Oil Scapegoats

Who to blame for rising oil prices?  Why not speculators

Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, according to a growing number of lawmakers and prominent investors, who blame the practice for helping to push oil prices to record highs. … Some Democratic and Republican lawmakers allege that gaps in oversight are allowing deep-pocketed speculators to manipulate prices. …

George Soros, one of the nation’s leading investors, testified in a Senate hearing this week that index funds were contributing to the rapid rise in commodity prices and were possibly creating a bubble. If it were to burst, sending prices tumbling, the fallout could wreak havoc on banks, retiree funds and colleges across the nation. … Under pressure from voters, lawmakers are pressuring the CFTC to take even more forceful action to regulate the commodity markets.

This is nuts.  "Manipulation" is an action that causes a harmful chain of events that comes back to benefit the actor.  Maybe a large supplier like Saudi Arabia could "manipulate"  by holding back production and to benefit them by raising the price of what they sell.  But hedge funds are not suppliers.  By pushing up prices now via speculation they are betting on higher future prices, not causing them.  If anything, their act causes reduced usage now leaving more oil for the future, which lowers future prices, which hurts them.   They only gain via the chain of events whereby they win their bets and inform the rest of us that oil will be scarcer than we thought, which if true is exactly what we need to hear. 

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