Good day all. As anyone knows who has bought gasoline lately, prices have skyrocketed. The question I’m asking is, why?
Now the blame for this is the United States destroying Iran’s Islamic terrorist government. Even though most of Iran’s command and control structure is no longer functional, (Meaning the leadership is dead), and the weapons are being blown up, the Iranian Revolutionary Guard Corps is still lobbing missiles and drones at tankers in the Straits of Hormuz.
As I understand it, something like 20-30 percent of the worlds oil travels through the Straits. A lot of that oil is sent to Europe with more heading to China, Japan and South Korea. The United States either gets very little from the Middle East or none at all. We are self sufficient with regards to our oil and gas needs. In fact, we are exporting oil and gas.
We are also seeing Venezuela, now that Maduro is gone, increasing their production. Along with the United States and Canada, there really isn’t any shortages of oil. So the question is, why are prices going up? In my honest opinion, there are several reasons. A big one is psychological. For decades, the world has been told that if we lose the Middle East’s oil supplies, it would be the end of the world as we know it.
Another reason is simple greed. Now due to the shipping times, oil that is being delivered today was pumped out of the ground and shipped several months ago. That oil was bought on the futures market months before that. This is where things get a bit confusing. For most people, they are wondering why gas prices are increasing even though no new deliveries have been made.
The answer is that the gas stations are being told what the price is going to be a few months down the road and they have to order it now at the price listed in the futures market. This is a very, very simplistic explanation of course. I asked the Grok AI to explain how this all works using this parameter:
“in simple terms, explain how the oil futures market works”
The answer provided is accurate and explains how futures contracts for oil, or anything else for that matter, works. Now the next question is, how do they determine what that price months down the road is going to be. Basically, it involves magic and witchcraft. Again I asked Grok with this parameter:
How are futures prices determined? Use oil as an example
Grok’s response was quite lengthy, but boils down to this:
The futures price is whatever buyers and sellers collectively agree the oil will be worth on the delivery date — based on their best predictions right now.
In other words, they are guessing and since they want to make money, they guess on the side that will make sure that they do make money. While I do dabble in the stock market, I’ve stayed far away from the futures market. It’s to easy to get screwed over. People who play the futures markets do not want to take delivery of the oil they’ve contracted for. They want to sell that contract to an oil company or someone else who can actually take delivery of the oil.
I’ve read accounts where amateur investors who really didn’t understand what they were getting into and guessed wrong on the price of oil. They may have bought a contract for 10,000 barrels at $100 a barrel, but the price suddenly drops to $75 dollars a barrel. They can’t sell that contract. This means they have to take delivery and store the oil. Guess what they don’t have? Any means of taking delivery and storing the oil. They’ve now lost their entire investment, and depending on how things have been set up, are also bankrupt.
Now you can see why the price of oil is increasing. Futures traders are jacking up the price on oil contracts they’ve already bought in order to sell them at an inflated price. The Oil companies, especially the refineries, are the ones who actually buy the physical product. They really don’t have a choice, but what they can do is pass on most of those costs to the average person in the guise of higher fuel costs. When you look at the books of Oil companies, and congress does from time to time, they quickly find out that the companies only make about $0.05 a gallon for gasoline.
What the Socialist and Communist idiots never do is look into how the futures market works and who is actually making the decisions. Since this is a global market, as much as the likes of Senator Elizabeth “Lie-a-watha” Warren and Comrade Senator Bernie Sanders would like to regulate it all to death, they can’t. What we all need to do is follow the Trump mantra regarding oil. “Drill baby DRILL!” As supplies increase, the price drops. In the mean time, we just need to be patient as the Trump administration finishes off the terrorist regime of the Islamic Republic of Iran. Hopefully, the Iranian people will step up and stomp what’s left and free themselves.
Thatisall
(3 votes, average: 5.00 out of 5)
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