The Unintended consequences of the BP Oil Disaster

[DC Tom]

*sigh* Commercial hedging speculation is different than investment speculation.

 

Why would a gasoline refinery buy a 2018 Crude Futures contract? It's not that difficult, think about it for a second then get back to me.

 

I think he needs the idea of "hedge" spelled out.

[GG]

What am I missing?

 

The search function on the upper right of this page that will take you back to the discussions of '08 gas prices.

 

Time for homework, Sue.

[Steely Dan]

The search function on the upper right of this page that will take you back to the discussions of '08 gas prices.

 

Time for homework, Sue.

 

IIRC, people were buying oil contracts and holding onto them in order to get the prices up before they would sell them.

[IDBillzFan]

I'm amazed that people can speculate on oil contracts more than 8 years in the future.

I'm not sure why you bolded my comment about the thousands of jobs to be lost because of the drilling ban and then linked to some stuff about BP. There are thousands of people in that region who, until recently, were working for drilling firms in one capacity or another. The firms are told to stop. This causes the firms to lay off all of those people. The drilling firms won't be back for years. Bad, bad for the people in the region.

 

It's not quite on the same intellectual depth of "playas make fat chicks have a lot of babies so it's easier to cheat on them," but you should be able to get it.

[Steely Dan]

I'm not sure why you bolded my comment about the thousands of jobs to be lost because of the drilling ban and then linked to some stuff about BP. There are thousands of people in that region who, until recently, were working for drilling firms in one capacity or another. The firms are told to stop. This causes the firms to lay off all of those people. The drilling firms won't be back for years. Bad, bad for the people in the region.

 

It's not quite on the same intellectual depth of "playas make fat chicks have a lot of babies so it's easier to cheat on them," but you should be able to get it.

 

Way to simplify my point.

 

Why aren't you addressing the fact the the WH is pushing to get them back on line asap? Why are you focusing solely on the oil workers and not the millions of others who's live are being destroyed by the disaster? Is there a way that we can make working on a rig safer, which helps oilmen, and keep the environment and associated jobs safe too?

[Magox]

IIRC, people were buying oil contracts and holding onto them in order to get the prices up before they would sell them.

Yes, that's called investor speculation which is not to be confused with commercial hedging.

[IDBillzFan]

Way to simplify my point.

You wrote "Fat women have very low self esteem a lot of the time and so they are willing to put up with more **** than anyone to keep a man around. They are huge targets for playas. Making them have a lot of kids causes her to look the other way when a playa has affairs," and then I wrote ""playas make fat chicks have a lot of babies so it's easier to cheat on them." Same point with fewer words, no?

 

Why are you focusing solely on the oil workers and not the millions of others who's live are being destroyed by the disaster? Is there a way that we can make working on a rig safer, which helps oilmen, and keep the environment and associated jobs safe too?

This is where you keep losing people. I wasn't "focusing solely" on anything. We were discussing unintended consequences of the disaster. I brought one up. I tried to add to the conversation. Yes, many people's lives are being hurt by this, and this includes the thousands that no one is talking about; those who currently have jobs and won't tomorrow while the WH pushes to get drilling back online. It took them almost 16 months to pass health care, and about three months to make a decision on Afghanistan. You think they're going to address the drilling issue before those firms pull up stakes and move on for the next few years. Not a chance in hell. Not with the November elections around the corner.

[KD in CA]

I think he needs the idea of "hedge" spelled out.

 

He should probably start out with a few bushes. I don't think he's ready for a whole hedge.

[Steely Dan]

Yes, that's called investor speculation which is not to be confused with commercial hedging.

 

You posted this;

 

Speculation doesn't come just from investors, as a matter of fact, most of the contracts that are purchased come from those that process the crude into refined products such as gasoline and diesel. It's called hedging.

 

It sounds to me like you are saying that speculation also comes from those who process the crude. Which still is speculation going by what you've written above.

 

Can we agree that the cause of oil prices in 2008 were caused by market manipulations?

 

 

You wrote "Fat women have very low self esteem a lot of the time and so they are willing to put up with more **** than anyone to keep a man around. They are huge targets for playas. Making them have a lot of kids causes her to look the other way when a playa has affairs," and then I wrote ""playas make fat chicks have a lot of babies so it's easier to cheat on them." Same point with fewer words, no?

 

 

This is where you keep losing people. I wasn't "focusing solely" on anything. We were discussing unintended consequences of the disaster. I brought one up. I tried to add to the conversation. Yes, many people's lives are being hurt by this, and this includes the thousands that no one is talking about; those who currently have jobs and won't tomorrow while the WH pushes to get drilling back online. It took them almost 16 months to pass health care, and about three months to make a decision on Afghanistan. You think they're going to address the drilling issue before those firms pull up stakes and move on for the next few years. Not a chance in hell. Not with the November elections around the corner.

 

The point of the fat chicks is to sum up; they will put up with a lot more and are willing to accept a lot of transgressions in their men due to desperation. Do you disagree with that notion? BTW, nice job of changing the subject. Let's get back on this issue now, mmkay.

 

You still haven't addressed the WSJ article that kind of dismisses your point about them taking too long and people leaving. It appears that possibly this week guidelines will be issued that will allow the wells to start pumping. Why don't you address that? Is it because you would feel foolish if you had to give the Obama administration credit for something?

 

It amazes me to see how many people are fed a load a crap and when they find out it's crap say well they got me this time but there is no need to think another load of crap will be given to me.

 

The energy crisis of the early seventies was a set up to get the oil industry de-regulated. The oil companies knew there wasn't a crisis in the amount of oil on the planet, but it worked like a charm and people keep believing the things that industry and many other industries say just so they can continue to operate in less than ethical ways.

 

Supposedly the California brownouts were caused by user demand - well we know that was BS and that market manipulation was the cause of that. (I knew it was market manipulation long before it was proven)

 

Then in 2008 I said that gas prices were the result of market manipulations and was laughed at. It wasn't market manipulation it was Chinese demand or, my favorite, corn in the gas. Well then it turned out to be market manipulation. It's so easy to do when people refuse to question things. The industry has cultivated a lot of shills and made them believe that it's just the bad people trying to make them honest that are causing the problems.

 

Time and time again industries screw people over and then have the chutzpah to claim that they will never do it again and they don't need further regulations. Of course once they are deregulated all sorts of crap goes on to increase the wealth of a few at the expense of the many.

 

Sort of like giving the rich tax cuts leads to more jobs.

[Magox]

You posted this;

 

Speculation doesn't come just from investors, as a matter of fact, most of the contracts that are purchased come from those that process the crude into refined products such as gasoline and diesel. It's called hedging.

 

It sounds to me like you are saying that speculation also comes from those who process the crude. Which still is speculation going by what you've written above.

No. You are the only one here that doesn't understand the difference between commercial hedging speculation and investment speculation. You don't get it, I don't understand why you are having a hard time with this.

 

Why would a gasoline refinery buy a 2018 Crude oil futures contract? What I said was 100% correct, it is your problem that you are unable to differentiate the two. You can either decide to not be a hard head and concede that you were ignorant about this subject, or you can continue to keep looking like an idiot, the onus is on you.

[Magox]

Can we agree that the cause of oil prices in 2008 were caused by market manipulations?

 

 

 

 

 

Then in 2008 I said that gas prices were the result of market manipulations and was laughed at. It wasn't market manipulation it was Chinese demand or, my favorite, corn in the gas. Well then it turned out to be market manipulation. It's so easy to do when people refuse to question things. The industry has cultivated a lot of shills and made them believe that it's just the bad people trying to make them honest that are causing the problems.

 

 

 

Sort of like giving the rich tax cuts leads to more jobs.

To your first point, NO. It's not as simple as that, sure there was speculation that probably added a good 10-15% premium on the prices, but Chinese demand was going through the roof, there was unusually heavy crude purchases heading into the olympics. Also, which of course you didn't happen to mention, it wasn't by coincidence that the US dollar was at a record low the same exact day that crude touched $147. But I'm sure you don't understand the relationship between the dollar and commodities, do you? I mean for crying out loud, you don't even understand the difference between commercial hedging speculation and investment speculation.

 

Also, whoever said that corn was responsible for higher gasoline prices is an idiot, however, the droughts of 2008, the sinking dollar and the added corn ethanol demand did lead too much higher grains prices.

 

And yes, Tax cuts do lead to more jobs.

 

Do yourself a favor, and stop posting about things that you have no earthly clue of what your talking about. Seriously

[IDBillzFan]

You still haven't addressed the WSJ article that kind of dismisses your point about them taking too long and people leaving. It appears that possibly this week guidelines will be issued that will allow the wells to start pumping.

I'm not sure how you became an expert on the emotional state and motivations of overweight women, but suffice it to say the point of my criticism was your comment "playas" MAKE these women have multiple babies. A comment like that is ridiculous. No one MAKES these women have multiple babies. Unless maybe the "playas" have them tied up and bound in secret dungeons. I suspect you probably think these women are overweight because there are too many vending machines around.

 

Regarding the WSJ article; as I initially wrote, my comment was made on information I heard over the weekend. The WSJ article came out Monday. Regardless, the WH, clearly realizing that it has the leadership skills of a wet mop, knows it must pick up the pace to lift its six-month moratorium. However, it didn't actually LIFT the six-month moratorium, did it? No. And yet you somehow think a company is going to just sit around waiting for this WH to do something quickly just because it said it would? This administration has shown time and again it moves ridiculously slow when deciding anything. You aren't going to keep these companies from leaving just by saying "We're going to do this as fast as we can." Just THINKING it will work is assinine, and is yet another example of what happens when you elect a leader who has never run a company.

[Steely Dan]

No. You are the only one here that doesn't understand the difference between commercial hedging speculation and investment speculation. You don't get it, I don't understand why you are having a hard time with this.

 

Why would a gasoline refinery buy a 2018 Crude oil futures contract? What I said was 100% correct, it is your problem that you are inable to differentiate the two. You can either decide to not be a hard head and concede that you were ignorant about this subject, or you can continue to keep looking like an idiot, the onus is on you.

 

I was looking for information on the subject but the stuff you supplied wasn't clearly written.

 

I'm going by what you posted. According to you they are both speculation. You never made a differentiation between to the two other than to say that speculation isn't done just by investors. You need to be more clear. I didn't misinterpret anything you said.

 

You said;

 

Speculation doesn't come just from investors (others speculate too, and those people are), as a matter of fact, most of the contracts that are purchased come from those that process the crude into refined products such as gasoline and diesel. It's called hedging.

 

You are the one who placed them in the same boat without any differentiation in how. Your quote only talks about who speculates and not how they speculate. I understand the difference, what you wrote wasn't very well written to make your point.

 

Did you mean to write;

 

Speculation doesn't just come from investors. There are two different types of speculation...

[Magox]

I was looking for information on the subject but the stuff you supplied wasn't clearly written.

 

 

You are the one who placed them in the same boat without any differentiation in how. Your quote only talks about who speculates and not how they speculate. I understand the difference, what you wrote wasn't very well written to make your point.

 

Did you mean to write;

 

Speculation doesn't just come from investors. There are two different types of speculation...

No, I meant exactly what I typed.

So, the companies that process the crude, are anticipating higher input costs, stricter regulations, less rigs, and other points of data, and they are bidding the price up. Think about it for a second, if Hedgers (you know the one's that are going to be using the Crude) are bidding up the price, why would they be doing that? Why would they want to bid up the price of crude if they are the one's who have to use it?

I'll tell you the answer, it's not that they want to see higher crude prices, obviously they want them to be lower, but they are locking in these prices because they anticipate prices to go even higher, so if they lock in today at $90 a barrel for a 2018 futures contract, and 2018 comes around and the price happens to be $120, then they just saved themselves a crapload of money.

Now the one's who sell crude, could also hedge out as well. Except the difference is that they would be selling the crude and locking in gains going out to a 2018 futures contract lets say. If they thought that this price wasn't justified, I can assure you that the Oil companies would be selling heavily into the forward looking contracts, which would create a lot of selling pressure, which of course would put downward pressure on prices. So it's quite clear that the market, which are the hedging users and hedging sellers is signaling us that prices are going higher based on supportive fundamentals.

 

This is what I typed in the original post, it is quite clear that I made the distinction between the two. As I said, you are the only one who is having a hard time understanding the difference between the two.

[Steely Dan]

I'm not sure how you became an expert on the emotional state and motivations of overweight women, but suffice it to say the point of my criticism was your comment "playas" MAKE these women have multiple babies. A comment like that is ridiculous. No one MAKES these women have multiple babies. Unless maybe the "playas" have them tied up and bound in secret dungeons. I suspect you probably think these women are overweight because there are too many vending machines around.

 

Regarding the WSJ article; as I initially wrote, my comment was made on information I heard over the weekend. The WSJ article came out Monday. Regardless, the WH, clearly realizing that it has the leadership skills of a wet mop, knows it must pick up the pace to lift its six-month moratorium. However, it didn't actually LIFT the six-month moratorium, did it? No. And yet you somehow think a company is going to just sit around waiting for this WH to do something quickly just because it said it would? This administration has shown time and again it moves ridiculously slow when deciding anything. You aren't going to keep these companies from leaving just by saying "We're going to do this as fast as we can." Just THINKING it will work is assinine, and is yet another example of what happens when you elect a leader who has never run a company.

 

No, what's asinine is believing anything they tell you. When they pack up and leave talk to me then, but it won't happen. You just sit there and believe anything your told and that's exactly what the oil companies want you to do. They pull off one of the biggest avoidable mistakes ever and somehow they've convinced you that they're not responsible for lost jobs in the industry. It's the big bad government making sure that things like this won't happen again that's the problem.

 

If BP had "policed itself" to the point where this never happened there would be no deep government involvement going on now. The problem is that the industry can't police itself. They can't stop people from doing stupid things in order make money. They got all impatient because the well was taking too long to get working and cut corners that cost people their lives, the worst environmental disaster ever and the loss of hundreds of thousands of jobs and yet they are crying about having to leave because of the government. They're lying to you and your buying it. You are the perfect shill, just accept what they say and question nothing.

[GG]

As an aside, anyone notice that the oil spill/leak was reported in gallons, while the collection is reported in barrels? Why is that?

 

.. carry on with futures trading tutorial for dummies.

[DC Tom]

As an aside, anyone notice that the oil spill/leak was reported in gallons, while the collection is reported in barrels? Why is that?

 

Yeah, I noticed. I noticed that a while ago, that the spill was reported in gallons.

 

As far as I can tell, it's kind-of an unwritten, informal rule that spills are reported in gallons, while oil production is reported in barrels. (At least, I've seen other spills reported in gallons). And since this is now a "producing" well, BP's reporting "production" figures, i.e. barrels.

 

Best answer I've got...I have no doubt one of our industry wags here will disagree with me (in that there is no such rule officially), but at least my theory fits the observable facts. At the very least, I've gotten very good at converting barrels and gallons - I'm pretty sure I'm in a minority there, and many viewers (and not a few reporters) haven't twigged to the difference.

[Steely Dan]

No, I meant exactly what I typed.

 

 

This is what I typed in the original post, it is quite clear that I made the distinction between the two. As I said, you are the only one who is having a hard time understanding the difference between the two.

 

Ok. Got it. I disagree with your conclusion but I get it. In the 2008 the oil companies weren't complaining about higher prices. They were making more profit than ever before. They don't care what the price is they'll just pass it on to the consumer. People don't stop driving just because gas is so high. They make the lost money up in other parts of their budgets. So going by 2008 I believe they'd want higher prices. JMO

 

I'm just curious why none of the oil companies came forward during the last ridiculous increase in prices and complained themselves. It seems they really liked the price increases, at least their bottom lines liked them.

 

Once again this is just another scare tactic to get the public on their side. We'll see what the price of crude is in 2018.

[Magox]

Ok. Got it. I disagree with your conclusion but I get it. In the 2008 the oil companies weren't complaining about higher prices. They were making more profit than ever before. They don't care what the price is they'll just pass it on to the consumer. People don't stop driving just because gas is so high. They make the lost money up in other parts of their budgets. So going by 2008 I believe they'd want higher prices. JMO

 

I'm just curious why none of the oil companies came forward during the last ridiculous increase in prices and complained themselves. It seems they really liked the price increases, at least their bottom lines liked them.

 

Once again this is just another scare tactic to get the public on their side. We'll see what the price of crude is in 2018.

So even though, I just got done showing you facts, facts that clearly show the commercial hedging demand far outpaces investor speculative positions, you still are going to want the blame the oil companies for market prices? Let's be real here, you already had a preconceived, ill informed opinion, and you are beholden to your beliefs, no matter what the facts belie. That's the reality.

 

As if the Oil companies were fixing the price. Yup, it's got nothing to do with the market.

[DC Tom]

So even though, I just got done showing you facts, facts that clearly show the commercial hedging demand far outpaces investor speculative positions, you still are going to want the blame the oil companies for market prices? Let's be real here, you already had a preconceived, ill informed opinion, and you are beholden to your beliefs, no matter what the facts belie. That's the reality.

 

As if the Oil companies were fixing the price. Yup, it's got nothing to do with the market.

 

Of course they're fixing the price. Because they're manipulating the market. With hedging. Which is defined as price-fixing by market manipulation.

 

I think Steely Dan's position is crystal clear, myself.