Thanks Número for the insight and I do see your point and do understand futures and futures contracts--either individually or in a pool.
But why not simply have shorter term contracts and/or pay market prices while holding your cash in reserve offsetting what you might have hedged (investing this capital in a 'safe' investment). As you said, folks have gotten this right as much as they've gotten it wrong and there are significant transaction costs which net the managers money (i.e. the 'casino's cut). And while the theory of stabilizing volatility and output may be great I've never seen it work well in practice. Why not just let the market run unencumbered by producers ? Why use your capital to bear their risk ?
I do the same thing buying future airline tickets (at a much lower cost) and can cancel without penalty to cover non-rev commutes. But they are bearing my risk because they have no idea that I have no intention of using any of them if I can get on a non-rev flight. So they really don't get a stable demand from me or really gain anything by offering a discount. All I do is tie up the money for awhile (and this may not even be my money in the first place if I float it on a credit card then have it refunded)--so it's easy to see how this neither promotes a stable demand or necessarily benefits both parties by hedging.
At least from what I've seen of this it's still gambling--granted it's gambling dressed up in a tuxedo and with a 'system' but gambling nonetheless. Mostly because while we might guess at future energy supplies and industrial demand our track record has shown we haven't a clue. This uncertainty IMHO would be better off mostly offset by reserves (which could maintain capital value over time) able to absorb the transients and spikes.
Hedge fund managers have made some pretty decent windfalls and this money has to come from somewhere. Whether you win or lose the bet this is still ultimately paid.
Cheers
Last edited by Shep69; 7th Dec 2014 at 02:52.