Speculators Are Doing Our Children A Service
It's very hard to guess what the price of oil would be in the absence of speculation, but it's also impossible to imagine what a world without speculation would look like. I certainly agree that we have no good explanation of these prices. Certainly as an explanation by itself, "speculation" makes little sense. Speculators drive up prices only when they believe that future prices will be even higher. Why they'd believe that, I'm not sure.
I do think we should pause to note that if that's what's happening, then the speculators are doing our children a service by conserving oil for a time when it will be very scarce. In other words (if in fact that's what's happening), there are two reasons to applaud higher oil prices -- conservation and environmental issues. But speculators are unlikely to care about the latter. So no matter how high speculators push the price, they're unlikely to push it far enough.
~Steven Landsburg in yesterday's LA Times
6 Comments:
"In other words (if in fact that's what's happening), there are two reasons to applaud higher oil prices -- conservation and environmental issues. But speculators are unlikely to care about the latter. So no matter how high speculators push the price, they're unlikely to push it far enough."
There is an easy way for traders to take the second one into account too. Put a price on carbon. Either through some cap&trade scheme or the more effective approach would be a carbon tax.
The day that politicians accept responsibility for the consequences of their lack of economic knowledge is the day that I will entertain giving them more power.
Carbon tax/cap & trade is just another get power quick scheme being foisted on an uninformed or uncaring public. Contrary to public opinion, man made global warming is not a scientific fact, carbon use is not a proven villain, nor are speculators.
Speculators provide stability in a volatile market and hydrocarbons provide a practical energy source in the absence of a feasible, large scale storage technology for weather derived energy.
We will need oil, lots of it, and combustion engines, lots of them, for the foreseeable future.
A tip of the hat to speculators.
I'm a speculator. I work very hard to figure out if the price of oil is right or if it's wrong. Most of the time I can't figure it out so I don't participate. When it's wrong, I participate. I don't guess even though I deal with uncertainty... i'm not guessing. The price of oil has been right for a while because there's no excess production, no excess inventory and by the same token, there's no shortgages. So, hats off to us speculators. If we were doing it wrong you would know. Trust me.
Oh wow! Now sophist will be most unhappy to read the comment by anon @ 12:32 AM...:-)
BTW anon, what do you mean as a speculator when you say, "price of oil is right or if it's wrong"?
I'm assuming it has something to do with supply & demand but is there more to it?
This sounds like an environmentalist looking for a justification. In this case, they're just using speculation to shield themselves from criticism.
"the speculators are doing our children a service by conserving oil for a time when it will be very scarce. In other words (if in fact that's what's happening), there are two reasons to applaud higher oil prices -- conservation and environmental issues."
amen, bro. lets slap a tax on gas to keep it at $4/gal. you'll see people saving energy like crazy.
rebate some $ to poor folks so they can drive to their jobs (who cares if some billionaire has to pay an extra $100 to fill up his escalade)
spend the rest on paying off the debt that bush has run up with his 'tax cuts pay for themselves' failure.
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