Stop oil speculation! Now?
Both Northwest and United airlines today took time from their busy schedules to send me an e-mail urging to visit StopOilSpeculationNow, and craft a letter to my respective Congressperson, asking The Man to stop, well, oil speculation, and moreover, do it now (or by next weekend, if they’re too busy). The site teaches you what speculation is all about, and an unbiased opinion suggests speculators are buying oil future contracts in large quantities, therefore driving the price of crude oil up.
I am glad the issue is clear-cut, like the Batman movies. On one hand you have the evil guys, represented by oil speculators, on the other ones you have the noble truth-seekers, i.e., large airlines.
I was ready to fire up the typewriter, when the liberal media influenced my fragile mind yet again. None other than CNN Money insists that markets with future contracts actually are less volatile than those without futures (and speculators):
The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place.
Oops, I guess a lot of companies buy futures to hedge their bets against prices going up, not to encourage price increases. The Economist also takes a look at the commodities and futures markets blame game that’s unveiling, and introduces us to the concepts of supply and demand:
Speculators do play an important role in setting the price of oil and other raw materials. But they do so based on their expectations of future trends in supply and demand, not on whims. If they had somehow managed to push prices to unjustified heights, then demand would contract, leaving unsold pools of oil.
Not sure what’s causing the airline industry to react so viciously against crude oil futures trading. Perhaps we’re due for another price hike on airline tickets, and knowing the effort to stop crude oil futures would fail, airlines are conveniently setting up the scape goats.