Exxon Mobil's Senior VP Confirms What I Have Been Saying, The Market Is Protecting The Price Of Oil

[GreatGazoo]

8. Your theory is that pro oil traders, all over the world,

who have handled billion dollar trades for entire careers are all now just believing whatever Trump says? Like traders in Singapore are glued to Fox News with the subtitles turned on?

Pepsi, United Airlines, UPS and all the other major companies for whom gasoline prices are a large percentage of operating costs, have their own trading desks. They hedge both ways. They price in every possibility, not just upside or downside. Exxon wants them to shift that balance more toward the upside. By hedging the traders don't have to believe Exxon or Trump and they don't have to predict the future with 100% accuracy. It is like if they were betting on a coin flip and bet on both heads and tails -- they won't make any net profit on the bets but they will "win" in the sense that their companies will have oil in August. Their job is to minimize exposure to the risk of price fluctuations.

The price of futures today reflects everything that is known today. That includes the risk that the situation with the Strait gets worse or stays bad longer.