Commodities: Oil prices fall on speculation; not supply and demand

[brandon]

Senator John Kerry admitted to Bill O'Reilly that every congressperson, including John Kerry himself, took bribes from the oil companies to not allow alternative fuels nor usage of electric cars. I witnessed the interview myself first hand. Under Obama it seems that finally things may improve some.

Can you show me a federal law that prohibits electric cars and alternative fuels? Yea I thought not. ANd how much of this bribe money did Ron Paul get? Unsubstantiated facts or unsourced quotes from John Kerry are not really the best way to begin an argument.

 

[Brian4Liberty]

If you're talking about manias, that's a different story. In that case the traders that buy at the height and don't manage to sell before the fall get stuck with the bill, but it's their fault for participating in that already highly bid up market and not making good judgments about when to get in/out. And how does that harm society btw?

That's essentially what was going on when oil was going up. It was a speculative bubble. How does that harm society? Energy effects almost every aspect of the economy. How would a big, new government tax effect society and the economy? (Except it's like a tax that doesn't go towards paying government debt).

 

[hugolp]

That's essentially what was going on when oil was going up. It was a speculative bubble. How does that harm society? Energy effects almost every aspect of the economy. How would a big, new government tax effect society and the economy? (Except it's like a tax that doesn't go towards paying government debt).

I agree. Bubbles hurt the economy, but the point is that they are the result of government intervention.

 

[Brian4Liberty]

I agree. Bubbles hurt the economy, but the point is that they are the result of government intervention.

IMHO, bubbles have multiple causes, not solely government intervention. Just like wars. Some people say the Iraq war was all about oil. Yes, plus additional motivations.

 

[LibertarianfromGermany]

Senator John Kerry admitted to Bill O'Reilly that every congressperson, including John Kerry himself, took bribes from the oil companies to not allow alternative fuels nor usage of electric cars. I witnessed the interview myself first hand. Under Obama it seems that finally things may improve some.

The point I was making was that higher oil prices put additional pressure on finding alternative fuels; of course economically, but as a result also politically.

Please read the article I provided:

http://www.huffingtonpost.com/raymond-j-learsy/your-tarp-money-being-use_b_160249.html

The article states:

Billions upon billions of TARP dollars have been made available to the likes of Morgan-Stanley. And you know what the money was meant to be for -- to finance business and to take pressure off the housing market by helping homeowners avoid foreclosure.

But then again the first $350 billion was released virtually without strings by the Bush administration and its appointees, and you can well imagine the winks and nods that went on behind closed doors. "Home mortgages? C'mon. I've got a better plan. And it's going to be a big help to all the fans of Bush and Cheney in the oil patch. We're going to do our damnedest to prop up the price of oil, and if we buy enough we'll keep it from falling and push up the price of gasoline as best we can. Just think of all those dummies out there. We take in their tax bucks and hit them again with higher oil and gas and heating oil prices. Guys, we're on a roll!"
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The problem was that the government gave them money. Not the way they spend the money. Of course speculating and avoiding the consequences by getting bailouts is a good strategy. But the antidote is not forbidding the speculating, but getting rids of the damn bailouts. If you were to forbid speculating, you can't have a functioning economy.

So, how exactly did the price of oil go to almost to $150 a barrel if the banks did not initially purchase large quantities of oil only to dump it later? Our economy was collapsing and oil skyrocketed. Why is that?

Do you realize the strain that higher oil prices put on our economy? When gas prices were at its zenith, it prevented our economy from snapping back from the crash. Diesel fuel was too high and transportation costs were prohibitive. If fuel costs had been cut, it would have had a much greater benefit on our economy at the time than any "tax cuts", which is what the Republicans were screaming for.

Do you realize how you would completely destroy any prospects of a successful U.S. economy by trying to outlaw speculating? Speculation is a vital tool of the market economy on the process of making sure that resources are used efficiently. Remove that (impossible in practice anyway so it's really pointless to debate) and you don't have a market economy anymore.

Why did the American consumer have to suffer? We had no control whatsoever over the price increase of oil. It was manipulated by big money. If not, how was the price driven up so high, only to shoot straight down?

The only reason that speculation of that kind can be profitable is when you have the government bail you out. And even if you outlawed speculating, you wouldn't solve the problem, the companies responsible would just find another way of getting the government to give them money and control.