Categories





Silver Exchange

Oil Speculation – Speculators Benefit Society

from Wealth Cycles:

Recently we have ran across multiple “educational” articles on speculation and speculators that wholly misunderstand the great beneficial role performed by these market participants.

We aim to correct the faulty logic and inform readers why speculation, in all markets, is in fact, crucial to a better society. Plus, it is fun to be smarter than the average politico-media shill.

Too Easy

At HowStuffWorks.com we find this ignorance:

Speculators have no hand in the sale of the commodity they’re betting on; they’re not the buyer or the seller.

This is incorrect; in fact, the speculator can be either the legal seller or legal buyer of the good. By contract (a derivative is simply a contract) the speculator is obligated to deliver oil, or obligated to accept delivery of oil. The author even identifies parties integral to the physical oil market that engage in speculation daily, directly refuting their own quote above. Now consider:

A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes they’ll be able to sell it later on at the future price

Read More @ WealthCycles.com

Leave a Reply

  

  

  


× six = 30

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>