Lets blame the speculators
One approach to look at the soaring price of Oil is to blame it on speculators. Following the footsteps of Lenin both McCain and Obama using very harsh language toward the “speculators”. The reality, as usual, is slightly different:
To a large extent, this theory, if it is anything more than just populist capitalism-bashing, is a result of extreme ignorance. There are an incredible number of people involved in the oil markets every day in numerous countries with numerous different incentives, such a large number that it is impossible to imagine a conspiracy. There have been a couple of cases of proven petroleum commodity price manipulation in these trading markets - most of these have involved manipulation of prices at the end of the day on certain futures expiration and/or Platt’s pricing windows. The time frame for these manipulations have been on the order of 1-2 minutes.
But here is the best argument against this manipulation for higher prices, and it is amazing to me that no one ever thinks of it. Sure, there are a bunch of really savvy people in the commodity trading business who are long on oil and want the price to be higher. But for every seller, there is a buyer on the other side, someone who is at least as savvy and is desireous of lower prices. Yes, I know it is a complicated concept, but for every trader selling there is one buying. If there is an extended conspiracy to push up oil prices by speculators, do you really think the buyers are just going to sit on their hands and take it? And do you really think the exchanges are going to be happy with this behavior, threatening the integrity of their trading system (really their only asset)? Just ask the Hunt family, which attempted to corner the market and drive prices up in silver, only to have major buyers and the exchanges stop them cold, driving the Hunts in the process into bankrupcy.
Obviously this populistic rhetoric is being used largely because of the election, however it is being fed on existing notions and is feeding unfavor public opinion. It is convenient to blame the bankers (it used to be even more convinient when the “bankers” was code name for jews) - it distract the attention from the real issues, it provides common enemy and a great excuse to add more power for those who will “protect” us. Will it solve the problem? of course not, but who cares we can always blame the evil corporations.
Tags: Lenin, McCain, Obama, Oil Prices, Speculations, The Free MarketRelated posts