Logistics Management: “Can speculators profit from declining oil?”

No comments

Interesting editorial from Derik Andreoli today on Logistics Management web site about the role of speculation in oil prices. Quote:

“As a logistics manager, understanding that oil and fuel prices are a function of supply and demand rather than the rogue actions of “evil speculators” is important.

If speculators are driving prices above a level supported by the fundamentals, the solution is government regulation of futures markets. If, however, prices are supported by the fundamentals, mitigation through supply chain re-engineering is called for.

My motivation is not to defend speculators or their actions. Surely there are rotten apples among the bunch, and their existence justifies regulatory vigilance. Rather my goal is to show that speculators can profit from declining prices just as easily as when they rise—thus, the entire premise that speculators are to blame for high prices is called into question.”

 

I am not sure that just because speculators can make money on the downside does not absolve them of blame. After all, for something to go down it firs has to go up. The famous “pump and dump” strategy come to mind. The issue is volatility and is that volatility organic or synthetic. If the latter, then in what form and under what conditions? Still, it’s good to see logistics writers start to go beyond the “price is too high” mentality and try to understand factor dynamics.

Read the full text here:

http://www.logisticsmgmt.com/article/andreoli_on_oil_fuel_can_speculators_profit_from_declining_oil

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s