60 Minutes Looks At Oil Speculation In 2008

60 Minutes Looks At Oil Speculation In 2008


And they find that the folks who were trying to make a quick buck were affecting oil prices far more than the normal market forces of supply and demand.

Gee, that sounds oddly familiar…

Last year I argued time and time again that the energy speculators were the cause and that supply and demand couldn’t cause such massive price hikes. And yet some of you continued to fight me on it and claim that this was a result of market forces.

Well, here we are and I’m guessing you’ve watched the story above by now.

However, I’m completely uninterested in who’s right and who’s wrong. What I’m interested in is a fix so this doesn’t happen again.

I think it’s pretty obvious that allowing speculators to enter into this game is extremely damaging to both our short and long term goals. I’m not suggesting we should abolish the commodities market, but what I am saying is that we should only allow companies that can actually use the oil to purchase the contracts. I don’t think that’s an unreasonable notion, and I hope that’s some common ground we can agree on.

  • kranky kritter

    Fine, suppose we grant that it’s not unreasonable. Does that mean it will work in practice because it is simple and reasonable in theory?

    Nobody like speculators. Everyone sees them as parasites. But without them, there would certainly be adverse side affects. As soon as other folks begin acting as gatekeepers on capital that wants to invest, things get screwed up. Incentives become unclear. Don’t forget, for every trade on which someone made money, someone else lost.

    The broader problem here was cheap plentiful capital. Cheap capital makes it so easy for speculators.

    One important role speculators play is to help others who are more risk averse to manage their businesses by providing predictable cost numbers. So consider what would happen if only energy users could participate. Who would make the market for those companies when they wanted protection against volatility? And if they failed to get it, who would pay. Consumers. Again.

    Also notice that you could just as easily argue that the cure is additional speculation. Had we all been able to lock in energy costs 2 years ago, none of us would have been harmed by $4 gas. And if we had locked in 3 months ago, we’d all be screaming.

    I don’t pretend to be an expert in markets. Far from it. But I know enough to know that the kind of gatekeeping you suggest, while reasonable at a glance, is not so simple or easy a solution as you hope.

    Why not learn some more about them Justin, and for the time being, acknowledge your vast ignorance as I acknowledge mine. Don’t you see how foolish you sound when you say “can’t we all agree that regulation is the silver bullet?”

  • http://itsthe21stcenturystupid.wordpress.com Jim S


    Given that in fact the speculators increased volatility rather than decreasing it something seems not quite right about your post. Your comment about speculators helping risk averse businesses with predictable cost numbers is a great concept but obviously not borne out by the recent events.

  • http://www.abetterframingham.org Harold J. Wolfe

    What is not mentioned is that oil is a finite commidity (Hubert Curve) and is still the only way to store energy for transportation purposes until we go to electric cars which is less likely as oil prices decline.

    As that Saudi shiek said “The stome age did not end for the lack of stones”.

  • Steve

    The fact that ALOT of people suffered and had to sacrifice (possibly food) to be able to put overpriced gas in their cars to simply get to work to be able to survive, while these scumbags leeches got rich should be a crime and should make the American people outraged. I know I am really mad as hell. I have called and written to my congressman and let them know that there needs to be a stop put to this. I suggest everyone else do the same.