I'm just speculating...

You may have noticed a lot of chatter this week about the Damned Oil Speculator, a cruel beast whose malicious drive for Profit has no heart for the Plight of the Innocent SUV-Driving Suburbanite. There were commentaries. There were complaints. And, in the end, there were Congressional Hearings, with much associated Preening.

What there didn't seem to be was a lot of Common Sense. I'm no financier, but here's my limited understanding of how the market works: oil is a commodity. That means it can be bought and sold based on anticipation of its future price. This is good because it allows entities that buy a lot of fuel over time to anticipate, and to some degree control, their fuel expenses. And it allows energy companies to anticipate, and to some degree control, income. And it runs, naturally, on speculation -- anticipation by people of whether the price over time is going to go up or down. Which has to do with supply, and with demand, in the same way that all markets do. And since for every seller there is a buyer, this should be a self-policing process: for every person who thinks that prices will go up, another thinks that prices will go down. Speculation.

What seems to me to have happened is that the market has caught up with itself. It's not that oil costs twice as much because it's half as available today as it was six months ago, it's that the market consciousness has begun to acknowledge that oil is, incredibly, not an infinite resource dependent only on the the willingness of OPEC to create it from thin air. In other words, I think we've had $4 gasoline for years, and just haven't realized it. And now we do. Which is not all bad.

Like I said, I don't really know a thing about this stuff, so I've felt a little leery about jumping into a long discussion about it. But then I ran into this article in today's NYT, which says basically the same thing, and more.

JEK
Weekend economist