Dicker: Don't Treat Commodities Like Stocks

In the energy markets, we have $4-a-gallon gasoline at the pumps, yet we have domestic refineries that are quickly going broke. Does that make sense? Refinery margins, represented by crack spreads between the price of the crude barrel and the price of a refined gallon of gas, are down to untenable levels for domestic refiners. As speculation enters the energy market, it is overwhelmingly coming into crude oil and not into refined products -- summertime cracks for gasoline, normally somewhere between $20 and $40 the last few years, have now recently recovered to $9 after being briefly negative for a moment less than two months ago. That's right; there was a moment where the price of a gallon of refined gas was actually selling for LESS than the crude oil that went into it.

To be even more convincing, if this hasn't been enough to convince you about the speculative action in the market, we've seen heating oil cracks, normally seasonal for the winter (obviously), trade recently at a $30 premium. It is very clear that speculators, wanting to take advantage of reducing refining margins, got caught badly in a traders' short-squeeze in heating oil, pushing those margins totally outside of fundamental price reality.

I am constantly amazed that fundamental/speculative arguments still rage on CNBC and elsewhere. Sure, there are real, fundamentals price pressures that are bullish -- but those serve more to inspire people to look to get long, not to arrive at a correct price from fundamental supply and demand factors.

Ask a trader, he'll tell you right away - there's no doubt about it. The Apple (AAPL Quote) iPhone is great and everyone wants one -- why isn't APPL stock up this year? Aren't legitimate bullish reasons enough to drive the stock higher? Of course not.

Next time, we'll discuss the difference between how stocks and commodity futures are valued and the other major reason commodities refuse to show any limits anymore.