Last Word on Speculation

Is oil starting to crack? It's gone from $147 a barrel to under $130 in three days. What happened to those evil speculators? Well, the short-term longs got burned. The shorts made some money. If oil continues to go down, which I think it will in the short-term (long-term we will see prices in the $150 range, and higher, again), how will Obama and the Dems explain it to us commoners?

George Bush on occasion gets something right and on this issue he can take a well-deserved bow - a partial one anyway. The three day sell off in oil came immediately after he lifted the executive order banning off-shore drilling. The move clearly had a psychological effect on the market as traders came to the conclusion that public opinion on drilling has finally reached the political class and perhaps future sources of supply are on the horizon. Add to this the news of shrinking demand here in the U.S. along with evidence of a global slowdown and it all adds up to a quick correction in oil prices. As I've argued from the beginning, supply and demand forces seem to be in control, not speculators.

T. Boone Pickens, America's leading oilman, agrees. From a recent Reuters article:

Pickens downplayed the role that speculative trading and institutional investors -- forces some see behind the high oil prices -- have had in the price trend. Asked about the role of institutional investors, Pickens told reporters he does not "agree that that has anything to do with oil prices ... It's a global market. It doesn't have anything to do with traders on Wall Street or any place else."

Jim Rogers, one of the world's most famous and successful commodity traders, said this the other day:

"Some people blame speculation for oil price rise. If it is speculation, when the oil price is too high, the people with oil will drown the speculators. It is just a stupid accusation that speculators are behind the oil rally,"

Ben Bernanke, Fed Chief, said this to the geniuses on Capital Hill during his congressional testimony the other day:

Another concern that has been raised is that financial speculation has added markedly to upward pressures on oil prices. Certainly, investor interest in oil and other commodities has increased substantially of late. However, if financial speculation were pushing oil prices above the levels consistent with the fundamentals of supply and demand, we would expect inventories of crude oil and petroleum products to increase as supply rose and demand fell. But in fact, available data on oil inventories show notable declines over the past year. This is not to say that useful steps could not be taken to improve the transparency and functioning of futures markets, only that such steps are unlikely to substantially affect the prices of oil or other commodities in the longer term."

I hope people take note of what these experts have to say and ignore the demagoguery of Obama and the left. We need more oil, period. Better we produce as much as we can here and keep the profits in house, so to speak. Let's get moving.