or water or any other compound element. We are not going to run out. How we capture it is the thing that will change.

This sounds like theory vs reality, to me. There are a lot of economic theories, such as Supply Side Economics, that work well on paper, but don't conform to reality.

Commodities traders can smooth the market out, or make the price stray from real supply and demand parameters. There is a difference between Exxon buying oil for August delivery to real refineries where the oil is made into real products, and a speculator who's goal is to buy low and sell high. There are no gas lines, and no stations with "no gas" signs on display, yet prices go up daily. Right now, I don't believe that the oil futures market is a realistic reflection of real market conditions.

And, Oil is a finite resource. Period. It is not like air. Air is free. I can walk outside and breathe all I want, even on someone else's property. There is no OPEC for air, or futures market for air. Air won't cost more to develop in coming years.

Is there still plenty of "oil" in the ground? Sure, but it is getting tougher, more expensive, and more environmentally destructive to get it out of the ground and turn it into product. Turning Oil Shale into gasoline is difficult, expensive and does incredible damage to land and water resources. If we want to harvest that oil, we will need to except the costs.

CD

[Claw]

[quote="caseydog]
This sounds like theory vs reality, to me. There are a lot of economic theories, such as Supply Side Economics, that work well on paper, but don't conform to reality.

Supply Side works it is just that the media has convinced many that they are less well off despite the facts. Partisian BS

Commodities traders can smooth the market out, or make the price stray from real supply and demand parameters. There is a difference between Exxon buying oil for August delivery to real refineries where the oil is made into real products, and a speculator who's goal is to buy low and sell high.

So how is this (buy low sell high) different than any other economic enterprise in a free market?

There are no gas lines, and no stations with "no gas" signs on display, yet prices go up daily. Right now, I don't believe that the oil futures market is a realistic reflection of real market conditions.

[size=9]What is a real reflection?[/size]

And, Oil is a finite resource. Period. It is not like air. Air is free. I can walk outside and breathe all I want, even on someone else's property. There is no OPEC for air, or futures market for air. Air won't cost more to develop in coming years.

Are you sure that air won't become a commodity? Water has.

Is there still plenty of "oil" in the ground? Sure, but it is getting tougher, more expensive, and more environmentally destructive to get it out of the ground and turn it into product. Turning Oil Shale into gasoline is difficult, expensive and does incredible damage to land and water resources. If we want to harvest that oil, we will need to except the costs.

Obviously the cost will increase. But look at all the plastic about you and you will see nothing but a petroleum product. There are companies that respect this and pay to capture used plastics.

CD[/quote]


I guess I have a lot of faith in the ability of our capitalistic economic system to provide. Can you tell me of another that has provided so well for so many?

The biggest obstacle to our economic freedom is a government that thinks they know better than 300 million individuals on how best to spend a buck

[Claw]

Dodge is offering $2.99/gal gas for 3 years if you purchase their vehicle. If you buy that vehicle you have in effect bought a futures contract negotiated with Dodge. If the price of gas goes to $5/gal you really make out. But what if the price of fuel goes down to $2.50/gal? Dodge will still give you credit for your fuel puchases but still at the $2.99 price so then you lose or at least you don't get the benifit.

Futures traders are our friend as they take the wild swings out of the commodities market. They just bet on the prices based on all the variables they put into their computer models.

Purchasers of Dodge vehicles are implicitly buying a call OPTION, not a long futures contract. Also, I am not convinced that futures traders always take the wild swings out of the commodities (spot/options/futures) markets. Indeed, there is precedent in this country of states banning futures trading because of undesirable effects on commodity spot prices.

Commodity traders act in ways which they believe are in their own best interests. Sometimes those actions are consistent with the best interests of the rest of us; sometimes those actions are not! I do not assume that speculators are acting as my friends.

Dodge was an example.

If you buy a contact that is honored in the future it provides a stable point in which to go forward. Swings happen that is why a contract in the future is needed. Incorporate in Delaware.

Daniel, do you not act in ways that are in your best interest?! A commodity trader is not in the welfare business, but someone providing a service that is needed therefore someone that I would consider friend.

[caseydog]

I guess I have a lot of faith in the ability of our capitalistic economic system to provide. Can you tell me of another that has provided so well for so many?

The biggest obstacle to our economic freedom is a government that thinks they know better than 300 million individuals on how best to spend a buck

This is where our congress goes partisan, when people get so wrapped up in ideologies, that they can't tolerate any deviance from that ideology.

And, honestly, if all 300,000,000 Americans knew how to spend a buck, your ideology would work. Then again, if all 300,000,000 of us obeyed the law, we wouldn't need the police.

Going back to the original post, we now have a body of politicians who are so afraid of their "bases" that they won't come out in favor of compromise, and dare not buck the ideologies of these base voters. And, these base voters are obsessed with ideologies.

All of the sudden, you are either for the free market, or you are for socialism. You can't be in favor of a well regulated free market, because that does not fit with either ideology.




BTW, the problem I have with supply-side economics is that it puts the cart in front of the horse. In a consumer-driven society, demand drives investment in new products and services. Unless there is demand, no businessman is going to invest in new factories or technologies, just because you give him a tax break.

We gave the oil companies billions in tax breaks as an incentive to explore for more oil when oil was $25 a barrel. That's how supply-side economics is supposed to work. They didn't do it. Now that oil is well over 100 bucks, oil companies are starting to get interested in exploration, especially as they see demand growing worldwide that is not likely to reverse. They are ready to invest now that there is growing demand and profits to be made.

Supply-side economics is just welfare for the wealthy.

Now, that's my opinion, and there are well educated economists who agree. And, there are well educated economists who disagree. So, who is right and who is wrong.

People obsessed with ideologies are certain they know who's right. They make up the "base" of the political parties. They hold congress hostage.

I'm a realist. In a constantly changing world filled with human beings, I can not see how anyone can afford not to be constantly modifying what they think and believe.

Buying into any ideology is something I can not do. It would be like putting my brain in an airlock.

CD

[caseydog]

Daniel, do you not act in ways that are in your best interest?!

Um, I believe Daniel Bernoulli is a handle, not his real name. If it is his real name, he's very old, and I wouldn't argue Mathematics with him.

CD