I know this comes as a shock to you all but if they can scare everyone into thinking the sky is the limit, then guess what. It is. They can take oil to $200 if no one will sell it cheaper. Doesnt mean its worth that, but YOU will pay that because you are sheep. You have bought into the lie that the market sets a price based on reality. Gold went to 800 in the 70's then back to 200. Oil will likely do the same, but not before you are ripped a new one.
OK, but the argument is that it is commodity index funds, not producers, who are driving up the price.
Not that I agree, but: Problem By Jim Cramer RealMoney.com Columnist 6/12/2008 8:45 AM EDT We've got to blame speculators for everything. Lehman's (LEH - commentary - Cramer's Take) down? Speculators. Corn's up? Speculators. Oil's soaring? Speculators. AIG's (AIG - commentary - Cramer's Take) slumping? Speculators. Give me a break. Over any short period, speculators using lots of margin can overwhelm any market. The law that Sen. Joe Lieberman proposes banning institutions from the commodities markets is the kind of nutty legislation you get when you have prices being erratic and going in the "wrong" direction of the "longs" and the "consumers." Of course we want lower oil prices (unless we own oil) and we want lower grain prices (unless we sell grain). Have institutions exacerbated the direction of these commodities, as Lieberman attests? Sure. In the same way that pension funds that have placed money with dedicated short funds have exacerbated the downward pressure on some stocks of the very same companies that they are investing for. To which I say, again, there are two sides to every trade. Lieberman's theory works under some grand conspiracy that says institutions can corner the market by buying a whole host of commodities and permanently taking them off the market. But there is such a thing as "profit-taking," and there are always producers who over time can overplant and overproduce just about anything except oil, which has been in permanent short supply now for several years. The dollar, speculation, margin rules, blah blah blah. Yes, they account for some of the moves that are in the "wrong" direction. There's some blame. It would be better just to raise margins -- we always seem to be unwilling to do this in this country because it hurts volumes -- but passing a law that everyone knows wouldn't work is just a crummy idea. You want lower oil prices? Allow drilling for more oil and gas and waive the environmentalist stranglehold for a couple of years. Don't pass legislation aimed ultimately to raise stock prices or lower oil prices. It is silly, and it just won't work.