The scandal of the shady petrol middlemen

As the scandal of alleged price-fixing by major oil companies deepens, the AA said greed on the part of speculators risks destroying the consumer market and hampering the UK economy.

The traders buy huge quantities of petrol on the open market and store it until the price goes high enough to make them a large profit.

This is very different from the BP/Shell thing. And it\’s also obviously bollocks.

It is of course true that holding physical stocks can increase the price: hoarding can indeed do that as opposed to futures speculation.

However, you\’ve got to know that prices are going to rise to be able to make money doing this. And given that we cannot know the future there\’s obviously going to be some people attempting this who will lose money doing it.

If people were doing this in large enough amounts that they move the whole market then again, that might be different. But are they really trying to allege that there are speculators working in that large a size?

Anyone seen the details of what they are alleging?

14 thoughts on “The scandal of the shady petrol middlemen”

  1. Well, this is the duplicity of our ruling class. The constituency they represent- clustered in Islington, Brighton and Glasgow Kelvin- want Pigovian taxes on petrol to force the price up and stop people driving. So they do that.

    Then the rest of the population- not in Islington, Brighton and Glasgow Kelvin- get annoyed because they don’t reall want to “pay a bit more to help the environment”, so the ruling class start thrashing around trying to blame the free market for high prices, despite these high prices being deliberate government policy.

    The really bizarre thing though is how many people fall for this.

  2. At this point I cannot avoid the urge to snark that this kind of bullshit is one reason that genuine free marketeers won’t touch Pigou with a barge pole.

  3. No idea what they are suggesting, but it is a long time since I believed the AA knew anything about markets, or much else to be honest.

    It just noise – ignore it.

  4. Just where are the speculators storing the millions of gallons of petrol they have bought and kept off the market? Have they taken over Derwentwater and turned it into Derwentpetrol?

  5. If they are taking physical delivery and storing it, that is going to be expensive. Thye would need to hold hugh amounts to make even a small impact on the price.
    But ‘speculators’ are always good bogey men if you want someone to blame.

  6. It must be wrong since the AA are a well-known bunch of unreformed Neo-Marxist clipboard-wielding state-sponsored bureaucrats in bed with the EUSSR. Silly me for thinking that we should support consumer interests over those of big business!

  7. I’m comfortable describing myself as the most handsome man on Earth, but that doesn’t mean it’s true.

  8. @ nonothing
    Have you read the piece? Most of the tankers supposed to be waiting to offload were waiting offshore Suffolk. 13 of the 54 were near oil refineries, 41 were not. Not a single one near Milford Haven and if it really was about gouging the consumer you might expect half of them to be there.
    And the Daily Mail thinks the estuary near Edinburgh is called the “Fifth” of Forth!

  9. The only way this can ever work on a big scale is contango trading.

    You buy physical oil and sell forward a paper contract simultaneously. This only works when spot prices are lower than forward prices.

    If you are just gambling, it only has to go wrong once.

  10. nonothing – storing oil and selling futures contracts is not the same as moving the market, but responding to a predicted market move.

    I shudder to think how much you would have to stockpile to actually make a blip in the world market for oil. Even the US Strategic Petroleum Reserve is of limited use in controlling price swings (of course, not its purpose). 700 million barrels and it only represents a month or two of supply. Good to have in wartime, not so helpful as a market mover.

    And it

  11. And its not impossible that in a very tight market like oil (at least until recently) this could move prices significantly.

    No, it is impossible to believe that. The only way to make an impact on the world oil price is the OPEC method – turn off the taps and leave it in the ground in the first place.

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