I am not justifying inaccurate pricing. Burning speculators is fine, but give everyone accurate information.
Hard disagree. There are lots of reasons people with legitimate hedging concerns who don't intend to take physical delivery prefer the physical contract to a CSC (if it's even available).
* Different regulatory capital requirements
* Some commodities don't have cash settlement
* Sometimes a CSC doesn't count (as much) from a regulatory/insurance perspective if you're hedging a position in a commodities basket or whatever
I'm sure there are more - I don't work in commodities.
Freight industry, airliner, etc.
The issue here is total speculators using PHYSICALLY settled contracts to speculate who don't want delivery.
The number of people who need WTI are pretty few - refiners and some small others. Seriously - with WTI you still need to refine it - airlines CANNOT just load WTI into their tanks.
These sob stories from folks who supposedly were bidding to take delivery of physical oil (unrefined) from a condo somewhere are ridiculous.
To trade futures you need to certify you understand them. I'd love to see the form this guy filled out listing what was likely a fair bit of bogus experience.
I'm fine with all these idiots getting burned.
The freight industry will similarly buy futures in bunker fuel, diesel, or whatever exactly they use to fuel their vehicles. Again, they're not refiners and have no use for raw crude.
It's the oil refiners that buy futures in crude. Well, them and speculators.
It doesn't matter. Airlines absolutely buy crude futures to hedge against changes in fuel cost. It might be impossible to buy futures in the exact good you need, or it might be too expensive due to illiquidity and slippage.
It's like how beer manufacturers buy aluminum futures even though they almost never take delivery on the futures. They're just going to buy the processed aluminum from their regular processed aluminum supplier, but they can still hedge some of the price changes with the easily available physical aluminum futures.
Anyway, as usual, Wikipedia has a relevant article, and it seems that airlines do both: https://en.m.wikipedia.org/wiki/Fuel_hedging
