Every single day I look at Yahoo Business reports. One day oil is up, the next day oil is down. Is it all just a bunch of hokie pokie speculation?
2007-12-04 01:35:54 · 5 answers · asked by Anonymous in News & Events ➔ Current Events
Partially, oil companies attempt to gauge demand, but long in advance you actually going to the pump. This requires that they maintain substantial inventories in excess of ordinary demand, just in case a lot of people want to drive or fly more than is usual. Any oil held in inventory is lost revenue, not only can you not sell this permanent reserve but it costs money to store as well. Because of this, oil companies want to hold the smallest possible inventory without risking their reputation by running out of gas at the pump or grounding airplanes.
They are no better at predicting the future than you are, well not much better, they do have models of demand, but still they are modeling the future. Any disruption or potential disruption adds risk to their model, risk translates to price. Oil prices are highly elastic so small shifts in demand have large impacts on prices. In the short run, prices at the pump are determined by current speculation but in the long run it is determined by how much oil the population wants to use.
On top of this speculation there are members of the general public who buy and sell oil contracts for the opportunity to make a profit beyond what they feel they could make in other markets. Over time, this speculation is bounded by the physical realities of petroleum delivery and petroleum demand.
2007-12-04 01:50:15 · answer #1 · answered by OPM 7 · 0⤊ 1⤋
Yes. And due to the capitalist system you are wondering about, we have all the oil we need. Price is less important than having it available. Under a socialist government controlled system, we would have severe shortages or none available for regular people. Study up on the USSR and East Germany.
2007-12-04 14:11:40 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Probably - welcome to capitalism. As long as the market (demand) will bear it, who's to say how high it may go? It won't be capped. Take cigarettes & liquor - often sold at "lowest price in the state" - there is a limit below which you cannot sell, but I've never seen a maximum beyond which you may not sell.
2007-12-04 02:26:52 · answer #3 · answered by Anonymous · 0⤊ 0⤋
I think a lot of speculators are making a fortune at your expense.
2007-12-04 01:43:12 · answer #4 · answered by willywonker 3 · 0⤊ 0⤋
Its disgusting how we are being screwed out of our hard earned money..You better believe all the oil companies are happy..
2007-12-04 01:45:09 · answer #5 · answered by Brat25 4 · 0⤊ 0⤋