Saturday, June 28, 2008

Blame Governments, Not Speculators for High Oil

By preventing production and through inflationary monetary policy, maybe the government should be blamed for high oil prices, not speculators?

Link.

2 Comments:

At 6/28/2008 9:36 AM, Blogger Sophist said...

Why should be either-or? Both contribute to this. Government provides the incentive for the speculators to act.

It takes two to tango.

 
At 6/28/2008 10:37 AM, Blogger Sophist said...

This is my post in Stefan Karlsson's blog:

I'm sorry to say and this is by no means an ad hominen attack, but your analysis is completely wrong and potentially biased.

You are wrong on so many counts on how the futures markets work, how price discovery works and how speculators can cause bubbles that I feel it is pointless to even begin rebutting your statements.

With all respect of course...

I can only mention one possibility to you, out of the many that exist.

it is quite possible that speculators in the crude oil market lose money. However, they may be making many times what they lose in intermarket trades, like carry trades and shorting equities.

This is a very complicated issue and be sure speculators are very sophisticated. Your simplistic description of how futures markets operate cannot be indicative of the complex strategies that can be used by speculators in that market.

The solution is one: limit immediately speculation in futures exchanges and monitor the results. My recommendation is to demand speculators to take delivery or deliver oil if positions are kept more than 5 days. This compromise will not deprive futures markets from intraday liquidity but it will increase transaction and other costs for speculators.

 

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