Reply #8: They don't [View All]

[FreeJoe]

Speculators can have a dramatic effect on the price of oil in the futures market (the cost of oil purchased today for delivery in the future), but very little effect on the price of oil today. The price of oil on the spot market is determined by producer supply and consumer demand. It is expensive to hoard a bunch of produced oil, so you rarely see it happen.

Think about it. The companies that produce oil are greedy. They want to make the most money possible. Why would they sell it to consumers for any less than the maximum amount that they can get? If they are already gouging consumers for every last dollar they can get, where do the speculators come in? How can they buy it from the producers and sell it to the consumers for still more? Do you think the big oil companies are too stupid to get the best price for their oil?

On a related note, whenever you see an article that talks about who we get our oil from, the article is almost always full of shit. The oil market is global. If we stop buying oil from a country we hate, they sell it to someone else for almost the exact same amount as we would have paid. If a country hates us and refuses to sell us oil, we buy it from someone else for almost the exact same amount. That's not to say that a large trading block like OPEC can't affect prices by cutting production, but when they do the price goes up for everyone in the world. There is basically one worldwide oil market.

The gasoline market is different. It is comprised of more local markets each of which is small enough to be subject to more manipulation. This is typically done by refiners and not by speculators.