I should never read the Sunday paper ...
When the price of a gallon of gas got over four dollars, like most folks, I assumed that it was in response to the laws of supply and demand. I tended to disagree with the people who were claiming that the commodities markets were being manipulated by greedy traders.
I was wrong.
I really don't know who trades commodities. I have a slight inkling of the size of the markets and some understanding of the structure of the CBOE and the New York Mercantile Exchange. I do know however, the fundamentals of a market. Right now, the fundamentals of the markets for energy, as an example, dictate that prices should be lower. That is, there is less demand for energy, especially for natural gas and gasoline. Why are the commodity prices higher then? Why are markets that are so deep - meaning that the size of the contracts traded and the number of companies on the exchanges that trade them, so many - as thin as they seem to be and the prices of commodities as easy to manipulate? I know why ... because nobody has learned anything from the mortgage meltdown and the greed that caused it is alive and well.
Hope you all have a swell summer of driving around in your SUV's.
Subscribe to:
Post Comments (Atom)
1 comment:
The traders all expect the price of gas to go up in the summer because that's what the oil companies do to make more money. There is no mystery here. There is more demand for gas in the summer so why not raise the price of gas? Maybe you thought that increased demand produces lower prices. Not in this case. The demand is somewhat inflexible and the oil companies take advantage of this. People are driving to the lake in the summer, driving, driving, driving.
The price of gas will hit $4 a gallon, you can bet on it.
Post a Comment