So they want to stop oil speculation?
http://www.cato-at-liberty.org/…
Politicians who blame “speculators” in futures markets for the run up in oil prices — such as Sen. Byron Dorgan (D-N.D.) writing in this morning’s USAToday — should consider a lesson from the lowly onion.
Onions are one of the few commodities in the United States for which there are no futures markets, according to an item published Friday in Fortune magazine. (Futures markets allow the sale of commodities for set prices at future dates.) It seems that in the late 1950s domestic onion producers blamed those same speculators in futures markets for driving onion prices DOWN. They successfully lobbied Congress to ban all futures trading in onions, a ban that is still in place a half century later.
So has the absence of futures-market speculation kept onion prices low and stable? Quite the contrary. According to Fortune:
And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.
Sen. Dorgan and his allies will need to find someone else to blame for volitale and rising oil prices.
Isn’t this what serious economists, especially the Austrians, have been saying for perhaps 100+ years yet the politicians continue to use speculators as the scapegoat for many of the problems they instigated.
Related posts:
- “Energy speculation has become a growth industry and it is time for the government to intervene” – Rep. John Dingell
- Congress takes aim at oil speculators
- Asia and European markets fall hard, DOW futures cut off at -550
- Bringing us closer to socialism or something like it…
- House passes bill to sue OPEC over oil prices
June 30th, 2008 at 2:00 pm
This assumes that politicians are interested in what serious economists have to say. Let alone serious military strategists or anyone else of serious credentials. This move sits well with gullible Joe Sixpack because it places the blame on those evil Wall St. speculators. If Dorgan wants to blame the “elite” he could at least point to the Fed. You know, those guys debasing the dollar (immediately making oil more expensive) and pumping incendiary liquidity into the marketplace (leaving investors with no other place to invest this new, rapidly devaluing money but commodities). Oh, right, the pols aren’t interested in economics.
June 30th, 2008 at 3:22 pm
This was interesting read about the so called “windfall profits” these companies are enjoying.
http://www.respectcapitalism.com/2008/06/26/how-to-lower-gas-prices-stop-bitching-about-them-and-get-your-facts-straight/
June 30th, 2008 at 3:49 pm
Ooopps Second observation : so goes GM, so goes the US? Hmmm, at 1.1 profit margin? Third: I predict the top dog, Financials, to take a massive hit this year as CDSes unravel and some banks go bust.