tag:blogger.com,1999:blog-1469531130099587588.post6329274420214593499..comments2023-06-05T16:26:27.079+02:00Comments on Miscellaneous economic ramblings: Speculation and the Oil PriceThomashttp://www.blogger.com/profile/05980127611042973278noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-1469531130099587588.post-12510244068000638392009-07-11T22:35:09.044+02:002009-07-11T22:35:09.044+02:00@Thomas:
Risk premium is the premium an investor ...@Thomas:<br /><br />Risk premium is the premium an investor is willingly to pay to be on the right side of the deal if the world economy crashes. I suspect that might be short in oil. Then again, I can imagine the world economy because of lack of oil (Say Israel bombs Iran). Then being long in oil sounds better...ketzerischhttp://verlorenegeneration.denoreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-83981575602150997632009-07-10T22:23:18.655+02:002009-07-10T22:23:18.655+02:00I would argue that there's essentially two way...I would argue that there's essentially two ways this can go:<br /><br />1. If investors are right about the underlying trend (peak oil, increasing scarcity and all that), then the fact that they are driving up prices is essentially good, because it "spreads the pain" between today and tomorrow (instead of low price today and extreme price tomorrow, it will be a higher price today, and a less extreme price tomorrow).<br /><br />2. If investors are wrong, and for whatever reason oil will not become more scarce (or they overestimate the degree of scarcity), then this turns into a bubble. The bubble can keep inflating as long as enough investors believe in it, but if the fundamental markets never catch up with it (i.e. scarcity never materialises), then eventually the bubble will pop.Thomashttps://www.blogger.com/profile/05980127611042973278noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-59132996023134165802009-07-10T21:54:11.524+02:002009-07-10T21:54:11.524+02:00Ok,I thik you miss my point.
The requirements are:...Ok,I thik you miss my point.<br />The requirements are:<br />-increasing quantity of money<br />-investors with high risk appetite<br />-a commodity market<br />-peak oil theory<br /><br />So,they are sure about that the price of the oil will go up.<br />Due to this,they pour a lot of money continously (we have low intrest rate,so a lot of money) into the future market,and they are roll-over the contracts continously.<br />Because the amount of money which enter the market increasing ,the price increasing too.<br />If we have a lot of free money (loan) then the buyers will able to get loans to buy the oil.bomlathttps://www.blogger.com/profile/03006355651368807990noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-51870791656904443792009-07-10T21:32:29.679+02:002009-07-10T21:32:29.679+02:00I agree that position limits might increase oil vo...I agree that position limits might increase oil volatility: If speculators store oil when the price is low and release it when the price is high, that basically helps to reduce sharp movements. <br /><br />Of course if their predictions are bad and they predict a further price increase just before demand drops, they will unnecessarily drive up the price. But that's not their intention, because they themselves get hurt in the process(they buy oil hoping for a rising price, but then the price drops).Thomashttps://www.blogger.com/profile/05980127611042973278noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-56418042445710481792009-07-10T21:25:03.148+02:002009-07-10T21:25:03.148+02:00I'm not quite sure how you define "risk p...I'm not quite sure how you define "risk premium" in that context. Can you explain?Thomashttps://www.blogger.com/profile/05980127611042973278noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-22245269603128026262009-07-10T20:59:18.828+02:002009-07-10T20:59:18.828+02:00Contango causes people to store oil. If you buy fu...Contango causes people to store oil. If you buy futures in a contango market you basically bet on the contango not being steep enough, i.e. the future spot is even higher than the forward price.<br /><br />Do you know who's earning the risk premium? Being long or being short in Oil?ketzerischhttp://verlorenegeneration.denoreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-76226895387453241942009-07-10T19:51:00.694+02:002009-07-10T19:51:00.694+02:00Not the contango is the mayor driver of the decisi...Not the contango is the mayor driver of the decisions.<br />If the big money managers allocating more money into the commodity market then the price will increasing,and the contract roll over will bring you gradualy increasing profit.<br />After it,the diference between the spot and future price is not so interesting.bomlathttps://www.blogger.com/profile/03006355651368807990noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-30481187970186917852009-07-10T14:34:09.870+02:002009-07-10T14:34:09.870+02:00This article claims that oil volatility might incr...This article claims that oil volatility might increase due to th position limits. Might by true.<br /><br />http://www.handelsblatt.com/finanzen/aktienanalysen/schuss-gegen-rohstoff-spekulanten-koennte-nach-hinten-losgehen;2431179ketzerischhttp://verlorenegeneration.denoreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-12614090428638160672009-07-10T00:09:51.769+02:002009-07-10T00:09:51.769+02:00Buying oil futures is just a waste of money as lon...Buying oil futures is just a waste of money as long the market is in contango. As you write, someone is actually storing the oil to deliver. The buyer of the future is paying for the storage. So I'm with you: It's making oil cheap in future and thus basically a good thing. Just I doubt it's a good investment.ketzerischhttp://verlorenegeneration.denoreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-19869256211767769392009-07-08T20:57:11.302+02:002009-07-08T20:57:11.302+02:00Let say:I have a contract for 2010 jan
if I will r...Let say:I have a contract for 2010 jan<br />if I will reach that point of time,then the future price will be spot,and I have to sell/buy oil to eliminate the contract,and I could open a new contract in the future.<br />If I use future buy,and I use spot sell,AND the oil price is monoton growing,then I continously can roll over my contract into the future.<br />And as a new player enter to the market,he will create a new "buy" position in the future,which will drive up the price.<br />If the liquidity is infinite,then this play can go untill the end of the world (:-P)<br /><br />Untill all of the player just put money into the market,the prices will go.<br /><br /><br />But I think the fall in the prices in the past week is a singal about the slowing down of the liquidity pump in china.bomlathttps://www.blogger.com/profile/03006355651368807990noreply@blogger.com