Oil Speculators: Thank You For Your Service

A report by Masters Capital Management indicates that speculators (ooooh, ahhhhh - evil people) dumped around $60 billion into the oil futures market between January and July of this year, running up prices from $95 per barrel to a high of around $147 per barrel.

The immediate purpose of this report is to give documentation to the notion that fundamental supply and demand had nothing to do with the price variation.  The medium-term purpose of this report is to provide basis for enabling the CFTC (Commodities Futures Trading Commission) to regulate the trading of oil futures.

My friend, this is a power grab by the government, pure and simple.  And it’s based on second-grade logic.

So for the benefit of you morons in the government, I’ll make it easy for you:  If an oil futures contract is available to be sold and someone wants to buy it, there’s both supply and demand.  In that scenario, prices are likely to remain stable.

(For those of you who have a brain, please be patient.  This is for the benefit of those who never studied 7th grade economics.)

If there’s a sudden influx of buyers who all want to buy oil futures contracts, that creates excess demand.  This makes the price go up.  That’s what has happened for the last several years.

The problem here for the government isn’t that “supply and demand” aren’t in control of oil prices.  Clearly, there was significant demand from those evil, nasty speculators.  The government’s objection is the SOURCE of the demand.

This is just another class envy play the government is using to try to expand its own power, and it is absolutely disgusting.  After all - those oil speculators are certainly very wealthy.  And in this country, Congress likes to take aim at those who are successful so that underachievers will feel better about their lack of accomplishment.  It’s a way for the government to act like they’re doing something about the oil price increases, while actually doing nothing helpful at all.

Allow me to further explain why the idiots in Congress are doing this country a disservice on this issue.

If this report is correct (it’s not) and speculators are entirely to blame for the rise of oil prices, this leads to three conclusions:

1. Speculators are also responsible for the deflation of the market, as their money is being removed and/or applied to short-side oil trades
2. Speculators are not more powerful than supply and demand, because the timing of their “exit” from the market coincided directly with President Bush signing an executive order allowing offshore oil drilling, which would increase future supply and therefore potentially diminish the value of the oil futures purchased by the speculators.
3. Speculators assisted in and were subject to the larger supply-and-demand equation, because this oil price run up has directly resulted in a major public outcry about the price of oil, prompting both government action to increase oil exploration and significant changes in the driving habits of the American public.

All in all, we should be thanking speculators for taking action that will ultimately push forward the energy independence of the United States.  Without their involvement, the U.S. public never would have reached a “tipping point” for oil.  But that point has been reached, and it appears highly probable that changes are on the way.