The Evils Of Oil Speculation

The price of oil, and perhaps more accurately, gas, has been steadily rising during  the last several months.  All kinds of people have all kinds of reasons for this but one of the common themes has been the impact that oil speculators have on the market.  Many on the left are calling for legislation that would limit the ability of people to speculate on oil:

Experts have been clear: Wall Street speculators are artificially driving up the price at the pump and causing pain to millions of American consumers.

Now others have a different view of the impact that oil speculators play:

But economists and traders cautioned that pushing smaller investors out of markets would only hand greater influence to the largest hedge funds and Wall Street banks. Ultimately, there may not be enough traders left to do business with oil producers and consumers looking to hedge their needs.

“Reduced liquidity often means greater volatility,” said broker Jay Levine at Enerjay LLC in Maine.

So let’s compare.  Let’s take a look at an example of a commodity that prevents speculation and compare it to oil.

I recently came across a post at Mark Perry’s Carpe Diem that demonstrated just such an example:

This graph shows us that if we allowed oil to react to market forces in a way that speculators couldn’t impact the price we would see massive fluctuations in the price of oil.  Swings that we wouldn’t wanna see.

Be careful leftists, be very careful.

3 responses to “The Evils Of Oil Speculation

  1. In my grand-parents’ day, criminals only stole things that they could use. Now they will steal anything because everything can be sold.

    In the past investors focused their attention on commodities that they thought consumers would want. Consumer demand would drive the price up. Now they invest in what they believe other investors will want. It might make them rich, but it is sick way to make a living.

    • Now they invest in what they believe other investors will want. It might make them rich, but it is sick way to make a living.

      I’m not sure who you are referring to? Onion speculators or oil speculators?

      It seems that the point many economists make is that by allowing people to speculate in oil actually serves to keep the price of oil stable.

  2. Even people who like speculation think the onion comparison is a mixed bag: http://business.time.com/2008/07/09/what_do_onions_tell_us_about_o/

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