These markets are about informed people ANTICIPATING changes in supply and demand. That puts us ahead of the game and helps prevent REAL shortages. The “real” world is not limited to the present time, it also includes the future. There are entities like airlines that would hoard oil if there wasn’t an outside market controlling that price before it gets to the point where someone can hoard it and potentially cause a real shortage. If you’re talking about not allowing speculators to speculate, than that has the same effect as a price cap...it artificially lowers supply.
The oil speculation market is about nothing of the sort. It’s about profit. I have no problem with that. I have a problem with the fact that their “paper oil” is confused with real oil. Oil demand, for example, is about as inelastic as any commodity. Saying that speculators are betting on large changes in demand is pure folly. Now, you might argue that they are betting on changes in supply. Well, check here:
http://www.indexmundi.com/energy.aspx?product=oil&graph=production
Dating back to 1981, the biggest drop in year to year oil production was 5.92% (from 1980 to 1981) while the biggest jump was 4.88% (from 2003 to 2004). In other words, BOTH SUPPLY AND DEMAND ARE INELASTIC. No sane person can look at the actual numbers and find that the massive swings in prices are justified.
Are you honestly making the claim that speculation prevents airlines from hoarding oil? Speculation doesn’t prevent anyone from hoarding real oil nor does it in any way prevent shortages. It is simply a manipulation of the actual demand. Also, the entire elimination of speculation (which is not what I am arguing) would cause the price of oil to stabilize around what the market will bear. The producers are limited as to what they can charge by what the actual demand is (not artificial demand).
This is really not a hard concept.