Stock Markets Exposed
Why is oil traded on the stock market?
Or any other commodity for that matter. Whats the benefit of having oil or any other commodity be under the influence/value of spectators? If its used as an investing tool, how can people expect the price to ever go down.
Public Comments
- If the price never went down then people would always be making money at the commodities market. However, many people lose a lot of money investing in commodities. The prices can come down. Some people will bank on it going down and make money when it does.
- It is traded as a commodity because in the 1970's OPEC was told by the US that a OPEC determined oil price would not be acceptable. The US wanted a free market for oil prices and did not trust OPEC to set their own prices.
- The oil companies are publicly-traded because the shareholders own companies like Exxon; Conoco-Phillips; Chevron, etc, etc. Price is set by supply and demand fluctuations and politics between the oil producing countries and the rest of the world. Speculators only try to predict what will happen and make investments based on world events.
- Actually, it is traded not on the stock market but the commodity market. This is only a slight difference but worth noting. There is an index fund based on oil that is traded on the stock market. As to why? There are advantages to both producers and consumers to be able to trade a future contract of a commodity such as oil or corn or wheat or copper. For example if the airlines had been better managed they would have bought oil contracts for future delivery a couple of years ago and locked in a price and assured themselves of a supply at a known price. On the other hand an oil company today can sell future contracts at $120 a barrel for delivery in the future and assure themselves that when the oil comes out to the ground the price they will receive is $120 a barrel. Of course if the oil companies expect that the price of oil will continue to increase, they will not be selling many contracts at today's price.
- Oil is not traded on the stock market nor is any other commodity Commodities are traded in commodities market Investing in commodities is a business, and the traders are risk takers, as well as any other investor. Most end users do not want the risk of buying in the futures market, so there are investors willing to take that risk.
