These are truly strange times that we live in, but here I go quoting a Fox News expert, Mike Norman, on the role hedge funds are playing in oil prices.
Yet at the same time Energy Secretary Samuel Bodman trots out the supply and demand argument that Norman flatly claims is false.
Who to believe?
One Comment
I believe Mike Norman. At least I think the hedge fund trading is a substantial part of the price issue. The problem is that oil commodity trading is a global event. If U.S. legislators should try to affect the way commodity trades in oil are handled by the NYMEX, the traders would simply switch to the International Commodity Exchange in London, or one of the other foreign exchanges. Trying to corral all of the world commodity markets would be next to impossible.
I’ll bet that very few people and very few legislators have a firm handle on how commodity speculation works. All of the fixes proposed so far are like swinging a ball bat at that which is visible. None will have any effect.
Bill, how about doing an article on the details of how commodity trading and speculation work? How do purchases on the margin work? How does one win at the game? How is it possible to lose? What can cause the bubble of the speculators to burst? Exactly what procedure is used now by the hedge fund traders? What does it mean to see that the large speculators are net long on crude and the commercial hedgers are net short?