F... gas prices

[mlmpetert]

Originally Posted by Daseal

Simple supply and demand. Some of the largest countries in the world are becoming industrialized. With the rise of demand from India and China there's no doubt prices will go up. I love how people love to preach free market and capitalism -- then bitch when oil companies charge more for gas. They should be doing what nets them the highest profit. Who here has stopped driving? I haven't. It will take a much high price to get me to quit as well.

It's time to start finding renewable energy sources. Not bitch about gas prices.

But its not so simple. So 2005 was hurricane Katrina and that was primarily a true simple supply and demand problem (plenty of oil, not so many refineries to make gas). 2008 was primarily a oil and commodities speculation problem as is today. There are plenty of barrels of oil out there to indicate much lower prices, its just that there are also a lot of speculators out there for a whole lot of reasons (Middle East unrest, Japan, Obama energy policies, current monetary policy, summer driving and gas blends, hurricane season approaching, Emerging Market growth, global warming, Gulf drilling restrictions, refinery building restrictions, shrinking oil reserves, ect).

Its not like there are only 1000 hotdogs for sale at a baseball game with 50,000 people and the venders are bidding the price up. Theres plenty of hotdogs for this baseball game, its just concern about next seasons baseball game that’s driving the price up for today’s matchup. Plus its not even the fans in attendance or venders that are driving up the price of hotdogs, its people watching the game at home biding on contacts that outnumber the number of hotdogs 10,000 to 1.

Derivatives anrt so cut and dry as a baseball game hotdog (no almost-pun intended!) and are really hard to understand especially in depth but most scholars think that they add to market efficiencies. I wonder if people biding on contracts that have no underlying physical holding creates the opposite effect, especially when it comes to things that can affect people lives like food and oil.