Paul Krugman is a trained economist. He's got evidence in the form of a chart which puts paid to the argument that those nasty speculators are the ones driving oil prices.
Look, it's human nature to look for someone else to blame for our troubles, but in this instance it's all pretty simple. China and India are industrializing their economies and their consumers are adding cars to their roads in monumental numbers. Both activities require oil. Ergo, since supply is finite, demand is driving prices upward.
Posted by Linkmeister at June 24, 2008 11:41 AM | TrackBackI work in the convenience and petroleum industry. I know exactly why gas prices are skyrocketing, and it has very little to do with supply and demand. In fact demand went down last year for the first time anyone can remember, and yet the prices went up....demand down, prices up? Not basic economics.
The real problem is the Commodity Futures Modernization Act of 2000 (pushed through by Republican Senator Phil Gramm and signed by Democratic President Bill Clinton) which contained what was called the "Enron loophole" designed to make it easier to speculate on oil. The real problem with high oil prices has nothing to do with real supply and demand. It has to do with rampant, deregulated speculation of the kind that has also led to the housing mortgage crisis.
http://www.jonesday.com/pubs/pubs_detail.aspx?pubID=1962
http://www.financialsense.com/editorials/engdahl/2008/0502.html
http://prometheusspeaks.dailykos.com/storyonly/2008/5/28/17835/8414/407/524367