NEW YORK TIMES
FUTURES IMPERFECT
By DWIGHT R. SANDERS and SCOTT H. IRWIN
Published: July 20, 2008
Full article DWIGHT R. SANDERS and SCOTT H. IRWIN New York Times
Excerpts:
...First, recent price increases do not neatly fit a bubble explanation. For example, livestock and meat futures markets did not experience price increases until recently, yet the concentration of speculative buying has been among the highest in these markets for some time. It is difficult to see why speculative buying would have an impact on some markets and not on others.
Second, there are very high prices for commodities without futures markets, like edible beans, and in futures markets that are not included in popular commodity index funds, like rice.
Third, commodity inventories should build when a bubble is present, when in fact inventories for most commodities have remained stable or fallen sharply over the last two years.
Over all, there is limited evidence that anything other than economic fundamentals is driving the recent run-up in commodity prices. The main driving factors in the energy markets include strong demand from China, India and other developing nations, a lack of growth in crude oil production and United States monetary policy. In the grain markets, driving factors are, in addition to monetary policy and demand from developing nations, the diversion of row crops to biofuel production and unfavorable weather that has hurt harvests"...
Last But Not Leased
INVESTOR'S BUSINESS DAILY
Posted Thursday, July 17, 2008 4:20 PM PT
Full article INVESTOR'S BUSINESS DAILY
Excerpts:
Energy Policy: House Speaker Nancy Pelosi is pushing the "Drill Responsibly in Leased Lands Act" to block offshore drilling. The fact is, these offshore rigs may be the ticket to saving both our coasts and our economy.
The act would deny oil companies any new leases unless they can show that they're diligently exploring and drilling in existing holdings. It's designed to con the public into thinking the Democrats actually support drilling and the oil companies are restricting supply to drive up prices and profits.
Democrats keep talking about "use it or lose it," referring to 68 million acres of existing leases. But these leases are being used and are already of limited duration. A lease is merely a permission slip to look for oil, not a guarantee of finding any.
THE AMERICAN
Don’t Blame the Speculators
By John L. Chapman Wednesday, July 16, 2008
Filed under: Economic Policy
Full article John L. Chapman The American
Excerpts:
Increased speculation in oil futures is not a cause of rising oil prices, but rather an effect of those prices.
In recent weeks, many U.S. lawmakers have blamed soaring oil prices on the “speculators” who have invested in energy futures markets. But can a small number of investors really harm an economy as big as ours? More specifically, do flows of investment capital cause market fundamentals to change, or are they more often the result of perceived changes in those fundamentals?
Throughout the Western world, politicians have a long history of railing against capital markets. For example, after George Soros made $1 billion in 1992 by shorting the British pound, British government officials blamed currency speculators for causing the UK’s economic problems. Similarly, at the end of the great German hyperinflation in 1923, prices stood at 1.38 trillion times their 1914 levels and unemployment approached 30 percent. But Reichsbank president Hjalmar Schacht railed against speculators who had shorted the Reichsmark against the dollar.
Today, in response to voter anger over high gasoline prices, committees in both the U.S. House and Senate are holding hearings on commodity speculation. Oil market speculation has “become a growth industry, and it is time for the government to intervene,” Michigan Democrat John Dingell, chairman of the House Energy and Commerce Committee, said recently. “We need to consider a full range of options to counter this rapacious speculation.”
USA TODAY
Rick Jervis, William M. Welch and Richard Wolf
Worth the risk? Debate on offshore drilling heats up
