The link below is fascinating article on oil speculation, which at least now I better understand. Shit -------I never even heard of an
oil ETF until I read this article.

I'm sure GaG will want to comment about all this.

When reading the article, pay close attention to the last paragraph; I found it very illuminating
& ultimately, quite depressing.

Petrol is so high so people like GaG can be a parasite to every American who has to drive to work. The price increases are defacto taxes that you're forced to pay so GaG can lose money gambling instead of it going to federal coffers where it might do some good by bringing down the deficit.

“the price has nothing to do with supply and demand for oil?”

  Not true, the cost of oil obviously bears on the cost of gasoline and the greater demand for oil has caused the price of crude to rise over the past year:

      "The main factor for the increase in the price of crude over the last year is that there has been a stronger demand for oil and gas in emerging economies like China and India," says Brian Milne, the Refined Fuels Editor and Product Manager for Telvent DTN, a provider of real-time commodity information services. "There has been a much greater demand in those nations for oil. The economies in those nations have continued to grow even as the rest of the world was in recession for a couple of years." Domestic demand has also increased, as the U.S. economy has continued to recover.

     Now he may be correct that a 25 cent jump over the last 3 days is based on fear of supply disruption but the supply/demand equation plays a role in the increase of price over the last year.

      “While it's also possible to short oil ETFs, no one does.”

     Not true, there are short ETFS and even double short oil ETFS.
The UltraShort Oil & Gas ProShares ETF (DUG) has already traded over 600,000 units today.


Oil ETFs are the world's worst investment?

      Not true. The USO Oil ETF is up 22% over the past 6 momths. Wish my Bank of Amercia had done that well. You also have to distinguish between the commodity oil ETFS and the oil ETFS that own shares of oil companies. The former are poor investment choices because of the contango; the latter are great investments. The XLE which I own is up 60% from when I bought it a year and a half ago.

If not for people like me who develop American oil resources, oil would be even higher, not to mention that we would be even more hostage to coutries that don't particularly like us.

and you are both right, I spend my "ill gotten gains" on gambling, booze and hookers, the rest of it I just spend foolishly.

I find it amusing that nobody blame the farmer for the high price of corn, but everyone blames the oil producers for the high price of oil. I don't set the price, and I suffered through decades of low oil prices, now that I am finally making a few buchs, everyone wants a piece. Hey Willy, FUCK YOU!!! I'm rich bitch, want to make something of it???!!! roflmfao

I'll comment on Pri's link a little later, but Marikod has summed it up pretty well. It's not total bullshit, but the article if full of a lot of half truths and factual errors.

He doesn't lose his ill-gotten gains gambling.  He blows them on hookers and booze.

of ETFs over the past few years and the implied volatility associated with them. Unfortunately there is no real consensus on their impact in the market. I keep hearing different stories, including their impact on the the flash crash last May.

I need to clarify your comment about DUG. Yes it is a double long ETF, but it tracks oil and gas companies vs the price of oil. Look at the holdings and you will see they include XOM, CVX, integrators and the like. DUG went up today, but the price of oil declined. That's because the underlying oil integrators generally went up. DIG is the opposite of DUG. Now if you want a pure double long or double short on oil, then you would have to go to UCO (long) and SCO (short) as examples. This is not a game for chardonnay drinkers. Sorry, I couldn't resist.

Priapus, you in Vegas right? Think of these double long or double short EFTs like that new game Blackjack Switch. Somebody must have been on drugs to come up with that game. You get 2 cards, then you get to split them into 2 hands, basically doubling your bet. Sounds good, but the dealer can play his/her hand up to 22. At the end of the day, the house is going to win a lot quicker than standard blackjack. And at the end of the day you probably will lose with these bizarre ETFs.

I agree marikod with everything you said about supply and demand, though I do find it a bit counter-intuitive since there is an abundant supply and Libya generates less than 2%. But fear is a powerful component in the market.

This is what we see every business cycle, a lot of amateur investors buying up whatever commodity is "hot" at the moment. Once the Fed stops inflating, it all collapses.

The article has some true points, but its like attributing the motion of a car's wheels to the transmission. It is true that the transmission turns the driveshaft which turns the wheels. But its the engine that provides the power to the transmission. And its the driver that controls the throttle that gives the engine the gas.

And the Fed has the pedal to the metal.

I blame the government's ridiculous ethanol program, which has farmers growing corn to turn into ethanol so we can burn it up, thereby wasting energy. (Because it costs more to grow and convert the  corn to ethanol than it would cost to refine  and burn the same amount of gas).

but it's the same logic to blame producers for the price of oil.

There is and always has been huge money speculated on the price of corn, orange juice, coffee, oil etc. Somehow the producers of these other commodities are never blamed for price spikes, nor are these producers ever subject to "windfall profit taxes" when they start getting rich like the corn farmers are due the boondoggle called ethanol.

To expect equal treatment from an idiot populace is just wishful thinking I know, but I felt obligated to at least make the point, even though it will fall of deaf ears.

“I need to clarify your comment about DUG. Yes it is a double long ETF, but it tracks oil and gas companies vs the price of oil. Look at the holdings and you will see they include XOM, CVX, integrators and the like. DUG went up today, but the price of oil declined. That's because the underlying oil integrators generally went up. DIG is the opposite of DUG.”

       Okay, I did not quite follow that. You mean double short ETF, don’t you? According to the summary prospectus for DUG, “This ETF seeks a return of -200% of the return of …. Dow Jones U.S. Oil & Gas Index] for a single day.” So if the index goes up, DUG goes down not proportionally but 200%.

      At 11:05, the index is up.41% and Dug is down .77%, so the correlation is not quite exact. If it went up yesterday, I have to assume the index was down.


     And I don’t think DUG has holdings that include XOM, CVX, and integrators. My understanding is that holdings exclusively are derivatives and swaps. Not familiar with DIG- maybe you are talking about DIG?

     I think your point may have been that DUG is not a commodity based ETF but an equity based ETF – it does not move in inverse proportion to the spot price of oil but inversely to the collective value of the equities in the index.

   But who knows. If Arizona can beat Duke, maybe short does mean long; maybe up is down; maybe GaGambler will stop drinking and go to church; maybe Priapus will forgo the buffet and become a vegetarian.

Naah – some things can’t be changed.

DIG is the opposite of DUG, and the holdings are exactly what you said.

Stop it or at least control it or make make it trade on an exchange, prices will drop by $30- $40 barrel.

Insider analysis is just that.

Dude, they must be very wealthy amateurs. No, can't be, wealthy people have sophisticated investment advisors.

Amateurs will never get near the oil speculation, we are talking about billions in play, not millions. One of the biggest oil speculator is Goldman Sachs, don't think anyone considers Goldman an "Amateur".  

This all started when the commodity speculation rules changed, i.e., before the rule change, whomever speculated on a commodity, must take delivery of the commodity and must be user of the commodity. Before the rule change, Airlines were the largest speculators to control their fuel cost (it was not a sheer speculation, it was mostly long term price they will pay for the oil). Today, Airlines are out of the speculation market because they don't have the money to play and doesn't want to take the risk of speculators driving up the price and Airlines signing a long tern supply contract at higher price.

Enron in a different incarnation. I oppose all speculations because speculation doesn't create wealth, grow GDP or create employment. Speculation does the opposite.