Business owner and author with 25 years of entrepreneurial and executive experience in the health club industry featuring high levels of performance and breakthrough results.

Oil Speculators

I have been yelling at my television quite a bit in the last few days because of one of the most moronic statements I have ever heard. That statement is “Oil speculators are driving up the price of oil”. Anyone who says this, repeats this, or thinks this is a complete NIT-WIT. Oil speculators DO NOT drive up the price of oil or anything else. I will explain this so even an illiterate economical dunce can understand this.

Oil is a commodity. It is sold on the futures market. This means people who purchase oil will have that oil delivered to them sometime in the future. Oil futures contracts are how oil is purchased. The contracts expire in each month. If I want the oil delivered in October, I would buy the appropriate oil contract.

Oil speculators do buy oil contracts. They buy oil from other speculators who are selling it. Oil speculators SELL oil. They have to. If oil speculators don’t sell the oil they have purchased, it will get delivered to them. Selling drives down the price of whatever is being sold. Buying drives up the price of whatever is being bought. For every oil contract buyer, there is a seller. For every oil contract transferred between speculators, there is a winner and a loser. Every oil speculator who buys oil also sells it. That’s a wash.

Supply and demand are the underlying factors that determine the price of oil. This means the amount of oil and how much of it is being used are the major driving factors of the price of oil. Oil and all other products also cost more for people with a devalued currency. In other words, a week dollar causes prices to go up. Blaming the price of oil or gasoline on market speculators is laughable.

So what will make oil prices go down? The answer is drill for oil and stop printing dollars. An increased oil supply will drive down the price of oil and gasoline. Fewer dollars will make them more valuable and increase buying power.

An exploratory committee formed to investigate speculators is pathetic. I guess this is just too complicated for politicians. Especially stupid ones.

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