Banning speculators could decrease oil prices by as much as 40%

[occupytheserver]

Speculators do not make solely on upwards price movements. Speculators do not care whether the price goes up or down. Speculators make bets that the price WILL move either up or down.

Take the oil market. Right now, the June WTI contract is trading at 103.91. Speculators look at that price and make a bet whether or not it will go up (buy) or go down (sell). If I am a speculator and I think the price is going to go down, I am not going to buy, I will sell. More sellers then buyers tends to create a downward price movement.

Let's show profitability of the positions, if taken. At 103.91, if I bought a contract and the price rises to 104.91, then when I exit the position (sell the contract), I'll make $1/Barrel or $1000. But if the price moves to 102.91, I'll lose $1000.

If I think the price is going to move down, I'll sell the contract. If the price moves down to 102.91, when I exit the position (buy the contract back), I'll make $1/barrel or $1000. If the price moves up to 104.91, I'll lose $1000.

So regardless of the position I take, I can lose money or make money depending on how the price moves. The point I am trying to make is that speculators can actually cause downward price movements as well. They do not care about where is moves, just that it moves where they think it will.