McClatchy, Oil, and You
McClatchy quotes sources who blame speculators for driving up the price of oil and gasoline and draws this conclusion:
Not surprisingly, big Wall Street traders on Tuesday projected oil will rise above $112 a barrel; some such as Swiss giant Vitol even suggested $150-a-barrel oil is coming soon. When they dominate the market, as they do, speculators’ bids can make their prophecies self-fulfilling.
Yes, animal spirits exist in the market. But the cure, more government control (of a globally traded commodity… not sure how that would work, except to say poorly) is worse than the “disease” (you’re right, those are sneer quotes) of speculation and free markets.
McClatchy also forgets to address several things:
- U.S. demand (which has gone down slightly) does not equal worldwide demand (which is only peripherally addressed).
- When the value of a dollar decreases, it takes more dollars to buy a barrel of oil (all other things remaining constant, which they rarely do).
- The cumulative effect of idiotic regulatory decisions like disapproving the Keystone XL pipeline (which incidentally benefits one of the President’s stage props, Warren Buffet) which if reversed, should make gasoline costs less over time.
Of course there’s that Iran thing as well. I’m sure it’s on someone’s to-do list.
How do the evil speculators differ from the financial institutions or GM and Chrysler (which all rolled the dice, lost, and were bailed out)? Or for that matter, from those who fail to work or to save for retirement because the government will take care of them?
The outcome is the infamous moral hazard.