Speculations on Fuel Prices
Market speculators take a risk on their forecasts of future prices; if they bet wrong, they lose money. If they bet correctly, they make money.
Example: Southwest Airlines is an oil speculator. They bet fuel prices would rise sharply, agreed to buy fuel at a price more than the yesterday's price, and that price turned out to be less than today's price. They bet correctly, and Southwest Airlines customers are delighted with the speculation.
General effect of speculation: Smoothing prices. Instead of wild swings in price, speculation lowers the highs and raises the lows. The entire market (suppliers and customers) profit.
Price does not automatically go up because of speculation. If it did, we would all be speculators and we would all be rich.
Price goes up if the market expects less supply or more demand. "Speculators" is just another name for "the market expects" - in other words, good old capitalism.
More demand - China and India are growing rapidly into industrial giants, and they're thirsty for fuel. USA and Europe continue to grow and demand more fuel. Speculators do not control the increase in demand; they merely note it.
Less supply - USA refuses to access it's own huge supplies of fuel. Congress prevents drilling our own offshore areas; instead, we watch Cuba lease those reserves to China, which drills without the clean safeguards the USA would use. Congress prevents drilling known inland areas; it allows drilling only on leases which are known to NOT have oil! Congress prevents building nuclear power plants; the French are 80% nuclear, but we're only 20%. Congress prevents access to most of our huge coal reserves (enough to supply us with all our power for over a century); not for electricity, and not for clean gasification. So, USA-generated energy (especially oil production) is decreasing. Speculators do not control the lack of supply; they merely note Congress' preventions to increase our own energy supply.
Fuel prices are high because of more demand coupled with less supply. We can't have a significant effect on demand (unless we cause our own economic depression - see comments on the Congress' Federal deficit). We could have a huge effect on the supply, but the Congress refuses.
"Drill here, drill now!" is the USA voters' mantra.
"Just say 'No' to everything, except spending!" is Congress' mantra.
Congress has a 9% approval rating; below the IRS.
Coincidence? No
Consequence? Yes!
I'm not a speculator, and I don't invest in any oil speculators. I'm just a voter and a realist.
We don't need Congress to change regulation of oil speculators.
We just need a change in Congress - at any cost.
Example: Southwest Airlines is an oil speculator. They bet fuel prices would rise sharply, agreed to buy fuel at a price more than the yesterday's price, and that price turned out to be less than today's price. They bet correctly, and Southwest Airlines customers are delighted with the speculation.
General effect of speculation: Smoothing prices. Instead of wild swings in price, speculation lowers the highs and raises the lows. The entire market (suppliers and customers) profit.
Price does not automatically go up because of speculation. If it did, we would all be speculators and we would all be rich.
Price goes up if the market expects less supply or more demand. "Speculators" is just another name for "the market expects" - in other words, good old capitalism.
More demand - China and India are growing rapidly into industrial giants, and they're thirsty for fuel. USA and Europe continue to grow and demand more fuel. Speculators do not control the increase in demand; they merely note it.
Less supply - USA refuses to access it's own huge supplies of fuel. Congress prevents drilling our own offshore areas; instead, we watch Cuba lease those reserves to China, which drills without the clean safeguards the USA would use. Congress prevents drilling known inland areas; it allows drilling only on leases which are known to NOT have oil! Congress prevents building nuclear power plants; the French are 80% nuclear, but we're only 20%. Congress prevents access to most of our huge coal reserves (enough to supply us with all our power for over a century); not for electricity, and not for clean gasification. So, USA-generated energy (especially oil production) is decreasing. Speculators do not control the lack of supply; they merely note Congress' preventions to increase our own energy supply.
Fuel prices are high because of more demand coupled with less supply. We can't have a significant effect on demand (unless we cause our own economic depression - see comments on the Congress' Federal deficit). We could have a huge effect on the supply, but the Congress refuses.
"Drill here, drill now!" is the USA voters' mantra.
"Just say 'No' to everything, except spending!" is Congress' mantra.
Congress has a 9% approval rating; below the IRS.
Coincidence? No
Consequence? Yes!
I'm not a speculator, and I don't invest in any oil speculators. I'm just a voter and a realist.
We don't need Congress to change regulation of oil speculators.
We just need a change in Congress - at any cost.
posted by Robiewan | 9:57 PM
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