That Sound You Heard... · 25 July, 02:07 PM
Brad Feld pointed at the article Oily Speculations as a way of bashing the current fad of blaming speculators for oil prices. It’s an interesting article with the key point that while certain commodity markets have seen manipulation in the past, oil currently isn’t showing any evidence of manipulation. Anti-speculation legislation is right up there in the legion of Bad Ideas, along with “Gas Tax Holidays”, which isn’t a position that sells especially well, but unfortunately in these cases, allowing the market to do its thing beats ill-considered manipulations.
One of my co-workers forwarded around the Open Letter to All Airline Customers which I found highly ironic, considering that it was signed by a number of airlines which have famously profited by hedging fuel prices; notably Delta in the late 90’s and in the last year, Southwest, which supposedly locked in large fuel purchases at $50/barrel. That’s right: these airlines were speculating in the futures markets, and somebody took the bad side of that trade. That’s right, some poor slob (or very likely, a large number of poor slobs) are paying for that $100/barrel difference in oil prices that Southwest and its customers have been enjoying.
That sound you heard is the world’s smallest violin playing for the airline CEO’s who now want to put the genie back in the bottle, at least until the public isn’t paying attention and they can go back to speculating in private, like true gentlemen.
— Gordon Weakliem
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