And yet gasoline prices rise

[Tchocky]

Would those in favour of stopping speculation in oil futures also want to restrict trading in other commodities?

I mean,oil price is a function partly of speculation, yes. But look at what that speculative industry uses for a basis - expected supply, expected demand, and the prime movers of both.

That's why hearing a USA presidential candidate talk about war with Iran and reducing gas prices in the same breath is ridiculous.

[mookiemookie]

Originally Posted by Tchocky

Would those in favour of stopping speculation in oil futures also want to restrict trading in other commodities?

That's a good question. I would probably limit it to oil, since I feel it's such an important commodity to our nation. You could make a good case that it's a matter of national security. We can make do if the price of hog bellies got so high that we had to cut back bacon consumption. Precious metals are used a lot in construction and electronics, but I would bet that since they're used in such small amounts in those applications, we could probably survive a speculation-fueled price hike in them. I don't have any evidence, but I bet something like the price of copper adds little to the final cost of say, an iphone.

In any case, instituting volume limits or financial disincentives to excessive speculation in oil would probably be the best way to help stabilize prices.

I mean,oil price is a function partly of speculation, yes. But look at what that speculative industry uses for a basis - expected supply, expected demand, and the prime movers of both.

The laws of supply and demand aren't the drivers of speculation that you think they'd be, and when they are, they're amplified into wild price swings. Here's a chart of US oil production It was at it's highest level since 2003. Yet, during the past two years, we've seen the price of oil steadily increase.

For further proof, here's non-OPEC production and OPEC production. The correlation between price and production has been lost.

Consumption doesn't have much to do with it either - Here it is plotted against price. If we ignore the price spikes from the oil crises in the 70s - a truly supply driven event, there's a pretty good correlation between consumption and price throughout the 90's. Except until we get to the 2000s, when oil speculation took off.