Pat Dollard | Young Americans

Still … They are in a major state of denial as to the primary reason we are seeing this stupid crisis … No, it is everyone else’s fault but their own.

I, for one, am beginning to wonder if the democrat Congress likes the high price of oil/gas … and why.

Just Speculating

(IBD)

Energy: Democrats, in their never-ending search for scapegoats, have had a go at oil company CEOs, industry profits and now oil “speculators.” They’ve looked everywhere but where they should — in the mirror.

The congressional hearings that kicked off Monday to look into speculative behavior in the markets produced all the usual finger-pointing about the doubling in oil prices over the past year to nearly $137 a barrel.

Meanwhile, Barack Obama, seeking to catch a political wave he can ride all the way to the presidency, has announced he’ll “crack down” on oil speculation by imposing new limits and regulations on oil traders in the futures markets.

But as emotionally satisfying as going after speculators sounds, this will only make our current oil problem much worse.

It’s true there’s speculation in the oil market. But then again, there’s speculation in virtually every exchange-traded good — from oil and gold to corn and pork bellies. This isn’t just acceptable, it’s healthy.

Speculators aren’t evil. They ensure a liquid market for the commodities we need most. They make money by buying low, when the product is in low demand, and selling high, when demand has grown.

It has been pretty easy for them to make money recently, because speculation in oil has become a one-way bet.

Global oil demand has been growing by about a million barrels a day each year — thanks to surging use in fast-growing China, India, the Middle East and parts of Eastern Europe. Supply hasn’t kept pace. In fact, it’s falling at key suppliers including Mexico, Venezuela, Nigeria and Russia. So the price rises.

The logical answer to any question about speculation in a market is: What are you doing to boost supply? In the case of Congress and the solution offered by Obama, the answer is nothing.

They would punish people who do economically useful work, but wouldn’t add a drop to our oil supply. If they really wanted to break the back of speculation, they should signal that they intend to use every means at their disposal to bring energy markets back in line.

High prices already have curbed demand here in the U.S., the latest data show. What’s left is to drill for the literally hundreds of billions of barrels of oil we have here in this country locked up offshore, in Alaska and in vast shale-oil reserves.

Instead, the Democrat-led Congress has pursued foolish energy policies that lead inevitably to higher prices, less supply and declining standards of living for all Americans.

As for speculation, one tell-tale sign of market manipulation is a buildup of inventories kept off the market to keep prices high. That is, as the price runs up, the speculators pull supply off the market.

Is that happening? No. Oil inventories, in the most recent data, are down year over year. No one’s hoarding oil.

Claims of surging speculation likewise fall apart on closer examination. It’s true that speculative positions in oil have jumped from 37% of all oil traded in 2000 to 70% now. But much of that trading involves commercial hedging and risk-management — not speculation by people out to make a killing.

As the Commodity Futures Trading Commission notes: “There are almost as many short speculative positions as there are long positions.” In other words, speculators are betting as much that prices will drop as they will rise.

In short, there’s no real evidence that speculators are driving energy prices up. But there’s plenty of evidence that Congress’ refusal to permit drilling is a big factor keeping supplies down.