[extropy-chat] Re: peak oil debate framed from a game theory standpoint ?

[Robert Lindauer]

Brian Atkins wrote:

> Ok let me simplify and just ask you and/or Hal this:
>
> If we are to accept that longer term crude futures contracts have any 
> worthwhile prediction capabilities, how do we explain the fact that 
> the current October 2005 contract (CLV5):
>
> <http://charts3.barchart.com/chart.asp?vol=Y&jav=adv&grid=Y&org=stk&sym=CLV5&data=E&code=BSTK&evnt=adv> 
>
>
> essentially just has mirrored over its lifetime the spot cash price:
>
> <http://charts3.barchart.com/chart.asp?vol=Y&jav=adv&grid=Y&org=stk&sym=CLY0&data=E&code=BSTK&evnt=adv> 
>
>
> If it truly had some predictive power shouldn't it already have jumped 
> up closer to $60 when it started off?

Not necessarily.  Your model of gambling intelligence is naive.  People 
are smarter than that.

Let's say I KNOW that prices are going up simply because cost of 
production is going up (that is to say, there are OBJECTIVE FACTORS 
affecting prices contrary to some models of pricing).  Let's say I know 
that I'm not the only one who knows, some other people know.  I also 
know that some other people have an inkling but don't actually KNOW and 
I know that some other people in the market have more money than I do 
and could affect the value of my investment in other ways.

Now say I think - okay, I'll buy short term oil futures.  So I start 
buying big time - some other conglomerate - say a purely financial 
concern - picks up on my buying behavior and starts shorting me.  And 
then someone else sees them moving in and the market becomes chaotic.  
Then, say, lots of people pick up and start selling short or buying 
long, etc. 

In short, the only thing buying LOTS of a commodities futures is likely 
to do is to cause chaos.  Smart investors know this and so try to buy 
indirectly into industries likey to profit from long-term oil price 
increases.  But even here, moderation is always wise.  There's simply 
too much information for a single bet to be a good idea and certainly 
it's never a good idea to play your hand.

Robbie Lindauer