Sooo, Ezra Klein writes a bit about how it's impossible for speculators to account for the rising price of gas because they have no place to PUT the oil they are speculating on and some economist somewhere wrote a paper showing how you could never speculate on oil because its fungible or something.
His commentariat and I agree that Ezra and his economist were being naive.
Oil is pumped into a tanker in the Gulf and then proceeds slowly across the oceans to its destination. In the course of its ocean cruise, it is sold and resold in the commodities market before finally arriving at the port, where the refiner pretty much has to pay what has to be paid.
If anyone can't see the speculative bubble possible with this arrangement, they should restrict themselves to commenting on Kate Middleton's wedding dress or Kirstie Alley's dance moves.
So, last week, the Obama administration announced it was looking into speculation into oil prices, plus we are starting to see people driving less and the economy suffer as a whole.
Oil ended trading today at just about $100/bl.
No one could have predicted, blah blah blah.
There ARE reasons aside from speculation why oil prices are rising. After a recession, demand HAS gone up. The Chinese ARE driving more. The Middle East IS unstable. (Update: bin Laden is still dead)
But that explains why prices might be $3.85 here in Connecticut. Not $4.30. Demand suddenly doesn't spike THAT much.
Ironically, if gas prices DO fall, Obama will get credit for ordering bin Laden to be shot in the eye, which magically freed up oil or something. When really, I have to think that the Smart Guys on Wall Street just looked around, saw the Justice Department heaving itself up off its leather couch, realized that they had squeezed the consumer as much as possible without endangering long term growth, took their chips and cashed in.
The weak economic news also had to worry them. While sociopathic, they are not devoid of reason. Crashing the economy again, when it got out, would have been the final straw.
Of course, maybe shooting bin Laden in the eye really IS the solution to our oil supply problem.
Magic bullet indeed!
UPDATE: Southern Beale has the same take, but with better facts here.
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