Scapegoating Oil Speculators…Again

Take a moment and contemplate these grafs from today's New York Times coverage of a statement by the chairman of the Commodity Futures Trading Commission regarding his "firm belief is that we must aggressively use all existing authorities to ensure market integrity":

Oil prices have swung wildly in the last year, hitting about $145 a barrel last summer, then plunging to $33 in December before rising to about $70.

Much of that gyration stemmed from chaos in the global financial system, as banks and much of Wall Street came perilously close to collapse last September and the global economy fell into the most severe recession in decades.

But a growing number of critics have blamed some of the extreme volatility on the role of purely financial investors — those who are simply betting on the direction of energy prices, as opposed to those who actually use such products, like airlines.

So, to review: Oil price have fluctuated wildly during a period when our financial markets were in nearly unprecedented disarray. Let's blame speculators and regulate the heck out of them! 

Now seems like as good a time as any to link back to my previous rant on this topic and note once again that there is no substantial difference between airlines—who are buying futures because they anticipate future changes in the price of oil—and so-called speculators—who are buying future because they anticipate future changes in the price oil. Eventually taking delivery of the oil is neither here nor there.