Tuesday, July 01, 2008

"Shoot The Speculators!"

Robert Samuelson at the Washington Post gives a total beatdown to the dopes like Obama and McCain blaming the price of oil on evil speculators. If you want to understand the "speculators" issue, this is a great read.

Here's the money 'graph:

From 2002 to 2007, oil rose 177 percent, corn 70 percent, copper 360 percent and aluminum 95 percent. But that's just the point. Did "speculators" really cause all those increases? If so, why did some prices go up more than others? And what about steel? It rose 117 percent -- and has increased further in 2008 -- even though it isn't traded on commodities futures markets.

A better explanation is basic supply and demand. Despite the U.S. slowdown, the world economy has boomed. Since 2002, annual growth has averaged 4.6 percent, the highest sustained rate since the 1960s, says economist Michael Mussa of the Peterson Institute. By their nature, raw materials (food, energy, minerals) sustain the broader economy. They're not just frills. When unexpectedly high demand strains existing production, prices rise sharply as buyers scramble for scarce supplies. That's what happened.

Of course, if Samuelson is right--and he obviously is--then the only solution to "not enough oil" is "make more oil," and that's the one option that the idiots running Washington won't allow.