Outside Editorial: U.S. politicians love to blame oil speculators

Posted: Thursday, September 11, 2008

Nothing stokes our anger better than a convenient villain who probably drives a cool car. So it was that, through much of this summer's understandable angst over gasoline prices, flailing politicians tried to help the rest of us - hey, it's an election year - point the blame gun.

Their target: oil speculators, less menacingly known to their children as commodities traders. This scapegoating appealed to many Americans - even if it was about as logical as fearing that, during daylight-saving time, that extra hour of sunlight will ruin the crops.

Presidential candidates John McCain and Barack Obama tried to out-populist one another in their denunciations of those evil traders. Members of Congress - keen economists all - tripped over one another to do what many of them do best: introduce legislation that doesn't get past the press release stage. As oil prices approached the July 11 peak of $147.27 a barrel, even Saudi Arabia's King Abdullah joined the posse.

So we're puzzled that, as oil prices now have plummeted by close to 30 percent, all the politicians (kings included) haven't bought air time to serenade traders who supposedly drive the numbers. Where is Obama's "Oil Speculators Appreciation Act of 2008?" Where is McCain's call for a monument shaped like a derrick on Washington's National Mall?

Let's be charitable: Maybe the pols who were caterwauling this summer blessedly wound up hauling an Econ 101 text to the beach. That exercise would help them identify a player more important than any speculator in driving oil prices: the American consumer.

People who use petroleum are, as a group, using less of it. The pressure of the marketplace is working. The oil speculators? Some are getting richer, some poorer. Remember, commodities trading matches a bettor who expects higher prices with a bettor who expects lower prices.

Yes, traders do influence oil prices. So do fears of Louisiana hurricanes and limits on drilling in some 85 percent of America's offshore territory.

In recent weeks, though, nose-diving demand from consumers here and overseas has been a more powerful source than any of those force vectors.

What happens now? We were heartened to see this passage Friday in an Associated Press dispatch from New York:

"Investors are waiting to see if OPEC decides to restrict oil output at its meeting (this) week in Vienna in response to the two-month plunge in prices. The Organization of the Petroleum Exporting Countries has indicated it may take action to defend the $100-a-barrel level for crude. But with the dollar on the rebound, many analysts say even a production cutback could prove ineffectual in boosting oil prices."

Aw, should we organize benefit carwashes and bake sales for the petrol industry?

Um, not just yet. Nor, though, should we boil our 401(k) and pension fund managers in vats of oil, and not just because we can't afford to: Those money managers - investing for millions of us bit players in the U.S. economy - have been buying into commodity funds.

Back when the fury against oil speculators was nearing its own peak, syndicated economics columnist Robert Samuelson did some nifty homework: From 2002 to 2007, he reported, oil prices rose 177 percent, corn 70 percent, copper 360 percent and aluminum 95 percent.

Did speculators really cause all those increases, Samuelson asked? And if so, why did some prices go up so much more than others? "And what about steel?" he inquired. "It rose 117 percent-and has increased further in 2008-even though it isn't traded on commodities futures markets."

No, making faces at BMW drivers on the chance that some of them trade oil futures doesn't make sense. If we need a villain, let's instead blame a world economy that, since 2002, has been growing by a robust 4.6 percent a year. Americans have been shareholders in that growth, even if we haven't always felt like the productive workers and reliable consumers that we are.

Let's hope gasoline prices continue their decline. Although that, of course, could mean we'll drive more and raise demand.

Oil dropped Friday to $106.23 a barrel on the New York Mercantile Exchange, and for a while traded near $105. Can we push it still lower? Yes. Will we? That's, you know, a matter of speculation.

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