Quote:
Originally Posted by EarlyPorsche
Just a hypothetical question: does the fact that oil is almost as vital as many other daily use items make the price gouging easier for the [whoever you think or want to think is behind oil prices].
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Oil is a short term inelastic product. Which means prices can rise and we'll still buy roughly the same amount of it. In theory oil and gas producers could all collude together and raise prices and we'd still buy the stuff. Over the longer term we can adjust to the higher prices by driving more efficient cars, switching to alternative energy sources, etc. But in the short term most of us are stuck. Which also means that raising taxes on oil companies, just means they will pass added costs down to the consumer.
I for one, do not think gouging or cornering (as Shaun alludes to in post #1), the oil market is very likely. It is too large, with too many self interested parties. It is illegal to corner a market or to artificially manipulate prices. This would be regulated by the commodity futures trading commission and probably the SEC. How hard either of those two try to regulate their markets is debatable. One problem is the burden of proof is on the regulators, and neither cornering nor gouging is easy to proove. It would be darn near impossible to get a large enough position to corner the oil market without others knowing about it. If they new about it they would try to squeeze you out of it. Sqeezing is also illegal, and hard to proove.
Please note that this does not mean that oil cannot trade above fair value, which it may or may not be doing right now. Markets can act irrationally for a long time, and the oil market is not one that can avoid that fate. But just because oil is above a "fair value" does not mean there is collusion, gouging, and cornering of the market.
I could be wrong, but I think most people would not be able to trade futures. Futures require significant margin positions and settle to cash every night which means most brokerages will not touch them. It becomes a large accounting problem. The easiest way for most to access commodities is through Exchange Traded Funds (ETF), but be cautious with them, quite a few do not track the underlying asset as well as they should. The USO (oil ETF) being a very good example of one that does not track oil very well.