Why is it, that when something goes wrong a scapegoat must be found? Oil prices rising cannot be because of increased demand from other developing countries, nor can they be because of the increased usage of oil in the United States without a matched increase in supply. Didn’t you know? They’re because of the speculators! Those nasty, greasy people who soil the market with their grubby little paws and make it impossible for normal, clean-cut people to go about their business. But hey, it seems Western civilization has always had this problem:
Speculation has been a favorite target of politicians looking to mollify anxious voters since the time of ancient Greece, when the orator Lysias protested that wheat traders had reduced Athens to a “state of siege.” Even in market-friendly America, there is a long tradition of
denouncing speculators as dishonest, unproductive parasites; the
nineteenth-century preacher Henry Ward Beecher decried their “cool,
calculating, essential spirit of concentrated avaricious selfishness.” [link]
Far be it from me to defend speculators, but they definitely have their place to keep markets free-flowing. When a commodity’s expected to see an increase in demand, who but the speculators predict the increased demand and hasten the process of reflecting that in the price? They provide necessary liquidity, and do so in a reasonable way.
Speculators do play an important role in setting the price of oil and
other raw materials. But they do so based on their expectations of
future trends in supply and demand, not on whims. If they had somehow
managed to push prices to unjustified heights, then demand would
contract, leaving unsold pools of oil. [link]
And, ok, once in a while things get a little out of hand, when speculators invest a little too much in futures contracts for a particular commodity (in this case, oil), but they don’t actually buy the oil (or sell it, for that matter). In fact, there are no drastic changes in oil inventories to reflect that.
Speculators, by contrast, mostly use futures contracts to gamble on oil
prices, and have no interest in buying or selling real barrels of oil.
These gambles can be tremendously lucrative, but they don’t directly
determine the real (or “spot”) price of oil. That’s set by the people
who are buying and selling actual barrels of petroleum. Although
speculators could directly distort oil prices by turning their futures
contracts into oil and then taking it off the market to drive up
prices, a look at oil inventories shows no sign that this is happening. [link]
At the end of the day, it’s easy to blame the speculators, but instead of doing that why don’t politicians call for real change and risk making life difficult for their constituents? Stop driving the SUV, start doing some real research into alternative energy, etc. etc.
This is not new, but it’s worth reminding one’s self about who the top seven oil-consuming countries are and how varied their usage is: