Reply #27: You're overlooking the fundamental dynamic. [View All]

If there is 10 or 20 times the trading activity than took place a few years ago (when Goldman Sachs opened up the commodities markets to "paper contract" purchasers), then the people who make their money selling to the end-users -- the actual end-purchasers -- are competing with the gamblers. Who have more money (collectively, if not individually) than they do, no fear of wild swings in price, and can make purchases solely in the interests of gaming the system -- churning prices Up or roping in suckers before those prices go back Down, to allow themselves to buy l o w and sell HIGH. No matter what the actual conditions in the market are.

So the 2 % volume of Libyan oil output -- or the potential loss of that relatively small fraction of the world's production, already made up for by other oil-producers increasing their deliveries -- ramps up the greed all out of proportion to the actual, potential effects.

You can see the same kind of thing in reverse, in political pressure to open up oil production in the Arctic Wildlife Refuge in Alaska.

Not that there's anything like the volume of oil in Libya up there, but it ups the ante in the poker game, the psychological warfare of the Big Crap Shoot. (Which has replaced what used to be a vehicle for s t a b i l i z i n g prices.)