"Nothing hurts us so much as what we know that isn't so." (Pogo?)

Reading the first several letters in response to this post by Andrew Leonard brings that adage to mind. Now I can not guarantee that my point of view expressed in what follows is correct, but I can absolutely say as a former securities dealer that it is apparent a great many people sorely misunderstand futures, options and what happens when speculators, well, speculate. On this front, the best low-brow illustration to clear things up may be the old Eddie Murphy/Dan Akroyd comedy, Trading Places.)

Anyway, the thing that truly undermines the "the speculators did it" argument boils down to one word: Storage. See, no matter what you speculate the price may be at some future date (whihc is what futures options are), unless you have some place to hoard massive amounts of the commodity (in this case, millions up millions of barrels of oil), then the only thing you get by speculating that the price will rise is a road to the poor house. Futures option/contracts have next to no bearing on the spot price of oil (or any other commodity) but instead are merely a bet as to what that price may be. If the actual delivery/spot price is lower than the futures price committed to by speculators, then speculators are bankrupt. Period. End of story. (See the aforementioned movie which used the frozen orange juice concentrate commodities as the contracts im question.)

Do the "the oil speculators did it" crowd have maps to these utterly massive storage facilities where these speculators put all that oil in order to keep it off the market and push prices higher? Do they know why speculators suddenly decided to cease their magic in controlling the markets and pushing prices higher? Cause if they don't have answers to both questions, they are simply wrong. Period. End of story.

See, we are in a period where, like it or not, the world's thirst for oil is at or near the world's ability to extract this precious substance. In a world of growth where the line between ability to produce and the demand for the absolutely essential product is slim with a balance that is only slightly positive, then we face a situation where anything at all that potentially disrupts that balance can cause massive swings (read "increases") in the price. That's just the way it works. If you think otherwise, you are incorrect. Period. End of story.

What happens when that balance is upset by a contraction in world demand via economies in contraction/collapse? Well, if you realize that what we are talking about here is demand destruction and suddenly that commodity which was in tight supply is abundant, you get the same massive swings as when supplies were on the edge of the ability to meet demand...only this time it works in reverse. Period. End of story.

Peak oil, not a peak as in "Oh my gawd! We are running out!" but a peak in terms of the ability to extract ever increasing amounts of oil no matter how many holes you drill, is a factor. I absolutely beseech anyone and everyone who wants to get a handle on what is at play here to view the video and/or text at this link:

http://www.chrismartenson.com/crashcourse/chapter-17a-peak-oil

You can also just click my signature. It's linked there as well.

Bottom line: Speculators may have played a small role in the rise of oil prices, but if they were in control, they'd still be at it. And in any case, the lack of facilities to hoard massive quantities of oil in order to keep it from market and drive up the price renders the entire theory fatally flawed.

The irony! Squawking Nobelized kibitzers? Just...wow.

Look, people that support Obama really need to take off the partisan blinders. It wasn't good when Bushbots used the same sort of insults to disregard Krugman and Stiglitz (and Richard Clarke and UN weapons inspectors) and it's not good for...uh...Obama partisans to do it now. Drop the fallacy (argumentum ad hominem) and address the substance. If you can't do that, there is a great chance that you have no actual argument to make.