Rick Santelli oil speculation debunk

[TickleMehNancy]

A lot of big banks were leasing tankers and stuff to hold oil in. So Santelli may be right but that doesn't mean big speculators weren't getting it delivered.

[CaptainAhab789]

Speculators are just entrepreneurs who help find the market clearing price. If we drilled for oil instead of banning most offshore drilling, then gas would only be $1, but that wouldn't help the agenda of T. Boone Pickens and General Electric.

[jizzmonger]

Santelli's entire argument is that since people will pay 4 bucks a gallon for Gas that that is the price the market is paying and that speculation isn't controlling the price, it's merely finding the true market price of the oil.

So no, Santelli's argument (no matter how much you are in love with him) does not show that speculators don't affect the price of oil.

[jizzmonger]

The fact you cite Peter Schiff and Rick Santelli as intellectuals is about all I need to know.

Both of them say the things they say so in order to distort your thinking in order to make it easier to take advantage of you because that is how they make their money.

[corymd3470]

See: watch?v=tTlYE4SR6MM

See: watch?v=0D9ZtcZw8Ms

See: Interagency Task Force's Interim Report on Crude Oil July 2008 (which investigated the major run-up in oil prices).

[corymd3470]

See: "Oil Speculators: Bad or Good" By Robert P. Murphy (econlib)

He explains in more detail here in relation to the need to see inventories.

[jizzmonger]

It makes little sense for us to continue arguing when you have an agenda and cling to your claims in a fashion akin to a religious believer.

*If* they finally kick speculators out, prices will come down and they will stay down until Supply and Demand actually start becoming an issue many many years off into the future at which point extraction costs will go up so prices will have to be increased to reflect that change.

[corymd3470]

You're confusing speculation with cornering the market. That's why there should be more speculators and not less which the article I cited in Time said.

See: "Robert Bryce on Oil Speculation" by Robert Murphy.

See: "Don't blame the oil 'speculators'" (Fortune Magazine)

See: "Why There Should Be More Oil Speculation, Not Less" By Ari J. Officer (Time)

[corymd3470]

The CFTC Interagency Task Force on Commodity Markets which includes staff representatives from the CFTC, the Fed, the Treasury, the SEC, the DOE, and the DOA - published an interim report in July 2008 that found that speculation was not driving oil prices.

The CFTC has joined with the UK Financial Services Authority and the ICE Futures Europe to investigate speculation and manipulation of oil markets.

If you have a clue at all then you know it's about the dollar. Dollar down, oil up.

[luchpockets]

Rick, why would you even bother talking to these guys, just tell them to take a futures # 101 class, and get back to you !

[dorosz427]

Hey Santelli, is this what we now call "pulling a Cramer"?

[corymd3470]

LOL! Cramer is the one saying that oil is manipulated now. See, the CFTC is getting more pressure to blame oil speculators because congress is full of miserable failures and they need a scapegoat. Economic prospects have decline which means the government's interventions haven't helped much.

[jizzmonger]

The CFTC is full of industry hacks that have worked for or plan to work for the very businesses they are supposed to be regulating.

An example is Hank Paulson as treasury secretary. Then again you also believe that speculation doesn't effect the price of oil, so you might believe that having someone like Tim Geithner as treasury secretary would mean that he wouldn't make policies that might benefit his former and future employers?

You are a victim of rhetoric.

[corymd3470]

You are a victim of ignorance concerning how futures market really work. Most perform a reversing trade. But for the sake of argument lets say that the speculators were holding off huge amounts of oil off the market during the major run-up in oil. Where did it go? Take a look at a chart of West Texas International Crude Oil Spot Price versus U.S. Commercial Crude Inventories up to the start of June 2008 when the spot price hit its peak.

And then look at the chart of the dollar vs. oil.

[corymd3470]

Speculators only have a short-term effect. They actually reduce volatility and help with market liquidity.

[WillIAMSUCCESSFUL]

This is totally bullshit,If you think these ditwits are running the

market, your Nuts,The price of oil is set by oil barons who play

these guys like homo's In a airport bathroon stall,

Whenever we have a strong economy the prices of oil is

high and when we have a economy the price of oil is low,

These are paper traders trading paper money,

[lawinward]

Hmmmm....China prepares for Olympics....oil goes up...Olympics over ? oil went down. China wanted oil stockpiles so they looked good. That's why deisel fuel was more expensive and gas (which costs more to make) was less.

[dryejd]

Santelli for president!

[ckennyg812]

Read the book titled "Confessions of an Economic Hitman". This will set the record straight to those in the dark about corporatocracy and show how oil has solely been the downfall to how our U.S Global Empire has been built around.

[ckennyg812]

Read the book "Confessions Of An Economic Hitman" written by Perkins. This will set the record straight, and open a few eyes of those that are in the dark about Corporatocracy and how oil has solely been the downfall of building our entire economic U.S. Capital Empire!!

[heazheaz]

Try speculation at a garage sale. It doesn't work. You are going to buy something for a price. People can try and speculate about the price of the Atari 2600 for sale in the future when it actually sells. But someone (the actual user/buyer) has to buy it. THAT is the market price. End of story.

[jizzmonger]

You still have not shown that speculators dumping money into oil futures did not cause a massive price increase.

Maybe your Free-Market ideals can be applied at a toll booth? Maybe 10 different power companies can run power lines to my house so I can buy my electricity in a "free market".

The financial parasites must always rationalize their behavior since they serve no useful function in society.

[Decebal825]

yes i'm with sbenard1. i think it makes sense.

[sbenard1]

I trade futures, but not oil. Any true trader knows that Rick is right! Every spec contract MUST be liquidated in the end, thus negating any spec influence. That's the way its designed. Only the hedgers, who take delivery, can buy and hold forever. Speculators MUST liquidate. There is no alternative!

[jizzmonger]

You haven't shown how they can't not influence the price of oil when speculators drive the spot price.

[kcr357]

Who is the pro-speculation guy? He reminds me of Sean Hannity, a la loudest guy wins the argument, facts notwithstanding.

[kcr357]

I cant believe there are still people that believe supply and demand were driving oil prices.

[jizzmonger]

Are you drunk?

[jizzmonger]

If you think that speculators are not solely responsible for the huge increase in the price you are paying for oil then you are either ignorant or supporting an agenda that seeks to profit from speculation.

[misternogood]

explain the recent oil bubble bursting then.

[jizzmonger]

The Financial companies cashed out.

Anymore questions?

[user197a]

History is littered with fools like you who place blame for higher prices on "evil speculators." Read your history books.

[jizzmonger]

And what will I find if I "read" my History books?

[user197a]

Here's a headline from the NY times - printed in 1917!

"HOOVER WILL FORBID WHEAT SPECULATION"

H

[user197a]

Here's another from 1918. NY times again.

"BIGGER FUND TO CURB WHEAT SPECULATION; Wilson Authorizes Increase in Federal Grain Corporation Stock to $150,000,000"

[jizzmonger]

You are validating my viewpoint, not countering it.

Does your rant have a point other than to bore us to tears?

[user197a]

Are you stupid?

There aren't controls on buying wheat today. You can buy all the wheat you want, and sell it all you want. No controls, yet wheat prices are doing just fine and "evil speculators" haven't cornered the wheat market like Hoover said.

These headlines are a sign of the times. The prices shot up because of the fundamentals, and politicians, in their stupidity, blame "speculators."

Who are these speculators? Where do they live? They won't tell you because they are a straw men.

[jizzmonger]

"These headlines are a sign of the times. The prices shot up because of the fundamentals, and politicians, in their stupidity, blame "speculators.""

~User~

Did the price of oil drop when demand dropped or did it drop when investment Banks had to sell their positions to cover losses in the Bond Markets?

[Einstiensblackid]

Both but it's still 90% demand destruction. Think of a toy store now days. All of those shelves that aren't being cleared like last year are trucks not being driven, trains not hauling, ships not sailing, factories not using electricity, utility companies not needing coal, a coal mine that doesn't need much diesel and can lay off a few guys who wont be commuting 90 miles a day or buying many toys for their kids like the used to.

Demand destruction is an extremely long event.

[jizzmonger]

That's great but what I am looking for is proof that speculation doesn't drive price when it does in every other sector.

[Einstiensblackid]

You've already got your assumptions set in stone so there's nothing I can tell you to explain why the market moves when it does. Just go ahead and blame some "they's" instead of market fundamentals and see how the market treats you.

[jizzmonger]

Pretty hard to understand isn't it.

If I am an oil refiner, and speculators have bubbled up in price all the current contracts available for sale, what choice do I have to pay their price?

I do or I go without oil.

Kicking speculators out means the capital flow isn't there to cause the bubble.

[jizzmonger]

"Are you stupid?"

~User~

No. I hope you have a stronger basis for your argument other than an emotional outburst and pointing at the wheat-market and expecting being able to transfer what occurs there in a market that has long-term storage ability VS the oil markets which do not.

[user197a]

"[wheat] market has long-term storage ability VS the oil markets which do not."

Oil can be stored indefinitely -- it's been in the ground for MILLIONS OF YEARS.

Do you know any wheat that can last for millions of years?

[Soxxgo]

sorry buddy... pure speculation.... how do you explain oil goign from 40 bucks to 140 in 1 year and back down to 40 bucks?

[corymd3470]

The dollar and global demand! Asshole.

[corymd3470]

The CFTC Interagency Task Force on Commodity Markets have exposed your crackpot theory a while ago.

See "Interim Report on Crude Oil" July 2008.

The truth is that it's about the dollar, global demand and the effects of inflation.

[jizzmonger]

It's a crackpot theory that when more money flows into the market for something that the price will go up?

I'll give you the benefit of the doubt and take your post as a joke.

[corymd3470]

Listen to me you fuckin simpleton, search US Dollar vs Oil Prices vs. S&P500.

Money flow? The Fed is the one that creates the money asshole. And what about the value of that money?

[jizzmonger]

No. The Truth is that it's about deregulation of the commodities markets.

[corymd3470]

Oversight of contracts that do not affect supply and demand, such as NYMEX cash-settled futures and ICE cash-settled swaps, is a misguided waste of taxpayer dollars, Michael Cosgrove said today in an e-mailed statement. These contracts affect supply and demand no more than the betting at a race track affects the speed of the horses.

[corymd3470]

Even Paul Krugman gets it.

[jizzmonger]

So what you are saying is that speculators cannot effect the price of oil, correct?

And of course, your argument then also has to be that speculators cannot cause volatility, correct?

And so then your argument must also then be that speculators do not ever make a profit, correct?

Which then of course means in your mind that having another middle-man only results in the producer getting less money, it never means a price increase for the consumer, correct?

[corymd3470]

Do you even know how they influence the price of oil? Again, where was all of the oil during the run up? See, you don't know what you are talking about so stop embaressing yourself. I don't want a bunch of rhetoric. I want your detailed explaination. Stop putting words in my mouth and stabbing the straw man.

[jizzmonger]

No, it's just two different ways of looking at things.

You think that because people are paying 3 bucks a gallon that it means that's the price and that speculators are merely finding the price the consumer should pay and are thus not effecting it.

If speculators held the all the contracts and your refinery can only store a weeks worth of oil and you need next week and the spec says give me 100 bucks a barrel, then you pay 100 bucks a barrel. T

[jizzmonger]

And yes, your logic was defeated long ago when we HAD regulations in these markets that kept speculators out.

You are acting like this is the way things have always been done and that all regulations in the past were merely put in place by uneducated people who also thought that speculators could drive up prices.

Do speculators effect stock prices?

Yes or No?

[corymd3470]

Excuse me? Your logic was defeated. The point was about speculators and volatility. Look at the charts.

[corymd3470]

"Do speculators effect stock prices? Yes or No?"

That is the question the simpleton asks. Sure they do. The important thing is how and to what degree.

What you seem to fail to understand is that your notion of "money flow" is only being pointed at commodities. If the money went somewhere else then that would cause inflation in that sector. You can't escape the increased money supply. Blaming oil speculators is ridiculous.

[corymd3470]

That means they are encouraged to expand storage capacity. That's how the market works!

But that doesn't explain what Santelli was pointing out.

[corymd3470]

So let me get this straight. You are really blaming refineries for not responding to market pressures by exapnding the buffer. Aren't the specualtors driving them to do what they should do? If we let the market work there is no need for a government run ptero reserve.

[corymd3470]

And you didn't answer my question. With the major run-up in oil last year, where did all of the extra oil go? The evidence is against you about speculators holding off an abnormally huge amount oil off the market.

[corymd3470]

And I would like to mention that onion speculation (futures trading) was banned in 1958. Onion prices have had as high volatility, or greater, than other commodities since then. Banning speculation does not reduce volatility.

[jizzmonger]

Your rant about the Onion market is you parroting back something you just googled up yesterday.

Onion prices are volatile because Onions are a crop. Would you expect Onion prices to be higher or lower during harvest time when there is a glut of them on the market?

Oil doesn't have a growing season and the tanks have always been full of product except back in the 70's when we had an ACTUAL shortage.

[corymd3470]

LOL!

Now supply and demand matter.

[jizzmonger]

*If* they come up with regulations to kick speculators out, oil prices will drop just as they are doing now as speculators leave the market.

Your argument is that because the oil is being sold at a higher price to the end consumer who is willing to pay that price, that speculators are not effecting the price.

In other words, there is a set amount of chips on the table and the speculators take less or more chips without the affecting the total number of chips available.

Correct?

[corymd3470]

I'm not answering your confused questions until you tell me where all of the oil went during the run up and also address Rick's point.

But sure, the consumer being inelastic is part of the reason for the high price.

People had bid up inflation hedges (not just oil) but this was a reaction to fundamentals.

See: "Robert Bryce on Oil Speculation" by Robert Murphy.

See: "Don't blame the oil 'speculators'"

in Fortune Magazine.

[jizzmonger]

You don't have to hold oil off the market in order to increase the price, you just have to go in with a large amount of money and start buying future contracts and run up the price or sell a large quantitiy of them and drop the price. (making money both ways)

Wall-Street firms and Hedge Funds do that all the time with stocks, no reason they aren't doing it with oil

No worries though. Just the simple talk of regulation has forced speculators to sell their positions just as last year.

[corymd3470]

Just like the head of the CME has said, oil has followed the equity markets. I guess you don't want people buying stocks either.

In theory a high futures bid up would bid up the spot price based on the arbitage opportunity. In order for the spot price to be driven up, the barrels being delivered to market have to be diverted from the traditional users. But a run up in price so severe would surely increase the amount supplied from producers if you say that supply/demand was not part of it.

[corymd3470]

So they hedge the long physical position with a short futures position, pay the smaller storage and finance charges on the physical and receive the larger yield from the contango.

[corymd3470]

Remember that the speculators have to get out unless they want the oil in their back yard.

[corymd3470]

You get what I'm saying? They do have to hold oil off the market because that's the way you affect the supply. At the end of the day (or contract) the price is set by supply and demand.

But look at the CFTC's report that I mentioned. They investigated the matter quite well. Now they are only complaining because congress has put heat on them because congress is full of miserable failures who speak only for a minority of miserable failures of their constituency.

[jizzmonger]

No it is not set by supply and demand numbnuts.

If demand drops, oil is left in the ground, when demand increases more is pumped. There is very little above-ground storage capacity where you can keep excess "supply".

This really isn't that difficult to understand Einstein. If speculators hold the majority of contracts and have bubbled the price of the contracts up, what choice do I have other than to pay their price if they are the only people I can get contracts from?

[corymd3470]

LOL! The data showed that inventories were not going up. We have inventories now because demand is going down faster than production.

And again there is both a spot market and a futures market and you have to understand how they are related. Speculators have to get out of the contract so that forces them to sell the contract at the current real demand. If you go long on a contract that you believe is overpriced then that's your fault.

Don't take your failures out on everyone else.

[jizzmonger]

Right. Speculators also do not affect the prices of stocks because stocks must eventually must be sold at their market value.

Yeah, I can see your logic there.

Like I said, don't worry. Mere talk of regulation drove prices down and regulation in the past kept prices fair and stable for many many many many years.

[corymd3470]

LOL! Stop embaressing yourself. Stocks are now the same as commodities? But speculators are also on both sides of stocks. They take long and short positions. They help the market get toward equilibrium.

You have no logic. What you have just said is that people should not be able to buy stocks or commodities. After all, you aren't working for a company you buy shares in. LOL!

The prices went down on fundamentals which have recently turned worse as seen in the stock market. DUH!

[jizzmonger]

No.

The regulation I am proposing is simple.

People without the ability to take delivery of here-said oil, may not purchase contracts on the commodities exchange.

This is how it used to be. Since deregulation, prices have only gone up and become more volatile.

Because, guess what. Speculation drives up prices and increases volatility.

[corymd3470]

ROFL!

Who cares the number of times it trades before expiration. Supply must equal demand at expiration. You are talking about protecting the hedgers can't play the game.

I see your policy. It's reward the retards for being retarded. Well I have to say you are an expert in that domain.

[jizzmonger]

I am neither retarded, nor anti-capitalist.

If you think the United States should be punished then so be it. I doubt you will get many people behind that mentality.

If there are 100 widgets at a store and speculators has them all marked at 1000 bucks each, I either pay the price or I go without widgets correct?

[corymd3470]

Personally, I think the US deserves to be punished with capital flight. And I think that it's not too far down the line. Years? Yes, but not many.

You know, when you get to a certain level of national and personal narcissism and disregard for what made us great - being productive and the freedom to fail or succeed at your own expense - then you really start asking for it. We are a pathetic consumer economy whining because more productive people around the world are using more oil. Pathetic.

[jizzmonger]

Not really.

I problem with our economy is that not enough people work for a living. You have these huge banks and stores full of people who do nothing other than act as middle-men for the exchange of goods.

None are producers, all are parasites.

The producer eventually are overwhelmed by the parasites because the number is just too great. The solution thus far has been to outsource and lower credit standards.

That ship has sailed.

[corymd3470]

I agree that there isn't much production in the US economy considering the fact that it consists of 2/3rds consumer spending. But why just pick on oil speculators?

Lowered credit standards were enabled by stupidity on behalf of the bond holders and the fact that the Fed's money pumping created arms that made sense while interest rates were artificially low. The loans would not have made economic sense from the beginning (immediate defaults) if the fed hadn't price-fixed interest rate low.

[corymd3470]

And yes the US deserves the fate that developing nations face (capital flight) when they're completely irresponsible and refuse to get their shit in order. And I don't give a flying fuck if people won't admit that. That's their problem. And in the end it doesn't matter what they think because it's going to happen anyway.

[corymd3470]

Another France. Another loser.

[chaserehn]

Speculation cannot drive up price. Only supply or demand can do that. I can go in and speculate and buy a $1 stock for 3$ and if i buy enough it may go up for a bit but the price will come down to what its worth and someone will lose there azz

[jizzmonger]

If 100 contracts for a certain time frame of delivery are available via the different means of getting oil where it needs to be and I own all 100 contracts, what option does the refiner have other than to pay the price or go without oil?

Oil markets are sensitive in that way because producers don't pump much more than what is needed.

They leave it in the ground where storage costs are free.

[chaserehn]

If you demand that much then yes the price will go up. But if you don't have an actual use for that oil... Look out, you may loose you ass trying to get rid of it.

[jizzmonger]

@chaserehn

Sure and some Hedge Funds have tanked for that reason.

Other than that, Morgan Stanley made 1 billion dollars last year trading oil contracts.

That's 1 billion the actual producers and refiners don't get and 1 billion more the U.S. population had to pay and that was to 1 financial institution alone.

What a total waste shoveling all that money over to worthless, speculative parasites.

[finallytherock]

@chaserehn a cash settled futures contract does not have any delivery.  Speculation can, and does, drive oil prices up and down.

[mididoctors]

@finallytherock that would require that the producers stockpile production and such storage would be cumulative. If the argument is they fake production then the effect would be nothing because the total expiration date delivery oil would be in effect in a distinct separate market

[corymd3470]

But just to rub it in:

At all times the future price of a commodity is based on the reality of supply and demand. With a stock, there is absolutely no true supply/demand because no one must own a single share of any stock. There is no strong motivating factor as with commodities.

See: "Important Difference between Stocks and Commodities" by Larry Williams

"Because of this fact, commodity markets are more honest and certainly easier to forecast."

[corymd3470]

And please read the article before you say what I know you were just about to say.

The fact of the matter is that there are more commercial interests in the commodity markets and they keep things more efficient.

[corymd3470]

Also, what you are not able to admit is that a speculator is rewarded only for accurately predicting the supply/demand fundamentals. This weeds out herd. In that case they are leading towards correct prices and that is also across time which you seem unable to make the leap from the realm of two or three dimensions to the one we inhabit which is four dimensions.

[corymd3470]

And you fail to understand the point about the production end which would mean the spot market would eventually have a glut of oil and this would certainly be increasing inventories in a noticable way if you understood the dynamic with hedgers and speculators.

The market will turn us to alternatives well before the time we actually run out of oil. That's a good thing.

I'm done with your conspiracy theories.

[corymd3470]

Time also just had a good piece: "Why There Should Be More Oil Speculation, Not Less" By Ari J. Officer.

[corymd3470]

See: "The Bootstrap Theory of the Oil Price" By Anthony de Jasay. (econlib)

[corymd3470]

And yeah, I hate to type more than I have to.

[ITILII]

only people on cnbc who seem to actually tell the truth about things are Rick Santelli, and Joe Kernan...though Maria Bartiromo and Erin Burnett are very nice to look at ;-)

[AirelonTrading]

God bless Rick Santelli. Smartest man in the discussion.

[jizzmonger]

By smart you mean ability to mislead?

[776281]

Speculation induced rises don't last. It is called peak oil, the pice rises are due supply being less than demand.

SUV's sitting unsold, people know that the price is going up.

[anonym0u5]

Finally! Good explanation.