Can't someone come up with better enemies than speculators? If it's not shorts pushing fragile Wall Street firms into early graves, it's oil speculators ruining the automobile and air industry. Today we received an email announcing a group dedicated to stopping oil speculation. After complaining that financial traders account for a much higher proportion of oil contracts than they did twenty-years ago, the letter goes on to advance a novel theory of finance.
Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
We would dismiss this as quackery, but the email is signed by the CEOs of every major US airline. Those guys must be smart or else they wouldn't be so rich, right? They're so smart that they've unwittingly discovered a novel solution to slumps in housing, CDOs, and equity markets. We just need speculators to go long on everything! Why didn't Hank Paulson think of this?
Oh, and over at Bloomberg, one columnist has in fact discovered a better set of enemies.