[quote=Rich Toscano]Speculators can contribute to short-term spikes and drops (eg they surely played a role in the rapid 2008 runup to $147 and subsequent crash to $34).
But they aren’t responsible for the general trend towards high oil prices that we’ve seen this decade. Global oil production has basically not increased at all for 5 or 6 years against a trend of increasing global demand.
Speculators, along economic booms and slowdowns, can cause a lot of volatility around the underlying upward trend in oil prices. But they aren’t responsible for the trend itself… the “blame” there lies with the inability of oil production to keep up with rising demand.[/quote]
Agreed, the oil supply is dwindling, and the demand is rising, but the damage done by speculators who are betting on this trend in the interim is greater than the trend itself (IMHO). Like CG stated above, this is what revolutions are made of.
If I were Empress of the Universe, I’d raise margin requirements for commodities trading (or ban commodities trading on margin, entirely), and immediately reduce and regulate the number of people who could trade, who were not producers or wholesale consumers of the commodities. Joe Smith, the hedge fund guy (and his compatriots) should NOT be allowed to move commodity prices.
