Wall Street Journal: Speculators Are NOT To Blame

Speculators! Speculators! Speculators! The fuel and oil price problems are all the speculators fault! Or, so we heard non-stop from the powers that be (in control for now) in the House. There's no other excuse they said. It has nothing to do with Supply and Demand they said. It has absolutely nothing to do with a weak monetary unit they said.

Well. The global bastion of financial news, that being the Wall Street Journal, says otherwise.

Not only did speculation have absolutely nothing to do with the price spike, but according to the WSJ article, In one of the broadest and most authoritative studies to date, the Commodity Futures Trading Commission has offered hard statistical data that financial trading hasn't been driving price moves. The CFTC conducted an unprecedented Wall Street data sweep and scrutinized millions of transactions worth billions of dollars between January and June of this year. And it turns out, it was exactly "supply and demand" that was responsible, along with, you guessed it, a weak dollar.

Go figure.

As a matter of fact, the article goes on to mention (specifically) that oil trading actually DECREASED as prices soared. The CFTC found that index traders and swap dealers actually reduced their stake in crude oil futures as prices spiked. The number of contracts held by these investors betting that prices would increase -- the net long position -- fell by 11%, and more were shorting oil than going long over the six-month period. In other words, index traders and swap dealers were driving the future price of oil down. To bad, so sad to the finger pointing brigade on that one, eh?

It should be noted that Congress held more than 40 hearings on "speculation" over the summer, and commission chief Walter Lukken was the pinata. Anyone in want of a "refund" for squandered tax-payer funds? I'd sure be interested in that.

Additionally, the WSJ article brings up the point that the commodity index funds don't hold that much in shares in regards to the oil market/industry, as SOME (I'm looking at you blame-gamers,) would have people believe. Apparently, the share holding margin is only about 13%. It goes on for another "it really matters" comment, that even if it were incredulously high, say 70%, it still would have no bearing on things, as it's "one wins, one loses" trade. So 5 million barrels can't be BOUGHT, until someone else SELLS 5 million barrels.

The article sums up, what we as Americans en mass, are coming to the realization of. And rather quickly I might add. That, the speculation furor was never about the evidence. The politicians wanted a fall guy for rising prices, since the real explanations of supply and demand and the falling dollar were partly their fault.

Now, how about we give good 'ol Madame NO (Pelosi,) a swift kick in the ass, and get to voting on the Republicans "all of the above" energy plan. That should take care of the Supply and Demand part of the problem.