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View Diary: Economic Terrorism and Krugman's Latest: "The clear and present danger...is what is happening now." (267 comments)

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    They make money by anticipating price fluctuations.

    Of course, however, they also mitigate the price fluctuations as a part of making the money. If GS thinks that the supply/demand relationship is such that oil prices will rise in the future, they buy oil now. That causes a slight rise today instead of a sharp rise in the future.

    Additionally, keep in mind that for every long there is a corresponding short.

    The huge drop in the price of oil yesterday was a speculative bubble popping.

    It may have been. Short term speculative bubbles can always occur, but the long-term price is a supply/demand thing. Remember that the price can crash too.

    That said, the price today still seems high to most people but it reflects the reality of supply and demand. Growing population vs finite resources means higher commodity prices sooner or later. In the case of oil where supplies are around the peak, further price increases are inevitable.

    Yup.

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Fri May 06, 2011 at 06:35:40 AM PDT

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