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Originally Posted by semlin
does anyone understand how or why this "loophole" would drive prices down and for how long? i have not seen an explanation of how the oil market is being driven artificially high. i don't generally have a problem with people able to trade freely in stuff unless they are monopolizing or manipulating the market.
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It is through activity. I have had a hell of a time finding any data other than anecdotal on oil futures trading, but all the anecdotal is that it is skyrocketing.
If you start increasing the number of people who 'want' to buy oil futures, Dow for plastic, Vallero for refining, speculators to make money, it becomes a supply-demand thing on that scale. More and more money is getting 'invested' in these markets to hedge against inflation and a falling dollar.
15 years ago, pension and hedge funds held nearly no oil futures. It is now well over 250 billion. You can't pump that much money in what is a volatile market anyway and not see upward pricing pressures.
The falling dollar contributes ~$50/bbl to the price over the last 7 years too.
This was the Cliff Notes version given to me from a friend.