Sunday, July 13, 2008

Oil Speculators Chase High Prices, Not Cause Them

Saying oil speculators cause high oil prices is like saying that doctors cause people to be sick because you'll find more doctors in hospitals if there are more sick people.

Watch Biz Flog video here.

HT: Juandos

11 Comments:

At 7/13/2008 10:55 AM, Blogger Sophist said...

"Oil Speculators Chase High Prices"

I repeat, in the case of oil we are not talking about speculators causing price. We are talking about price manipulation.

So I can rephrase:

"Oil Manipulators Cause High Prices, Not Chase Then."

You see, a little rephrasing can make all the difference in the world and convert a straw man to a valid argument.

Manipulation has little to do with speculation. Speculation involves some guesswwork. Manipulation involves deterministic mechanics.

Shifting the focus to speculators is a red herring. It's manipulators we should be after.

As I said before, speculation is healthy because due to the law of large numbers and the nature of zero-sum game the expected gain of speculators as a group reverts to zero mean in the longer term. At the same time, speculators provide liquidity and assume hedging risk.

The bell tolls for manipulators.

 
At 7/13/2008 12:39 PM, Blogger juandos said...

Well sophist for all your word gymnastics you've yet to come close to making even the smallest headway into proving your conspiracy theory...

Keep trying though, its pure entertainment until you can come up with something that both CREDIBLE and substantial...

 
At 7/13/2008 12:53 PM, Blogger Sophist said...

This is not a conspiracy theory Juandos.

If you think calling it a conspiracy theory deprives it of any value you are mistaken.

Oil companies have been caught in the past to manipulate prices. Do you recall BP?

If you think I talk about a conspiracy theory in turn I may come back and argue you are acting purposly to confuse the public by intentionally mixing speculators with manipulators.

OK, you can maybe provide a guaranty to all citizens of the world that there is no price manipulation. But if you are wrong, are you willing to pay the difference?

Say, yes or no...

 
At 7/13/2008 1:01 PM, Blogger juandos said...

Now sophist jumps from the conspiracy of speculators to the conspiracy of oil companies...

'Speculators' have now morphed into 'manipulators' and in turn morphed into 'oil companies'?!?!

People are responsible to themselves to not get ripped off by anyone...

That's what local and state elections are all about, electing people who look out for the interests of those who vote them into office...

 
At 7/13/2008 4:51 PM, Anonymous Anonymous said...

Sophist,

Unless you actually can substantiate your "claims" they remain highly speculative and unproven and as such are likely to be viewed as conspiratorial.

http://en.wikipedia.org/wiki/Conspiracy_theory

Unless you have direct, unequivocal evidence demonstrating price manipulation, your argument has not been proven. Arguing that swings in prices prove that there are "manipulators" is not sufficient any more than George Bush's claims that Saddam had WMDs made it so.

 
At 7/14/2008 7:20 AM, Blogger Sophist said...

To per(con)spiring anon:

(1) I have never attacked speculators. As a matter of fact, I have said many times that speculators are required for market efficiency in price discovery. Normal speculation is very healthy activity. I speculate in the markets myself on a dialy basis for the past 25 years.

(2) Anon said: "Arguing that swings in prices prove that there are "manipulators"

First of all I never talked about price swings. This is proof you both do not understand the subject discussed and you are also a cheap accuser. I talked about sustained price trends like we have in oil nowadays partly caused by market manipulation. This has been done in the past many times and you are either too young or too ignorant or both to know. One example: Hunt brother and the silver market. Does that smell to you like a conspiracy?

(3) I have said that I have no proof of market manipulation and that the exchanges should undertake the task of proving if there is none. I described a specific, almost trivial way, that organized oil market manipulation can be used to create cross-asset trading situations by manipulating oil futures prices.

(4) This issues is very complex and not black & white. If you lack the knowledge and the comprehension skills to understand what posters claim you ought to refrain from posting and making silly accusations.

 
At 7/14/2008 5:24 PM, Anonymous Anonymous said...

"I have said that I have no proof of market manipulation"

There's our answer. You have repeatedly claimed there is market manipulation yet cannot substantiate your claims.

Not accusing you of anything. Just making an objective assessment of the lack of substantiation of your claims.

By contrast, the majority of posters are supplying links to data in support of their claims. Isn't that sort of standard stuff.

 
At 7/15/2008 8:37 AM, Anonymous Anonymous said...

"Just making an objective assessment of the lack of substantiation of your claims."

Lack of evidence does not constitute any kind of evidence.

Isn't that something basic you ought to know anon?

 
At 7/15/2008 8:39 AM, Anonymous Anonymous said...

sophist,

What I find fascinating is that you have presented a conclusion and obviously know something about the subject yet when one asks you essentially "What lead you to that conclusion?" you interpret the question as a personal attack rather than a request for information.

I am a fellow classicist and grew up in a family where discussing ideas was interpreted as confrontational and overtly hostile rather than an exploration of ideas. All discussions seemed to end in "Well, you obviously just don't know what you're talking about" or "Let's not argue about this". The discussions seemed to be personal, the communication passive agressive and the primary approach to conflict or difference of opinion was avoidance.

Strangely, I seem to be drawn to you perhaps, because I considered sophist as a possible blog ID. Perhaps, to graduate to some higher level of understanding represents something of importance to me. Perhaps, this is more possible with a stranger than a member of my family.

 
At 8/02/2008 10:59 AM, Blogger Kent Carter said...

This comment has been removed by the author.

 
At 8/02/2008 11:00 AM, Blogger Kent Carter said...

The top independent oil companies by market capitalization saw year-over-year production rate declines of 3% in the second quarter of each of the last two years. That would be Royal Dutch Shell, Exxon Mobil, Chevron, BP, Total S.A. and Conoco Phillips. This is why oil prices have increased so rapidly because free-markets are losing control of production to state-owned companies owned by countries like Venezula, Russia and China. Not to mention exponential production declines from the most prolific fields.

 

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