Comments on: Should the federal government use the SPR to counter speculators? http://knowledgeproblem.com/2009/08/28/should-the-federal-government-use-the-spr-to-counter-speculators/ Commentary on Economics, Information and Human Action Fri, 10 Feb 2012 04:58:33 +0000 hourly 1 http://wordpress.com/ By: bartman http://knowledgeproblem.com/2009/08/28/should-the-federal-government-use-the-spr-to-counter-speculators/#comment-9264 Fri, 28 Aug 2009 16:05:42 +0000 http://knowledgeproblem.com/?p=5325#comment-9264 Too bad the oil market is in contango, huh?

]]> By: OneEyedMan http://knowledgeproblem.com/2009/08/28/should-the-federal-government-use-the-spr-to-counter-speculators/#comment-9263 Fri, 28 Aug 2009 15:10:42 +0000 http://knowledgeproblem.com/?p=5325#comment-9263 This is as opposed to using the SPR to fight a market in backwardation — right? That is, selling oil from the SPR in the spot and buying replacement oil in the futures market and pocking the difference. That doesn’t have any of these risks. If it continues to get even more backward then you can make even more money.

All you need to do is specify physical delivery and fully collateralized positions in government debt are requirements for anyone wanting to enter into such a trade. In those rare times when current supply is highly limited but there is no threat to medium to long term production, this could be a big money maker.

Back in 2007 when I wrote about this on my blog (A wealth of oil) this strategy was worth about $15 million a day.

]]> By: D.O.U.G. http://knowledgeproblem.com/2009/08/28/should-the-federal-government-use-the-spr-to-counter-speculators/#comment-9262 Fri, 28 Aug 2009 13:13:37 +0000 http://knowledgeproblem.com/?p=5325#comment-9262 Speculating from a long position is still speculating. To counter the effect of market speculation using government speculation would require counter-market speculation. Not that market speculation is always “smart” speculation, but it seems too easy for counter-market speculation to be “dumb” speculation.

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