ARNOLD KLING
August 14, 2011
The Top Political Contributors
August 11, 2011
Gender and the New Commanding Heights
August 11, 2011
Jamie Galbraith Makes an Assumption
August 11, 2011
Macroeconometrics: The Science of Hubris
August 10, 2011
Real and Nominal Bond Yields
BRYAN CAPLAN
August 14, 2011
The Effect of Thumb Sucking on Income
August 12, 2011
The Voice of Cold, Hard Truth to All Would-Be Educators
August 12, 2011
Ability, Morality, and Prosperity: A Paper and a Report
August 11, 2011
The Theory of Time and Frittering
August 10, 2011
Male Variance and the Remnants of the Gender Gap
DAVID HENDERSON
August 9, 2011
Hayek in "Unbroken", Part Two
August 8, 2011
Hayek in "Unbroken"
August 5, 2011
James Bovard on the Peace Corps
August 4, 2011
Summers Way Off on FDR and 1941
August 3, 2011
The "Amazon" Tax
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Hasn't the trend been towards lower inventories in the economy as a whole? Business people always seem to be talking about just in time inventory. It would be interesting to know if oil firms shed inventory over this period and non-producers, non-consumers increased their holdings.
I'm not sure how it fits in, but unlike food commodities which have to be produced, oil in the ground is also a form of inventory. Any oil firm with untapped reserves (not wells with oil still in the ground pumping full speed) is storing oil in the earth. If you want to store oil for later why buy it out of the ground? Wouldn't it be cheaper to store it in the ground? It cannot just be the liquidity of oil futures contracts because we are talking about physical oil being stored here.
Is it really plausible that speculators are causing the current prices? Since new oil is constantly flowing to market, they'd have to be accumulating ever larger holdings to prop up the market. 50 million barrels seems like a lot of inventory, but that is just 2 days of global production.
I love economics. Nothing is every as it seems.
There is also the potential profit of holding oil during a strong recovery. Couldn't the "hoarders" be pricing in the probability of a sudden boost in demand? That could happen under both the Sumner and Recalculation regimes.
Seems to me that the demand for oil at "full" employment can only have grown since summer 2008. If the OECD recovered that would drive up demand not only in those countries but also in their developing trading partners. Hell, oil could be $200 by 2012?
if there were no investors using equities as an investment they wouldnt be as high as they are now, either...
what a crazy statememt...
Well, who does he define as "investors", just speculators who are not significantly impacted by oil prices in their real world, non-investment activities?
Trucking and airline companies routinely hedge against rising fuel prices via oil investments. Are they investors, or merely smart commodity end users?
Companies who have shipping costs, but do not directly handle transportation (think a catalog company that sends products via UPS/FedEx) sometimes hedge rising shipping costs. Are they investors?
Heck, I have an acquaintance who drives many miles for his daily office commute, who set up an oil hedge to offset his monthly gasoline costs and make driving his car cheaper than taking public transport. Is he an investor needlessly driving up the price, or just a late game joiner rationally responding to other oil speculators' driving up the cost of his commute?
At some point financial instruments become so heavily embedded in business transactions that the line between user, investor, and speculator becomes very blurry. If you're going to carve out any one class, you need to not only define your terms, but to explain why that one class is causing market moves significantly different than the other classes.