Originally posted by djohnsto77
Originally posted by Dulcimer
If you want a real mystery, tell me why gas prices rise in Canada when a hurricane hits in the united states.
I think it shot up in Europe too...
Ask the petroleum corporations
Oil corps wish!
The real reason (most don't seem to know) is because oil prices are run on a free market system and prices can be locked in via
commodity futures contracts. Essentially oil investors/companies can all buy up oil at certain price levels or if speculators feel they will ahead of
time, they can start buying it up, running up prices.
Although technically they don't physically own the barrels, they own the right to own the barrels at a certain price (contract). They are the ones
who run up prices on this tulip called oil.
And it actually has very little to do with companies or opec raising prices. They aren't raising anything, they can't just go in and change the
price. It's not wal-mart. What governments and oil companies can do however is purchase up contracts at certain prices as a hedge and then start
requesting delivery for distribution.
Say they own contracts on oil at the $67/$3 a gallon level, and oil skyrockets to $100+, technically they can say we'll lock you in at $3 a gallon
meaning that although they will have the right to sell it back in the open market at possibly $5+ a gallon for a profit since they got it for $67 a
barrel, they won't try to make a profit and will sell it back at the same price they got it for (at cost).
The odds of that happening from a company are very laughable considering they would be going against their own mission statement and shareholders
interest and could possible even be fired. The shareholders could literally then fire an oil company CEO for acting against their interests by voting
them out. So that's probably not going to happen.
Another way is that the government of certain countries could buy contracts and lock in prices or say you cannot sell oil for more than this price and
come to a uniform agreement.
But as far as governments doing either, I think that is a slippery slope. Depending on the scale of a goverment doing that, either one of two things
could happen, the artificial ceiling could place so much pressure on oil and suppy constraints that it literally skyrockets to the moon, or investors
will see it as a cap and get out, and oil would then gap right back down.
Historically on govt intervention on commodities, for example in around 1970 i believe it was, gold wasn't allowed to pass a certain price level or
be sold for more than a certain amount. Right after they lifted that price level/cap on gold, I believe it was in the 70s, gold skyrocketed.
So we'll see.
[edit on 23-9-2005 by Lord Altmis]