Quote:
Originally Posted by Shaun 84 Targa
two threads in one:
1. How much "new oil" is found worldwide, annually, and how many total new wells are drilled, both for new fields and existing. How many oil fields are found and not utilized each year, due to any reason: economic viability, war, politics, etc.
2. If I were to buy oil futures, is there anything prohibiting me from trying to effect the price of oil? Could I do it anonymously? Is there an agency, U.S. or other international group, that I would need to worry about?
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Shaun;
I'll address the 2nd point from a fairly straight forward perspective. Anyone can buy oil futures contracts. Call your broker and tell them how much of what contract you want to buy and you're in. Anyone can also step into ring with Manny Pacquiao too. The results may be about the same in both cases.
I'm not suggesting that you can't make a killing in Commodities in general, or Oil Futures specifically, but consider the following as a sort of disclaimer...
1) A large portion of the entities trading oil futures have stake in the game -- namely either oil in the ground, or business that significantly use oil in their products. Both of these groups are very educated traders with access to all sorts of information that you won't have. So you'll essentially be taking a knife into a 21st century battlefield.
2) The third group of players are the speculators who don't have a stake in the commodity. Many of these are also professionals. Among these are folks practicing arbitrage where they are comparing oil-futures versus other things (like funds of stocks that tend to move opposite oil) or the markets in Europe and Asia, and make huge movements based on tiny changes in the value. They are backed up by teams of professionals, many with heavy weight math degrees and large computers to identify the slight gap in the movements between the things that they are offsetting which allows them to make their profits.
3) The 3rd group are small time guys who figure that they can outsmart groups 1 and 2. I'm not saying that it can't be done, but for how long, by how many people? You'll always hear about the guy who makes a killing by doing this, but you'll never hear about the rest of the distribution. You'll be joining this last group (small time players) if you enter the market.
Will you be able to influence the price of oil? Absolutely. Will you be able to measure the results (compared to all of the other players)? No. It took a lot of effort for the Hunts to corner the silver market a few decades back, and it ultimately ruined them financially. Sure they cornered the market -- but they didn't stop to think of what their exist strategy was going to be.
So that's my $0.02 after getting my MBA. I'm no expert but I still remember one example from my Investments professor.
"The Chicago School of Economics is best described by this example -- If you saw a $100 bill on the floor of a busy hallway -- should you pick it up? The Chicago School's answer is "No", because if it really was a $100, it wouldn't have been left on the floor for you to find". Note that the commodities exchange is located in Chicago...
So are you feeling lucky???
