We Want More Oil, Not More Hot Air from Congress
Senator John McCain recently called for a "thorough and complete investigation of speculators" to see if they've driven up oil prices. And Senate Democrats plan a new bill aimed at commodity speculators - a witch hunt that's clearly about oil.
But, much as politicians would like to blame speculators, it's just not so.
For starters, there's nothing about futures or options that makes it any more attractive to bet that commodity prices will go up than to bet they'll go down. Guess wrong on the direction, and you lose money.
Speculators are now increasingly leaning toward betting the price of oil will go down, not up. So they're unlikely villains if prices do keep rising.
There is no mystery behind the rise in oil prices. They rose too high too fast because of booming demand for oil for electric power, petrochemical products and shipping from many emerging economies (particularly China, India and the Middle East). Meanwhile, the supply of oil slipped in the US, Mexico, Venezuela, Nigeria and Russia (see post below).
The urge to blame speculators is as big a waste of time as blaming oil companies. Americans want more oil and gas - not more hot air from politicians.
Cato Institute's Alan Reynolds article "Scapegoating the Speculators"