OIL, COMMODITIES TRADING & THE DOLLAR
HOW THE SYSTEM WORKS, FOR SOME
AND WHY THE GAS YOU PUMP COSTS SO MUCH TODAY
The American President Is Working Hard For The International Oil Companies, And Against The Interests Of The American People Today
Does this make sense to you: Iran is years away from having nukes. They had to Photoshop "evidence" of their failed missile test last week. Just the other day, there were reports in the Israeli press that claimed that the U.S. had allowed Israeli warplanes to be staged on U.S. air bases in Iraq, five minutes from Iran. This caused a rally in the price of oil, which had been going down. U.S. consumers will be hurt at the pump and at the grocery store. U.S. businesses will be further damaged, and more layoffs are inevitable. The economy may collapse if oil supplies are actually cut.
Even just the threat of a cut-off in supplies of oil is hurting, big time: In case you wanted to know why prices are so high when demand is down and supply is up. Yet, it's a tough election year for the Repukelickin's, and all this is coming directly from the White House. So, nu? What gives? Are the Bushies deliberately generating tensions in the Middle East that will drive up the price of oil?
All oil produced and sold by all oil companies in every country is subject to the same pricing. (Excluding sweetheart local deals or nationalized oil sold in the country that owns it.)
The final consumer price of oil, and ultimately, gasoline, is determined by trading on the commodities markets. Such trading is very much effected by world events. The possibility of an interruption in supplies, which is what Bush, Olmert and Ahmadinejad have been threatening for months, now, is very real, or at least very much on the minds of traders, who are buying & selling for current & future delivery. If you don't think that the potential elimination of a big chunk of the world's oil supplies can have an effect on prices, you won't make it as a trader on the commodities market.
There is currently no shortage in the supplies of oil. Demand is, in fact, shrinking, along with the economy at large, and the U.S. dollar. The saber-rattling also hurts the dollar, making everything more expensive. As the value of the U.S. dollar goes down, the price for oil & gasoline goes up. Traders have to take positions either way. As oil markets go up, dollar markets go down. Better buy yourself a vicious cycle.
I don't believe there will be a war with Iran any time soon. It would be against almost everyone's interests. But constantly threatening a war with Iran has almost the same effect on oil prices, without actually effecting supplies. Bushco may also believe that generating a climate of fear can help McCain, and hurt Obama. Finally, the whole phony crisis gives them a lame excuse to tick off a few other items on their wish list: ANWR, off-shore drilling, and royalty-free drilling for their buds in Big Awl. So it's win-win-win for them.
Exactly the same thing happened in the phony "oil shocks" of the 1970's. That's when our policy in the Middle East began to change, and when the popular opposition to the new Alaskan oil pipeline was swept away, while prices for gasoline and everything else went through the roof. Oh yeah, and the bills for the Republicans' failed Vietnam War started coming in then, too, causing record deficits, and further devaluing the dollar. Sound familiar?
The difference this time is that they could start yet another war, with Iran, accidentally or on purpose. If you think gas prices are high now, you can't imagine how high they'll go if Iran is attacked and they shut down the Strait of Hormuz. Wherever your gasoline is coming from, the price will be effected just the same as if it came directly from Iran. Or had been...
"NYMEX crude up amid weak dollar, supply concerns"
' U.S. crude oil futures rose Tuesday as a weak dollar and concerns about weather and Iran's dispute with the West kept oil prices supported even as restored Nigerian and Brazilian operations limited the rise. Prompt NYMEX crude neared "record territory as the spot euro has hit a record high above $1.60 against the dollar," Addison Armstrong, analyst at Tradition Energy, wrote in a report. On the New York Mercantile Exchange at 9:53 a.m. EDT (1353 GMT), August crude CLQ8 was up 42 cents or 0.29 percent at $145.60 a barrel, trading from $144.51 to $146.73. The dollar held losses against the yen and euro after reports showed a larger-than-expected rise in U.S. producer prices for June [nN14256072] and June retail sales rose less than expected [nN14255802]. Iran's dispute with Israel and the West over Tehran's nuclear program remained a concern as were the bombings in Iraq, traders said. '
"Introduction to Commodities and Futures"
What the Hell are "commodities"?
' The terms “commodities” and “futures” are often used to describe commodity trading or futures trading. You can think of them as generic terms to describe the markets. It is similar to the way “stocks” and “equities” are used when investors talk about the stock market. To be more specific, this is what they really mean: Commodities are the actual physical goods like corn, soybeans, gold, crude oil, etc. Futures are contracts of commodities that are traded at a futures exchange like the Chicago Board of Trade (CBOT). Futures contracts have expanded beyond just commodities; now there are futures contracts on financial markets like the S&P 500, t-notes, currencies and many others. Futures are standardized contracts among buyers and sellers of commodities that specify the amount of a commodity, grade / quality and delivery location. Commodity trading with futures contracts takes place at a futures exchange and, like the stock market, is entirely anonymous. '
"How Does Commodity Trading Work?"
How does this go, exactly?
' When you buy or sell a commodity, you're technically selling ownership of that commodity, just as if you bought or sold something in a store. However, since most commodities are impractical to buy and sell that way (“Here's your 30 thousand head of cattle, where would you like me to put them?”), most commodity trading is actually a form of futures trading. You are agreeing to buy or sell a commodity at a certain price on a certain date (which are called forward contracts). For example, on Monday, you might buy an agreement to sell oil at $65/barrel on Friday. If the price of oil is $66 on Friday, you now can buy that oil for less than its real cost. However, if the price of oil is $64 on Friday, your forward contract is valueless, because nobody will want to buy above market value. It's fairly rare for people to actually buy the oil (which is called taking delivery), but rather, they buy and sell further futures options. '
"How oil speculators may be driving up prices"
Is the System "fair & balanced?"
' Speculators are able to drive up crude oil prices today because they're allowed to trade in the U.S. in futures markets not overseen by U.S. regulators. Therefore, they are free to dominate these markets by taking huge positions within them to dominate them; and there is an additional fear that, because of a lack of oversight, they may be engaging in manipulative practices — i.e. wash sales and false reporting that would be barred in a regulated environment. '
How speculators speculate.
' Futures Markets: Part 8: Market News and Analysis: Technical Analysis - the Philosophy of Charting: The cornerstone of technical trading is the belief that fundamental information, political events, natural disasters and psychological factors will quickly show up in some form of price movement. The chartist, therefore, searches for certain formations or patterns which indicate bullish or bearish shifts in fundamentals. If his analysis is correct, he can quickly profit from the changes without necessarily knowing the specific reasons for them. '
"Government Could Lose Billions to Oil Industry on Royalties"
' The law was intended to provide incentives for more costly drilling in deeper areas of the Gulf by allowing companies to avoid paying royalties for specific volumes when oil prices were below certain thresholds. However, for leases issued in 1998 and 1999, the price thresholds were errantly omitted, and the price of oil has since increased dramatically, now surpassing four times the original thresholds. Once the threshold omissions were revealed publicly in 2006, Interior sought to renegotiate the faulty leases with the oil companies. A small number agreed, but the vast majority of them are holding out. Congress has also made several attempts to address the issue but without much success. This relative inaction is partly due to a lawsuit brought by Kerr-McGee (now owned by Anadarko) in March 2006 against the Department of Interior, which if won, could result in the government losing royalties on virtually all deepwater leases. The federal court sided with Kerr-McGee (pdf) in a ruling last year, but Interior has since appealed. '
[Read more "MORE WAR TODAY? HIGHER OIL TOMORROW!" ]
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