Oil Speculators Account For 50% of Oil Trades

New study here.
I don’t understand economics very well, but this seems ridiculous. What is the point of this? Why are 50% of all oil trades made by people who are not even buying or selling oil, but instead are just betting on futures, that is whether or not the price will go up or down? Ridiculous. That’s not buying and selling, that’s just gambling. So capitalism requires gambling in order to run its economy? Good Lord, what next?
This seems absurd to me. People who are rewarded in society are people who are producing or distributing a product.
Even artists selling schlock are producing something that someone wants to buy. Overpriced pituitary cases on basketball courts seem silly with their multi-million $ salaries, but they are producing a product, professional sports, which millions want to pay for in various ways. All of these strike me as socially useful types of production.
Hell, even dope and porn are products that folks are willing to fork over bucks for. Production need not be socially beneficial, but I would suggest that production or distribution itself ought to be a requirement for any socially useful type of economic activity.
I have no beef with folks who are either buying or selling oil, or any other commodity for that matter. That’s a product. Buying and selling is part of the function of the market in a market society.
But sheer gambling seems to be completely extraneous to any social benefit. No product is produced, no product is purchased, no product is sold. This seems to me very much a useless, leech, “parasitic” type of economic function. Just gamblers in a casino called a Commodities Market. Well, it turns out that these gamblers blew up the cost of gas to $4.50/gallon last year. Similar gamblers serving no useful social function whatsoever blew up the housing market and screwed the economy of the whole damn world.
Various arguments are offered. The typical one is, “They will make money and invest it.” First of all, that’s not really true, and second of all, that’s trickle down economics, which can be used to justify the most outrageous kind of economic inequality on the basis that the rich will somehow share the wealth in some funny and hard to see way.
Various other neoliberal arguments were offered that I did not understand, with these capitalists suggesting that speculation plays an essential role in markets and in the economy. The assumption being that if you get rid of the speculators, the whole economy collapses, but no one cries “Chicken Little” like a capitalist. Anyway the speculators themselves are already collapsing the damned economy. How could things get worse if you reign the leeches in?
These arguments were found on a liberal site I go to. It’s amazing how many “liberals” are hardcore, radical, neoliberal free market capitalists. One wonders, since economics is out of the question, what exactly their liberalism is all about? Clicking on their profiles reveals guys, some Jewish, always with lots of money, who are members of groups called “Progressives,”Left This”, “Left That”, “Fight the Right”, “Stop Rush”, “Obama Supporters”, etc. They’re main concern is “world peace,” which will never occur in my lifetime. I guess some of them want to save the whales or the fucking baby seals.
As commenter Lafayette Sennacherib suggests, when you take Economics out of the Left, there’s nothing left. You have a bunch of greedy capitalist bastards living in mansions yelling about gay rights or feminism or baby seals or snail darters or “White racists.” What about the workers? What about economics? What about a fair and just system? Silence from these guys, as they try to count their uncountable piles of cash and write a check to the Democratic Central Committee.
If this is “Obama liberalism”, Hell, just take it out and shoot it in the field in the back and put it out of its misery. I want no part.
One final note on the oil commodities market: a reasonable regulation would be to require these speculators to at least take possession of the oil they are buying. Hardly any will do that, so that will kill the parasites right there. Reasonable, right?

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9 thoughts on “Oil Speculators Account For 50% of Oil Trades”

  1. Hmm, yes that is disturbing.
    So much of the modern ‘capitalist’ (nee, plutocratic) economy just involves a bunch of useless paper-shuffling or even just the ‘transfer’ of vast amounts of phantom ‘computer money’ wherein the connected exploitative class just skims a bit off the top of all transactions which adds up big-time since there are perhaps millions of such transactions each week.
    It’s all sickening, extremely greedy, and ‘Jewey’ types of behavior, just very pathetic and hyena-like, picking at the scraps and whatnot, producing nothing whatsoever and profiting off of the true work and labor of others…this is ‘democratic’ bogus-money at its absolute worst.

    1. Right on, bro. I agree, this is as “parasitic” as it gets I guess. One would think we could regulate this somehow. At least when you buy stock you buy a share in a company and become a part-owner. You’re actually purchasing a real product. This is just bullshit – gambling, what a joke, man.

  2. We are told that every entrepreneur is a capitalist. That is not true. A true entrepreneur is someone who starts and maintain a company. This is the people that create something and make people get jobs.
    A capitalist is someone who parasit on the entrepreneur and his company. One way they parasite is that they buy the company at one dollar a share. Then they sell one share at 100 dollars. Now all the sudden 10.000 one-dollar shares are “worth” 100 dollars. Do the math.
    This is what the jew capitalist do all the time, they buy a company at five cent to the dollar, boost the share and then they split up the company, making the share useless.

  3. Last year when oil spiked to $140 a barrel Paul Krugman tried to maintain that price was driven by demand rather then speculation. It’s amazing people still listen to that clown.
    The average barrel of oil trades thirty times bettween the well and the pump. Placing a tax on these trades is the best way to reduce their number.

  4. Dear Robert
    Suppose that I’m good at picking winning horses. I place bets every day and I win 2 times out of 3. If I have enough starting capital, I can make a living out of it. What I do is perfectly legal, but am I a productive citizen? Certainly not. My skill consists of transferring money from other bettors to myself. This is the essence of speculation, it is unproductive redistribution of income. It is all about pie-slicing, not about pie-making.
    Now suppose that I’m good at predicting stock price fluctuations. I can get rich that way. This is what speculators try to do: buy low and sell high. However, if Peter manages to buy low and sell high, Paul has to buy high and sell low, and money is tranferred from Paul to Peter.
    Let’s say that Paul buys shares for 20 dollars. Then they drop to 10, at which time Peter buys them. 2 years later they are at 20 again, and Peter sells them to Patrick. What has happened is that, ignoring transaction costs, the gains of Peter are matched exactly by the losses of Paul. Speculation is a zero-sum game. Actually, it is a minus-sum game because there are professional middlemen and because many speculators live off their speculation rather than doing productive work. The more speculation there is, the more piemakers turn into pieslicers.
    This is not to criticize the stock market, which is a very useful institution. However, there is a difference between an investor and a speculator. The former commits his money for a prolonged period and is interested in a rate of return. The latter only wants to buy and resell as soon as possible and with as much profit as possible.
    Governments can’t eliminate speculation altogether, but neoliberal arguments that it can’t curtail it are bunk. It is easier to regulate finance than to regulate 1000’s of medical drugs, which is what we expect governments to do. Ultimately, there is nothing mysterious about finance because it is just applied arithmetic.
    If the American government had adopted a law in 1990 that stipulated that mortgages can’t be negotiated, so that each bank would be responsible for the mortgage that it accepted from a house buyer, then the housing bubble would not have ocurred. The essential cause of the housing bubble was that banks were willing to accept all kinds of highly risky mortgages because they were going to tranfer them to others.
    Banking, insurance and the stock market are all very useful as long as they are not corrupted by speculators and as long as they do not try to tranfer risks. Lending and investment are inherently risky, and it should be up to the lender and investor to incur that risk, not tranfer it to the public.
    Anyway, you must have figured out by now that I agree with you. Down with speculation.
    Regards. James

  5. Exhibit #1,936 of what’s wrong with the financial economy. In Adam Smith’s world of principals (producers, consumers and distributors) when the price of something goes up, demand drops and vice-versa. In the financial economy, in which the goal to guess price movements, price-velocity is the primary component of demand, which leads to volatility and its end-game, the bursting of bubbles.
    BTW, if as an individual consumer your energy consumption is not elastic with price (i.e. you’ll use the same amount no matter the cost) you might consider buying USO, and ETF that trades on the wholesale price of crude. I bought some a couple of years ago and sold when gas was $4.25; then bought it back when gas was $1.75. The point is not to speculate, but simply to hedge my own consumption.

  6. Bob has the right angle here but, hate to tell you, generally speaking a government of Authority
    right-left-middle-religious-secular, with a will to rein in financial parasitism, will also be one which drives drugs and porn underground.

  7. Economics does seem to have become more politicized recently. It is a leech economic function. It’s discouraging to think about. A lot of areas of the economy and the job market amount to the shuffling of cards around. A lot of areas are houses of cards. Or maybe it would be better to say these areas are like circus shows (I’m not talking about P.T. Barnum), where there’s a facade that’s glitzy and that’s rich in showmanship. Behind the curtain, there’s nothing much there of substance. That’s sort of what some of these financial sector jobs seem to me to be like.

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