Oil Prices: Better Profits Through Cheating

Regulators are going to look more closely at the trading of oil. According to The Wall Street Journal "U.S. regulators disclosed a broad nationwide probe into potential oil-market manipulation and said they are expanding surveillance of energy markets."

Increased regulation can come from several things. One is a classic witch hunt in which someone must be blamed for problems which have created broad harm and suffering. Congress needs to show that it is doing something to keep down oil and gas prices. All of the members stand for re-election in November. They can’t go back to their districts and say there is nothing to be done about $5 gas.

Another explanation is that where there is smoke, there is fire. Commodities prices have been manipulated off and on since the beginning of time. Who can forget the fun in1980 when the Nelson Bunker Hunt and Herbert Hunt tried to corner the silver market? OPEC has claimed over and over that the weak dollar and market speculation are the main reasons for high oil.

Of course, speculation and manipulation are not the same thing, although they may be cousins.

Regulators believe, quite rightly, the the hint of investigations usually drives the bad guys underground. That is often enough to snuff out the creation of a bubble and get things back to "normal", whatever that is.

Douglas A. McIntyre