From: Gene McAloon 

On Thu, 3 Jun 2004 00:18:39 -0400, "Mark"  wrote:

>
>"Gene McAloon"  wrote: That is
a very strange thing
>to say. The commodity traders do not determine the
>> price. They are trading futures, in affect what they think the price will
>be
>> down the line, not today's price. The base price is in the long term
>contracts
>> under which the producing nations sell the oil. That price doesn't change
>> regardless of what the traders are betting.
>
>Replacement cost (new contracts) is the true cost, thus the futures
>determine the current price.
>
No. No one is paying $42 a barrel today. Only the suckers at the pump are paying
a higher price and at that there is no direct correlation between rising futures
prices and pump prices. The futures price has been high because the traders
are betting that there will be interruptions in supply because of terrorist
activities.

 If the futures price remains high, the producers might try to use that price
in
their long term contracts. That may or may work because the futures price
would have to remain high for a considerable time and that is not likely.

It is a fact that the price paid at the well-head is based primarily on
supply and demand and the traders are betting that supply will fail to meet
demand in the months ahead. That is called speculation and is primarily of
concern to traders only because, unlike oil companies, traders make their
money not by buying or selling oil, but futures contracts.

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