Don't knock speculators

President Obama’s Justice Department wants to go after oil speculators on Wall Street. Perhaps he should look at his policies as the reason for spikes in oil prices.

Every stock or commodity traded on Wall Street is an act of speculation. Traders try to guess whether the price of a stock or commodity is going to go up or down. They base their guess/speculation on past performance and present conditions, but mostly on future outlooks. If Apple Inc. announces a new i-Gadget, there will be more buyers and sellers of Apple stock, based on the fact that Apple makes more money when they release more i-Gadgets. If South Florida has a deep freeze in early March, traders would buy orange futures assuming orange prices are going to rise based on an orange shortage because of the freeze.

Stock prices rise on rosy profit outlooks. Commodity prices rise on gloomy supply outlooks. Apple Inc. is a stock. Oranges are a commodity. Oil is a commodity. When traders speculate on the future of oil prices, they see an increase in worldwide demand and no increase in production from OPEC.

Most of all they see an administration bent on stifling domestic oil production – no drilling in the Arctic National Wildlife Refuge; a moratorium on drilling in the Gulf of Mexico; no new drilling off our coasts; no new permits to drill on federal lands; and cancellation of the Keystone Pipeline. Plus, Obama has unleashed a more powerful Environmental Protection Agency to over-regulate and penalize domestic energy producers.

Obama once said, “Under my policies energy prices would necessarily skyrocket.” If you were an oil trader, what would you speculate the price of oil would do?



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