A Case Against Speculation As Cause Of High Oil Prices

There has been a lot of speculation that speculators have been causing high oil prices.

Perhaps demand in India and China do not do much to the rising cost of crude. Flat supplies from OPEC and political trouble in places like Nigeria were not an important trigger which helped shoot the cost of a barrel close to $150.

Congress put together a "task force" to check into the "speculation makes prices higher" theory. It turns out there is not much to it.

According to The New York Times, "the task force said that its research “does not support the hypothesis that the activity of these groups is driving prices higher.”

The finding make sense on the face of it. Oil exports from countries like Mexico and Indonesia are actually falling as more crude is kept by the countries for their own growing populations of cars and trucks. The members of OPEC are making so much money on crude that there is no reason for them to move supply in the direction of lowering prices.

The speculator theory was always thin. It has been a way for politicians and oil companies to take the public’s eye off the ball.

Supply and demand are driving up oil. Unless T Boone Pickens can have his windmill farms up this year, the situation is not going to get any better.

Douglas A. McIntyre