Oil Prices: Blame the Buyers AND the Sellers

Well here's an interesting story* that'll make the Congressional witch hunt for the culprit in rising gas prices a tad more difficult. Over the last 10 months those nasty, greedy hedge funds have reduced their positions in oil futures by about 80%. What's the fun of being in Congress if you can't blame the wrong guy?

Speculation (whatever that is) and its dastardly cousin, manipulation, are silly but politically useful targets to blame. Futures require a long for every short, so if Trader X "speculates" long, Trader Y has to be "speculating" short. On balance, the "speculation" has to cancel itself out.

But off the CFTC goes to find someone to blame, preferably someone no one likes anyway (hedge funds, oil companies). Certainly, there will be no pressure brought upon the CFTC to find politically pleasing results. If the CFTC finds even one pension fund over-hedging its inflation risk, that's all the justification our trusted leaders need to ignore legitimate long term solutions: more production, more public transportation and nuclear power.

Solar (so far) and wind (forever) are insufficient to make a meaningful dent in our energy needs (to replace 1/40th of Manhattan's annual power supply with wind requires a wind farm about 3x the size of the island itself). I'm hardly an expert. I figured this stuff out just cruising the web (Wikipedia has all the inputs you need to do the math yourself). Can't anyone in Congress do the same?

*Hat Tip: Jeff Matthews

Comments

[CaptBob:]

It's all about hearing yourself talk--and of corse pandering to the constiuency--have you noticed the "Savoir economics" of that bunch??

2008 Jun 04 11:12 AM

[Ebi:]

Blame the demand AND the supply????

2008 Jun 04 03:03 PM