Another stupid question on speculators

JRK

Senior Member
Feb 27, 2011
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Exxon makes 8% profit about every year
How is it they can do that with the price of oil at a level that is driven by pure speculation?
and
Who is it that ends up with these speculated cost?
The Saudis?
The driller?

Lets start there
 
Exxon is so freakin' huge, one or more segments could lose mony and they'd still return that 8%. They're quite diversified.

Not sure what you mean by speculated cost.
 
Exxon is so freakin' huge, one or more segments could lose mony and they'd still return that 8%. They're quite diversified.

Not sure what you mean by speculated cost.

I think he means who the speculators are :confused:.
 
Not too clear as to the point? Oil and natural gas prices are dictated by foreign oil cartels, driven by supply/demand. Exxon purchases oil on the open spot market, drills, distributes natural gas, refines what they produce and purchase, but most importantly distributes with a built in profit margin. So they make money and speculators that purchase leases and run wildcat exploration outfits make and loose the big bucks. The art of management is to insure continual supply and contain operating costs.
 
When they drill and develop a new unproven field based on geologic research they are speculating that the reserves are sufficient to cover the development and transportation expense at the same time make a profit (risk reward). Is that what you mean by speculator?
 
When they drill and develop a new unproven field based on geologic research they are speculating that the reserves are sufficient to cover the development and transportation expense at the same time make a profit (risk reward). Is that what you mean by speculator?

Both of your threads were excellent
I am trying to get the Libs to figure some of this out them selves, to think in-side the box
BHO claims the speculators are the reason Gas is 4.00 a gallon. If this is the case some-one, some-where is making huge profits.
I would like the Libs to have identified that group and explain to us why, the why Obama has not pointed these figures out to us, to identify that place were real cost meets a speculated, driven up cost that is not real
I seen a Lib on CNBC yesterday that stated oil is 30.00 inflated. That would mean 30% profit for some-one

Another words if there leasing the off shore wells
If a large drilling company has a cost of 70 dollars a barrel to obtain and deliver the product for a price of 102 a barrel, call them out
If a hedge fund is creating an atmosphere where they know it cost 70.00 a barrel to obtain a barrel of oil, yet they bid 102 on the open market, let the SEC to ask them to come visit them
Fix the problem you have to first identify it. BHO keeps telling us that speculators are the reason fuel cost are so hi
then fix it
 
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the big money is from the institutional hedgers, not speculators. *shrugs*

They would have to be involved in the product from its origin for it to help them. The only thing that would them would be volume of cash
8% on 1.00 is 1/2 of what 8% on 2.00. This is the record profit analogy BTW

My point is if the price of crude oil is artificial, some-one is making huge profits. If its a hedge fund then they would be involved from cradle to death
That could be pin pointed and BHO could back his claim up with and exact example

GS has 52.00 a barrel in cost and there selling it for 102. BHO could make there life a living hell for it
 
It's election year...
:cool:
Price of oil still falling as supplies grow
16 May`12 — The price of oil continues to decline on the expectation that world markets will be flush with extra supplies this year.
Benchmark U.S. crude on Wednesday fell by $1.17 to finish at a seven-month low of $92.81 per barrel in New York. Oil is down nearly 13 percent since the beginning of May. Brent crude, which helps set the price of oil imported into the U.S., fell by $1.70 to finish at $109.75 per barrel in London. Prices fell as a report showed that U.S. crude supplies had climbed to the highest level in 22 years. Supplies grew last week by 2.1 million barrels, according to the Energy Information Administration. That's a bigger increase than analysts expected, and more could be on the way. Japan's Kyodo news agency reported that the U.S. will ask other countries to release spare oil reserves when the Group of Eight meets this Friday. The report follows rumors earlier this year that Western nations were planning a coordinated release of spare supplies. The White House wouldn't comment about the report.

Peter Donovan, a broker at Vantage Trading, said oil fell sharply in the afternoon as the Kyodo headline was passed around the New York Mercantile Exchange, where futures are traded. Kyodo said President Obama will ask leaders of other G-8 countries — Britain, Canada, France, Germany, Italy, Japan, Russia — to make spare supplies available to refineries this summer. The release would be geared toward keeping prices in check in July, when the European Union begins a ban on oil imports from Iran. The U.S. and other industrialized countries tried a similar tactic last summer after the Libyan rebellion shut down that country's oil fields. The move had only limited success, however. Oil prices fell temporarily but ended 2011 higher than they started.

Oil prices have been falling on signs that demand is cooling while supplies are building. Major oil producers like Saudi Arabia delivered more supplies to the world market. Meanwhile, data from the U.S. and China suggest economic growth is moderating, while Europe is teetering on recession. If the eurozone cannot solve its debt problems, it will weaken an economy that consumes 18 percent of the world's oil. It also could contribute to a global banking crisis that would hurt the U.S., China and other countries. "It's making a lot of guys nervous around here," Donovan said.

At the pump, U.S. retail gasoline prices were flat at a national average of $3.73 per gallon, according to AAA, Wright Express and Oil Price Information Service. The price of a gallon of regular has held steady since Friday, though experts say the average pump price could fall as low as $3.50 per gallon by the Fourth of July. In other energy futures trading, heating oil lost 3.54 cents to finish at $2.8976 per gallon, while wholesale gasoline fell dropped by 2.32 cents to end at $2.9209 per gallon. Natural gas rose by 11.8 cents to end at $2.618 per 1,000 cubic feet.

Price of oil still falling as supplies grow - Yahoo! News
 
Exxon makes 8% profit about every year
How is it they can do that with the price of oil at a level that is driven by pure speculation?
and
Who is it that ends up with these speculated cost?
The Saudis?
The driller?

Lets start there

It's typical of big business to report absurdly low profits in their effort to avoid avoid taxes. For example, Apple has some of the highest profits of any company in the world, yet they report a tiny profit to the IRS. One way they do this is to assign their patents to "fake" off-shore companies in tax havens. So, their R&D counts as expenses, but their IP revenue doesn't count as income. I suspect Exxon likewise is attributing all the revenue that they can get away with to off-shore companies.

Loopholes with certain stock options is a common method that many companies use to avoid taxes by understating their profit. There are many other ways the rich avoid taxes.

It costs only pennies per gallon to extract most oil. A few pennies more to refine and ship it. The US and Canada is now extracting hard-to-get oil which costs more (and burns up our natural gas in the process). Oil companies sometimes have to pay for leases which can suck up a percent of the profit. But, they are making profits far higher than they report.

You can be an oil speculator yourself by buying oil that hasn't yet been sold.
 
Exxon makes 8% profit about every year
How is it they can do that with the price of oil at a level that is driven by pure speculation?
and
Who is it that ends up with these speculated cost?
The Saudis?
The driller?

Lets start there

Another stupid question by another stupid person
 
Not too clear as to the point? Oil and natural gas prices are dictated by foreign oil cartels, driven by supply/demand. Exxon purchases oil on the open spot market, drills, distributes natural gas, refines what they produce and purchase, but most importantly distributes with a built in profit margin. So they make money and speculators that purchase leases and run wildcat exploration outfits make and loose the big bucks. The art of management is to insure continual supply and contain operating costs.

the point is there is so much reference by the far left that "speculators" drive up artificially the cost of oil
The claim is increased land based drilling in the US as well a smart delivery of that same oil from Canada will make no difference
The entire event is mind boggling to me. to start with the increased land based oil production, new refinement (see Motiva, Total and Sabine pass Texas jobs created) is about JOBS
Yes speculation plays a huge part in all commodities and as hedge funds can manipulate the stock market short term, long term the truth of the events that surround that stock will prevail, same with commodities
 
Funny you never hear about the speculators when the price goes down. D0 they just disappear into thin air and reappear when the prices go up?

No, the last one holding the bag loses his ass.

That is likely to be your 401(k) manager.

But go ahead and feel smug. It's only your pocket that is being ripped off six ways to Sunday.
 
Exxon makes 8% profit about every year
How is it they can do that with the price of oil at a level that is driven by pure speculation?

If oil is 50 dollars a barrel, what is their profit if their margin is 8 percent?

Very good! 4 dollars!

If oil is 100 dollars a barrel, what is their profit if their margin is 8 percent?

Well done! 8 dollars!

They make "record profits" when the price goes up, see?

Now how hard was that?


Who is it that ends up with these speculated cost?

Us. The people who put gas in the tank of our car.
 
Speculators serve a very useful and necessary purpose, but they have wreaked havoc in the markets since the beginning, and they were regulated for that reason.

Ever since, speculators have sought ways to relax the regulations which keep them in check. Our regulations do not keep up with their innovations. The infamous "Enron loophole" is but one example.

I will explain exactly how speculation works using very simple examples, and then I will explain how they can abuse their role in advantageous moments.

In one corner, we have Farmer Jones, who grows apples. In another corner, we have Grocer Smith, who buys apples from Farmer Jones to sell to his customers. Grocer Smith is an "end user".

In another corner, we have Speculator Adams. Under normal conditions, Adams buys and sells excess apples in the market.

Adams does not have any storage facilities for apples. He never actually takes delivery of apples. Therefore, Adams can in no way be mistaken for an end user.


Farmer Jones has been subject to the whims and fortunes of Mother Nature. Some years, there is a bountiful harvest. Other years, floods and hurricanes have resulted in reduced output. Then there are the bumper crop years.

Because the output of the orchards vary, Jones can never be certain how much he will get for his apples come harvest time. If the supply of apples is low, apples will rise in price. If there is a bumper crop, apples will be cheap.

Therefore, at the beginning of growing season, Jones has no idea what his income will be at harvest time.


On the flip side, Grocer Smith does not know how much he will have to pay for apples at harvest time. If the apple supply is low, he will have to pay higher prices, which means his customers will have to pay higher prices, and that could result in lost customers.


This is why the futures option was invented.


Long before the apples are harvested, Smith and Jones enter into an agreement. Smith will pay Jones a nickel for each apple. Smith also agrees to buy up to a million apples from Jones, as long as Jones has a million apples to sell. So this is a $50,000 futures contract.


Then let's say it is a bumper crop year. Apple farmers bring in a record number of apples. So apples drop to three cents apiece.

The futures contract has worked out well for Farmer Jones as he sells one million apples to Grocer Smith for five cents apiece.

Since it was a bumper year, Jones actually harvested a million and a half apples. After selling one million of them to Smith, he still has half a million apples left.


This is where Speculator Adams serves a useful purpose.

Farmer Jones could expend a lot of effort trying to find more customers, but Grocer Smith owns a whole chain of stores and finding another customer as big as Grocer Smith could be quite a challenge. Jones will more likely need to find several customers upon whom to unload his extra apples.

Well, Speculator Adams is wired into the entire apple market. He knows every producer and every end user. He can take Jones' extra apples and find buyers for them much more quickly than Jones can. For a price.

Jones and Adams enter into an agreement where Adams buys the apples from Jones for two and a half cents apiece. Adams then sells them to end users for three cents apiece.

Adams makes his living doing these deals for many, many growers, not just Jones.


And so everything works out just fine, and we see how a speculator keeps the wheels of commerce moving smoothly.


Now let's say there is a bad year for apples. The price of apples therefore rockets up to 7 cents apiece. But Farmer Jones only brings in 700,000 apples.

Grocer Smith gets a good deal. He is paying 5 cents for apples when the market price is 7 cents. However, the contract was for one million apples and Jones only has 700,000.

Farmer Jones then goes to Speculator Adams for the remaining 300,000 apples he needs. And he will probably pay 7.5 to 8 cents apiece for them. He then has to sell thse to Grocer Smith for 5 cents, so he takes a loss on those 300,000 apples.

But once again, Speculator Adams provides a very useful service.



But what if Adams decides to interject himself between Farmer Jones and Grocer Smith?

All these years, Grocer Smith has been paying Farmer Jones 5 cents for his apples. Suppose Adams approaches Farmer Jones and offers him 7 cents for each apple he grows for the next three years? Suppose Adams approaches every apple grower out there and offers all of them 7 cents apiece for the next three years?

Farmer Jones is not an idiot. He clearly would be better off selling to Adams, and so he agrees.

If Adams is able to get enough producers to sell him all their future apples, he can "corner the market". All of the end users will have to come to him to buy their apples. And since he owns all the apples, he can name his price.

So the price of apples which have not even been grown yet skyrockets. This is exactly what happened in the grain markets before the Commodities Exchange Act of 1936.

Grocer Smith panics. He sees the price of apples is going to go up, and so he seeks out Adams to lock him into a set price for which he can buy apples from Adams before they go up again. This panic becomes a self-fulfilling prophecy and every other end user begins upping the amount they will pay in order to ensure their supply does not vanish.

And that is one way speculators drive up the price of commodities regardless of the law of supply and demand.



Another way is to imagine that Farmer Jones is one of the biggest apple producers in the world. He's a 100 million apples/year producer.

Jones is kind of tired of the ups and downs of the apple business and he is thinking about going into walnuts. Or at least that is the rumor which some pundit somewhere spreads.

Jones has a lot of buyers, and they panic when they hear the rumor. Their usual supply might suddenly disappear. They are snapped out of the complacency and begin to panic. A Goldman Sachs analyst puts out a report which says if Farmer Jones gets out of the apple business, the price of apples could double from the current price of a nickel.


Speculator Adams is besieged by panicked end users to get locked into new futures contracts.

Adams is in the catbird seat.


Seeing the advantage to the panic, Wall Street dealers do everything they can to keep the fear alive.
 
Exxon makes 8% profit about every year
How is it they can do that with the price of oil at a level that is driven by pure speculation?
and
Who is it that ends up with these speculated cost?
The Saudis?
The driller?

Lets start there

It's typical of big business to report absurdly low profits in their effort to avoid avoid taxes. For example, Apple has some of the highest profits of any company in the world, yet they report a tiny profit to the IRS. One way they do this is to assign their patents to "fake" off-shore companies in tax havens. So, their R&D counts as expenses, but their IP revenue doesn't count as income. I suspect Exxon likewise is attributing all the revenue that they can get away with to off-shore companies.

Loopholes with certain stock options is a common method that many companies use to avoid taxes by understating their profit. There are many other ways the rich avoid taxes.

It costs only pennies per gallon to extract most oil. A few pennies more to refine and ship it. The US and Canada is now extracting hard-to-get oil which costs more (and burns up our natural gas in the process). Oil companies sometimes have to pay for leases which can suck up a percent of the profit. But, they are making profits far higher than they report.

You can be an oil speculator yourself by buying oil that hasn't yet been sold.

really? pennies huh?
Motiva completes Port Arthur refinery expansion, becomes largest in US | Hydrocarbon Processing | April 2012
The startup is among the finishing touches on a 5-year expansion project that cost approximately $7 billion.
lets talk about taxes
http://www.api.org/statistics/fueltaxes/upload/gasoline-diesel-summary.pdf
about 45-50 cents a gallon
Then of course the delivery from the distributor after
exploration
drilling
extraction
delivery
refinement
storage
delivery
Income taxes
corporate taxes
fuel taxes

pennies, that is all
And the Motiva refinery added 17 billion to the local economy and about 150,000 to mine
 
Exxon makes 8% profit about every year
How is it they can do that with the price of oil at a level that is driven by pure speculation?

If oil is 50 dollars a barrel, what is their profit if their margin is 8 percent?

Very good! 4 dollars!

If oil is 100 dollars a barrel, what is their profit if their margin is 8 percent?

Well done! 8 dollars!

They make "record profits" when the price goes up, see?

Now how hard was that?


Who is it that ends up with these speculated cost?

Us. The people who put gas in the tank of our car.

So you and I end up with those speculated profits?
I did at Motiva in 2010 and 2011
Record profits?
I ask a simple question and you did everything but answer

Who in the food chain of speculation is the end user?
And why is it no-one ever investigates?
And what about the 50 cents a gallon of taxes we pay? you never mentioned that have you?
http://www.api.org/statistics/fueltaxes/upload/gasoline-diesel-summary.pdf
 

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