Sacandaga

Oil Price Economics the 60 Minutes Way

Truly, it doesn't take a Wharton MBA -- or even Steve Kroft's Syracuse BA in journalism -- to understand that prices of all essential consumer goods (food, housing, fuel) commodities were being jacked by speculators during the exact period when interest rates were being kept artifically low by Mr. Greenspan. And, that those same prices all plummeted when a big piece of that speculative pie, housing, turned out to be the first to turn elastic (i.e., turns out people will move in with their parents to escape a bad-deal mortgage faster than they'll stop eating or stop driving to work and the store) when interest rates began climbing again and threatening the leveraged towers they'd built.

Housing also fell fastest and hardest because it was super-jacked with CDS plays and other leverage schemes, but once those deals went south, you knew that a box of Corn Flakes would be down from $7 to $4 not long afterward.
It's equally clear that there's a lot more involved than SUV mileage and demand from China and India when you realize that the number and average size of energy-related hedge funds more than quadrupled between 2001 and 2006, when doesn't include similar plays among sovereign wealth funds and commodity broker-dealers.

The true scandal is the fact that those oil-desk traders will move from Enron to Morgan Stanley and now somewhere else for the signing bonus and the chance to inflate the next commodity bubble.
Some of them undoubtedly must have had relatives for whom $4 gasoline was a true crisis. Did they share their trading profits with those relatives? Not likely.