Last week, the Financial Times had this to say by one of their pundits:
I have spent 25 years of my career at exchanges, and most of those at an energy derivatives exchange (with which I have no present connection). For several months, I have watched the growing frequency and vigour with which government and business leaders have focused on the role of speculators in driving energy prices sharply higher around the world. As a market professional, having in past years been responsible for regulation of energy derivatives, and called upon to testify as an expert in energy derivative matters before governmental committees and by the US Department of Justice, I am extremely sceptical that speculators are behind high energy prices. My reason for writing is driven by my concern that in hunting the monster in the closet, we will end up adopting legislation and new regulations that will harm our public markets, which are essentially the work of my life.
In today's WSJ we have this story:
The collapse this week of SemGroup LP, a little known private oil-marketing firm, may have played a role in crude oil's 14% drop over the past 10 days.
The Tulsa, Okla., company filed for Chapter 11 bankruptcy protection Tuesday, citing among other financial woes a loss of at least $2.4 billion in crude-oil futures. Changes in its hedging strategies coincided with big moves in oil recently.
The company had taken out short positions, or bets that crude prices would fall, as a hedging strategy for oil it intended to move through a subsidiary's pipelines and sell to refiners, according to an affidavit filed in Delaware bankruptcy court by Terrence Ronan, SemGroup's senior vice president, finance. Then, when oil prices rose, SemGroup moved to "cover" its short positions by taking out equivalent long positions, or bets that oil prices would rise...
One theory making the rounds in the market is that as SemGroup's long positions snowballed, so did the oil rally. SemGroup's rapid exit from the market removed a force for upward momentum when the market, under siege from negative U.S. economic indicators, needed it most.
Nah, it isn't speculators! It's the 87 million barrels of crude we use, and the 85 million barrels of crude that is produced..blah blah blah...
Everything reduced to a soundbite.
And Senator McCain came out with one today. He said that oil dropped because Bush said we need to start drilling!
I could say oil dropped because Bush finally quit filling the SPR!
Whatever. I just guess speculators have holy hands!