Originally Posted by
iahphx
Of course, there is much precedent to folks fixing the energy markets. Does no one remember Enron, and the supposed California electric "shortage"? That shortage never actually existed, and once Enron went bye-bye, California had plenty of power.
Actually, there was a shortage. Enron controlled some of the power plants in California and asked/suggested that they go off line for maintenance. This created a localized supply shortage since there is limited capability to transmit power from other parts of the country. The only reason this worked though was because they controlled supply and transmission (transportation) was inadequate. Neither of those things are true about oil today.
Originally Posted by
iahphx
These markets were never designed to handle "investors" -- futures contracts aren't like ownership of a company. The more money you pour into them, the more the price goes up, supply and demand be damned.
But there's no reason why they can't handle investors. It's not true that the more money you pour in, the more the price will go up. Investors can invest in the short end of the contract. They can make the bet that prices will go down by selling oil for, say, November delivery. We agree on $130 today. November comes and if the price is only $110, I just made money. The problem isn't that there are investors or not investors. The problem is that everyone (speculators
and end-users) is buying oil and no one is selling it.
Originally Posted by
iahphx
So if you want oil prices to be determined (like gold) as a "financial instrument," feel free to ignore the concerns of the airline executives. But if you believe that REAL oil buyers and REAL oil sellers should control the prices -- and not those only interested in trading "paper barrels" -- maybe it would be worth your time to read the anti-speculation website and learn something about the issue.
Gold is determined as a "financial instrument" because there is very little end-use demand for gold and historically it has been used as a store of wealth. And it is convenient in that respect. You can store a whole lot of dollars worth of gold in a very small space, so the storage costs are virtually nothing as a percent of the total value. Oil on the other hand is very inconvenient to store: you can only fit about $130 into a barrel (42 gallons) and it leaks and then it's not worth it to soak it up and filter it depending on where it leaks. It's super heavy and therefore expensive to transport. Plus all sorts of other reasons.