In Carpe Diem ( a daily read for me) economics professor and blogger Mark Perry writes What Can Onions Teach Us About Oil Speculators?. 4/22/12

The two critical points made by Perry

  1. Futures trading in onions was banned in in 1958 because farmers thought it was making prices too LOW.
  2. Since futures trading in onions was banned onion prices have been more volatile than both other agricultural commodity prices such as corn and much more volatile than oil prices.

Also noted in Carpe Diem Oil Speculator Smackdown: Kennedy vs. Hamilton, responding to Joseph Kennedy’s call to end oil speculation.

The article notes that most trades go full circle in a single day.  If the buy side runs prices up, shouldn’t  the sale side send prices down?

Also noted in the post is that while speculators are blamed for driving oil prices up, who is to blame for driving natural gas prices down?

Also read the readers’ comments in Perry’s posts, they are also quite enlightening.

HKO questions:

Could the problem be other than speculators? Are there market forces that may be hard to determine in any short time window? Could the real fluctuation be the value of  the dollar and oil is merely a reflection of poor currency management? Could the problem be policies such as bans on domestic drilling and the blockage of the Keystone pipeline?  Is Obama’s responsibility any greater than was George Bush’s when oil prices rose?

Cheap, ignorant, populist rhetoric prefers demons to solutions.