Let the Market Work

Beldar has a suggestion for dealing with oil speculators. Let the market deal with them.

...there is already in place a devastatingly efficient mechanism to punish any who've artificially inflated the current price of oil by reckless, collusive, or abusive trading in oil futures. It's a two-step mechanism:

(1) Start in a serious way to do what we can do to both reduce demand (i.e., conserve) and increase supply (i.e., drill and promote alternative energy sources).

(2) Let the market work.

Basically, speculators are betting that supplies will stay tight, and demand will stay high. As soon as you start drilling or taking other steps to increase the supply, and taking real steps to decrease demand (including building nuclear plants), the price of oil will plummet.

As soon as that happens, the speculators, with their huge holdings in oil, will take a bath. If they're very, very lucky, they'll have gotten in while prices were low, and they'll only lose a few percent of their investment, or maybe even make a small profit. The speculators who bought in near the peak will lose their shirts.

We don't know for sure how many market manipulators there are, or who they are, or how much of the current high prices are the result of their manipulation. Nor are we likely to track them down: Crooks hide their tracks, and the difference between a crook and an entrepreneur is often purely a matter of subjective judgment.

The market doesn't care; the market doesn't need tracks. The market passes its relentless judgments automatically, inexorably, and with the closest thing to perfect justice we're likely to see in our lifetimes — if, but only if, it's allowed by government to function normally, i.e., freed from government interference.

You want to purge the market of manipulative speculators? Let the markets work. Permit and encourage conservation to reduce demand; permit and encourage development (both drilling and alternative sources) to increase supply; and drive the price down using basic laws of economics that are more powerful than even Barack Obama on his best day when he's got a full gospel choir and both chambers of Congress singing with him in harmony.

And then, it'll be "all over but the gloating".