I’m not so sure. I think we should follow Newts advice and flood the market with the reserves—let’s see if it makes a dent in the speculators “not my fault” excuses anf funds. Then the drill now and drill here policy needs to go ito effect. Let’s see if the sauds want to be eating oil in the next 5-10 yrs. If they don’t—too bad-they have mades their bed.
What kind of punishment will Congress pass to sanction Southwest Airlines which “speculated” on price of jet fuel and is now able avoid fuel surcharges?
The WSJ, fails, as always, to actually understand how “oil futures” are actually being traded.
They also are pointing to an ag commodity which isn’t well commoditized, ie, onions.
When you look at the ag commodities, there are specifications for what the commodity is - eg, the test weight (lbs per bushel) and moisture content of grain (wheat, corn, beans, etc).
Onions aren’t quite so uniform, for starters. I’m sure it could be done, but there would have to be some give on both sides - on the contract specs as well as by the farmers growing onions.
Throughout this whole “speculators are to blame” and “they are not!” tit-for-tat, the WSJ has displayed deliberate ignorance that:
a) energy futures were exempted from the level of oversight by the CFTC that are given to ag futures
b) the rise of cash-only futures exchanges like ICE
c) that the same legislation that enabled the energy speculators to effect Enron’s manipulation of power prices, Amaranth’s manipulation of natural gas futures is still in place, and that if there have been two successful manipulations of price in less than 10 years, the burden of proof here shifts to proving that oil specs aren’t to blame here. “Trust us” no longer quite seems to work when there are two cases of maniupulation under the CFMA.
d) CFMA also opened up the market in financial derivatives trading, and probably has a role in the current credit market problems.
The WSJ is simply carrying water for the financial industry here, just as they’re bucket boys for businesses who want illegal immigration for cheap labor.
Sorry, WSJ -- that's in a perfect world. Here in the real world you left out a few motivating factors, such as fear, nervousness, the power of rumors, and "price momentum" of the sort that fueled the dot-com bubble and the current mortgage problems. And, of course, there are some big players in the market with huge exposure, whose only hope is in trying to keep futures prices rising.
It's one thing to want to avoid Congressional meddling in the futures market; but quite another thing to suggest that the current futures market is not seriously askew.