Energy and Speculation...A Problem....Not So Much

Well, we have analysts saying that oil and gas are have had twice their price doubled by speculation, but I think that this is a load of crap. I agree with Paul Krugman, that the effects are smaller than that. If you were to argue that there were a 5% effect on the price over the short term, I would buy that, but 50% is way out of ling.

Krugman had a nice picture on the relationship between oil futures, contracts for later delivery, and spot prices, where the oil is delivered immediately:
Simply put, there would be more of a spread if there were more of a speculative effect.

That being said, market volatility, which aggressive speculation exacerbates, does a lot of damage otherwise, so I do support some of the measures that the Congressis considering in order to reign in excessive speculation.

That being said, at its core, we have demand for raw materials outstripping supply. That's why we are seeing things like a 96% jump in iron ore prices, a market in which there are no futures contracts.