1. "Nothing sparks spasms of poor economic commentary like rising oil prices.
From left to right, pundits and politicians outdo each other at accusing
evildoers of hurting good people. This week, a Democratic congressional
committee held a hearing on the issue of high gas prices and excessive oil
Speculators are easy targets. They seem to produce nothing. They merely buy
and sell and hope for prices to move in directions that will bless them with big
profits. In fact, though, speculators also bless the rest of us with significant
benefits -- although too few Americans understand this truth.
Speculators should be celebrated -- not so much for their motives (which are
no better or worse than normal) but for the socially beneficial, if largely
invisible, consequences of their activities. Speculation makes resources more
abundant when there is great scarcity by encouraging people to use those
resources more sparingly when there is relative abundance."
2. "Speculators anticipate shortages and buy up commodities early, thereby removing them from the market. This alerts consumers to the oncoming shortage, fulfilling the important financial market role of providing information and allowing them to reduce consumption as prices rise. Later, the speculator sells, ameliorating the shortage while making a profit.
Speculators anticipate and warn others about shortages—they do not cause shortages. As a result of their trades, price swings are less severe than they otherwise would have been. We do not blame doctors, police, or firemen for profiting from the misfortune of others because it is understood that they help a bad situation. Speculators deserve the same consideration."
3. "People who argue that speculation is destabilizing seldom realize that this is largely equivalent to saying that speculators lose money, since speculation can be destabilizing in general only if speculators on the average sell when the currency (commodity) is low in price and buy when it is high."
MP: In other words, speculators who continually lose money by buying high and selling low (which would increase volatility and be destabilizing) will be forced to leave the market eventually, and only rational speculators – those who will actually help to stabilize prices – will survive.
~Milton Friedman, Essays in Positive Economics (p. 175)