This week, President Barack Obama is taking the fight to "oil speculators" and "market manipulation" (nee "free enterprise"), demanding that traders put up more money for transactions and government ratchet up enforcement and monitoring. "None of these will bring gas prices down overnight," Obama helpfully explained in his news conference. "But they will prevent market manipulation and help protect consumers."
No, they won't. They'd probably hurt consumers, and they would doubtlessly raise the cost of doing business. So for a few hundred words, let's treat populist agitation as if it were earnest policy.
Let's start by being thankful for oil speculation"”no matter what the motivation of those involved might be. To begin with, speculation allows companies with exposure to fluctuating commodity prices to hedge against rising costs by locking in. Sometimes the bet pays off; other times it doesn't. But risk and profit are not yet crimes.
Oil speculation also offers consumers and investors information about the future that can help them make informed long-term decisions. Speculators trade commodities based on the information available in the marketplace. They reflect reality; they don't create it.
But sometimes, unfortunate as it is, prices will rise. "Gouging," the close scaremongering cousin of "speculation," helps persuade consumers not to use what they don't need. It incentivizes to modify behavior"”our driving habits or the size of our cars. We conserve more when prices are higher, so we avoid shortages, and producers intensify their production. (Funny how Democrats get this concept when writing energy policy designed to artificially spike fossil fuel prices.)
The president surely understands, as well. He knows that a fungible commodity's price is driven by demand and geopolitical events beyond the control of speculators or, for the most part, Washington. There are billions of people in China, India and elsewhere who are new consumers of oil"”and they are better off for it. We are better off for it.
Or put it this way: Natural gas prices are trading so cheaply that it's no longer profitable to drill for most companies. According to Businessweek, there are only 624 operating drills in the United States, the fewest since April 2002. So I guess natural gas speculators forgot to manipulate the world market this month. Or do oil manipulators only work part time? Confusing.
Where, after all, is the president's evidence that oil speculation is driving up oil prices? The White House "Fact Sheet" on the matter offers plenty of solutions to a problem it hasn't even proved exists. Why are we going to spend another $52 million"”and who-knows-what in political witch hunt trials"”on a theory that plays on assumptions and flourishes in the progressive blogosphere?
Obviously, much of this is driven by political realities and accusations by Republicans that the president isn't doing enough to curb rising oil prices. George W. Bush also talked about manipulation nonsense, and I'm sure it's gone on forever.
So it's also worth noting that Washington, regrettably enough, already has the power to enact the counterproductive regulations the president is asking for. Nothing needs to be passed. It was only last year when Obama formed a special task force designed to find manipulation in the oil market and to ferret out incidents of gas gouging.
It is rare when Washington gives a topic what it deserves. But the Oil and Gas Price Fraud Working Group has given the American people exactly what the topic deserves: zip.
David Harsanyi is a columnist and senior reporter at Human Events. Follow him on Twitter @davidharsanyi.
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Dinner at Maobama's
"None of these will bring gas prices down overnight," Obama helpfully explained in his news conference.
Wait, I thought there was no point in drilling because it won't bring down gas prices overnight.
Yeah, but that's "drilling", which is bad. This is about punishing evil investors who gets rich on da backs of da poar. Don't you see the difference?
SPECULATORS!
CHILRENZ! ROADZ! BANKERZ! WURKERZ!
Or the Keystone XL pipeline. That wouldn't bring gas prices down overnight either.
And embargoing supply of oil from Iran has no affect on price either. And I'm sure that war in the gulf will bring down the price of oil....
Stop bringing supply and demand into this. You know that is an antiquated theory used by the wealthy to enslave the poar.
global supply n demand remain in balance before and after the run-up per the saudi oil minister...who might know just a wee bit moar than H&R posers...ahh, posters.
Explain what you think this means.
the saudi oil minister made it clear that production & availablity hadnt changed.
Supply and demand always balance at the market-clearing price.
I can see my comment under the crack cocaine sentencing thread really should've come over here.
"None of these will bring gas prices down overnight," Obama helpfully explained in his news conference. "But they will prevent market manipulation and help protect consumers."
Actually, Mr. Obama, you're just guaranteeing an oil shortage.
Here's a hint: Prices are a signal of the scarcity of the resource + the demand for the resource. If you artificially reduce the commodity price, you WILL run out of that commodity.
the CEO of Exxon testified that light, sweet crude should be ~$60-70/brl.
the saudi oil minister said global supply n demand remains in balance before & after the speculative run-up.
>the best reg is the threat of SPR release which cuts the legs from under the parasites...hopefully AFTER they've taken long positions!
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