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I can't see how speculators make any money betting on oil prices except from other speculators. If this is true, then most of what is in the media on this issue is just pure nonsense.

The second part is wholly true. For every buyer, a seller. The media understands how capital markets function *not*. Esp auto-bloggers like the above.

A speculator is just an investor with a different time frame. And there are plenty of 'speculators' who are willing to hold commodity positions for well over a year.

Speculators do, however, make money both from other speculators; but may also from underlying ownership interests/needs -- the Hedgers: The farmer with his corn, the airline with their fuel oil, the shipper with the fleet of not-yet-rented supertankers.

By providing that most puissant of needs to the marketplace - liquidity - the 'speculator' is able to earn a market or above-market rate of return.

There is one area of concern, if 'speculators' were wholly unregulated, then if you saw a pattern of withdrawing overly large chunks of spot commodities from the market place *purely* with the intention of causing a squeeze and manipulating prices due to technical factors in the futures pits - that could cause a sharp price change in a relative near time-frame. But such actions are deemed prima facie illegal pretty much everywhere and such exchanges tend to be fairly heavily regulated by Gov't. [and most speculators don't have storage facilities, without which you can't own oil anyway, only futures which are fin'l products.] A zero-sum game of trading derivatives [negative-sum in fact since I surely got paid when I did it] cannot really influence a liquid spot market.

And, as is obviously true, such a speculator is de facto removing liquidity from the market by preventing more trades from occuring - they are attempting a corner, in essence if not in fact.

Oil is so important and so widely traded that the only things that affect it are supply/demand, shape of those curves, and Gov't regulation. Even a blowout in the GOM doesn't affect the price overly much or long. Oil is going up currently because, not surprisingly, the worldwide economy has recovered and Emerging Markets are using more every year.

But it's ever so much easier to blame the mean, ol' nasty 'speculator' for price changes instead of the unseen forces of global trade and production and Gov't ever-changing policy [witness Argy and Vene'z problems lately w/r/t inflation].
Plus you get to blame them when prices move in either direction! Prices rise - they are hoarders so ban them! Prices fall - they are Eeevvvvvillll short-sellers, so ban them! Etc.

It should be intuitively obvious even the most casually informed observer that 'cheap capital' is an incredibly illogical reason for a speculator to randomly trade oil, AND to go long instead of short.
After all, it costs the same for any big player.
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