Are Oil Futures Markets Being Manipulated? | Jerry Taylor and Peter Van Doren | Cato Institute: Commentary

Are Oil Futures Markets Being Manipulated? | Jerry Taylor and Peter Van Doren | Cato Institute: Commentary: "If futures prices rise even though no underlying shortage exists to justify higher future prices, the shorts (along with everyone else) will be offered a golden opportunity to buy oil in spot markets (so-called because oil can be bought 'on the spot'), put it into storage, and sell that crude forward into the futures market — at the inflated, 'manipulated' price — and realize a very real and totally risk-free profit. Because our economy is full of people who are smart enough — and motivated enough — to know a risk-free profit opportunity when they see one, any significant divergence between spot and futures price will trigger so much of this sort of thing that futures prices will fall (more futures are being sold into the market, and futures prices — like the price of everything else — is established by the supply of and demand for futures) and spot prices will rise (because of the reduced supply from oil being placed in storage) eliminating the difference between the futures and spot price."