Finance Question

What happened what happened with the debate about whether speculation or market manipulation could affect oil prices? I’m wondering because of the recent discussion about the urgency of preventing shortselling. Why would shortselling in stocks have an effect, but not speculation in oil?

2 comments so far

  1. Daniel Rosenberg on

    The argument was, if I remember correctly, that financial speculation does not involve hoarding, and therefore doesn’t have any serious effect on the prices. Personally I think this argument is based on a false view of the capitalist economy as based on the trade in physical goods, rather than on trade in financial claims, which are ultimately virtual.

    Concerning short-selling, I’m not an expert on the subject, but isn’t the practice involves only short-term trading, as in day trading? I can’t see how it can have long-term effect on prices. Moreoever, it seems that assets that are subjected to “shorting” are acting very precariously, while oil price are more or less stable in last months.

  2. mperelman on

    In the oil markets, experts claim that since every sale in the futures market is matched by a purchase, futures markets can have no effect on prices.

    Short-sellers borrow a stock, then sell it, hoping to repurchase it at a lower price. Supposedly, they start false rumors, drive the price down, repurchase the stock cheaply, then return the stock, pocketing a profit.

    More often than not, the short-sellers have been correct about the weakness of the stocks that they are shorting.

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