supply and demand question

[phil5185]

So why isnt it selling at $60? If demand is not there, what will speculators do with $100 oil?

When the settlement day of their futures contract hits, or when triple witching day on the options hits, they must either 'settle' or accept physical delivery. In other words, they lose $40/bl. That is why it is called speculating, it goes both ways (BTDT

It costs the Oil companies about $14/bl to refine OPEC oil, transport it to the US, and distribute it. That cost is fairly constant. The big variable is the cost of the OPEC crude.

[Savoir Faire-Demogague in NJ]

Speculation works both ways. Speculators are always in the commodities markets. In 2008, gas prices fell from $4.12 to $1.61 per gallon, due to speculation activity.

mjperry.blogspot.com/2011_04_01_archive.html

WSJ -- At Mr. Obama's request, the Justice Department announced Thursday that it has created a task force to investigate the oil and gas markets, a move some Democrats in Congress have advocated. "The attorney general is putting together a team whose job it is to root out any cases of fraud or manipulation in the oil markets that might affect gas prices, and that includes the role of traders and speculators," Mr. Obama said during a town hall event at a renewable energy company in Nevada. "We're going to make sure that nobody's taking advantage of American consumers for their own short-term gains."


WSJ Letter to the Editor from John Malgar -- "The challenge for investigators isn't proving that traders drove up oil prices. The real puzzle is, why did these public enemies suddenly have a change of heart during 2008 and drive prices down?"

See chart above showing gas prices falling from $4.12 per gallon to $1.61 in 2008.