Economists the Jr and Rupert on Oil Prices

This blogger has recently brought you stories on CNN reports about speculative bidding being largely responsible for up to half the cost or $60 per barrel of crude oil.

This afternoon, the Wall St Jr, now under the control of a less than forthcoming owner, Rupert Murdoch, issued an email alert to subscribers titled, "WSJ NEWS ALERT: Most Economists Say Food, Energy Price Surge Not Due to Speculators --WSJ Survey"

However, when one actually reads the article in the Journal, one finds the title is less than objective because the second paragraph of the article states:

"Fifty-one percent of the respondents said demand from China and India was the prime factor in soaring energy prices, and 40% said demand was the chief contributor to rising food costs."

Is this just sloppy reporting by the Wall St Jr or is Rupert Murdoch already at work obfuscating the stories in the previously highly accurate newspaper?

Either way this is a complex issue and the Journal's headline is poor journalism to say the least. I encourage you to read the entire article which is short. Obviously demand will play a role, and at least the Journal had the decency to bring in other opinions from economists such as Diane Swonk of Mesirow Financial - see below.


"11% of the economists see a potential bubble driven by speculation. "Commodity markets have become a strange safe haven, with prices well out of line with underlying market fundamentals," said Diane Swonk of Mesirow Financial. "I am dumbfounded that a report like Friday's employment report triggered a rally in oil prices... Just plain ridiculous."

What is not mentioned by the Journal that CNN reported is that in 2000 there was a deregulation of market rules and regs which has contributed to the speculative bidding problem in commodity markets.

CNN pointed out that if the bright lights requiring large investors to disclose their positions on commodities trading were put back in place, we would soon see a change in the large investments made by firms that don't need oil bidding up the price of commodities like oil, in an effort to flip their investments and make money in the markets. See my posts below on Oil Prices Who is Responsible?

Hmmm...didn't we just go through a speculative investment bubble and crash due to poor regulation and oversight in the housing market?