Replies to post #121221 on ajtj99's Market Pulse

[fanshaw51]

Everybody seems to want to blame someone for the energy mess, so they've pointed the finger at "speculators" not supply and demand.

Were they to point the finger at supply and demand then some real energy policy would have to be adopted, but that would require bipartisan work, which is not something they seem to have any knowledge of...

I find this following article gets it but alas some never will.

Fan.

Article from Fortune "peels back the onion" on Speculation
By Jon Birger, senior writer
June 27, 2008: 10:09 AM EDT


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(Fortune Magazine) -- Before the U.S. Commodity Futures Trading Commission starts scrutinizing the role that speculators may have played in driving up fuel and food prices, investigators may want to take a look at price swings in a commodity not in today's news: onions.

The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place. "There probably has been more volatility since the ban," says Bob Debruyn of Debruyn Produce, a Michigan-based grower and wholesaler. "I would think that a futures market for onions would make some sense today, even though my father was very much involved in getting rid of it."

[ajtj99]

If you want to know who's responsible for the rise in oil, blame the businesses and business people in China. They're buying 10-million new cars this year, and all will need gas.

There's barely a used car market there, so that means almost nothing will come off the road.

That amounts to about an additional 300,000 Barrels a day of oil demand just coming from cars in China. Add in the trucks and other transport and you've probably got 400,000 barrels of additional supply.

What we do here to conserve makes little difference when this is happening.

That blame the speculators stuff is missing the basic econ 101 point - supply is well below demand, and demand is growing while supply is shrinking.