Easier to point fingers than to learn economics

July 11th, 2009 at 10:06pm Annette LaCross

We are dauntless, it seems, in our quest to find and conquer our bogeymen.

You know him well, probably. He exists in many forms — the debt collector, the unethical coworker, the former spouse.

Of course, as the recession has unfolded around us, his various forms have started to look a lot alike: Wall Street financiers, American International Group executives, commodities traders, bankers, stock traders, short sellers, politicians … you get the idea.

It’s a fundamental human reaction, to be sure, this need to blame somebody for our woes. It allows us to identify the cause of the problem. By assigning it to one individual or group, we are reassured that the offending behavior has thus been labeled, isolated and, hopefully, imprisoned.

It doesn’t mean we’re right, of course. It just means we’ve identified the most convenient scapegoat for our troubles and can now move on, satisfied that the behavior won’t be renewed.

If nothing else, it gives us a sense of control after a global economic meltdown.

The latest bloodsucker to capture the attention of Capitol Hill is the ever unpopular Oil Speculator, with new rules proposed by the Commodity Futures Trading Commission to limit the volume of trades on energy futures by any one trader.

Politicians couldn’t find a better scapegoat — nameless, faceless and dedicated to destroying the American lifestyle. Even better, most people don’t have any idea what these guys do, anyway.

In my more cynical moments, I often wonder whether the politicians do.

At any rate, these particular bogeymen are before us for the second time as the cause of some, if not all, of our fiscal pain.

North Dakota Democratic Sen. Byron Dorgan summed up the populist tripe, saying the proposed rules would help thwart such speculators, who are no doubt “looking for a quick buck at the expense of American consumers.”

He probably said something similar last year, when gas prices jumped to $4 a gallon and politicians demanded justice from the evil Speculators. That is, until gas prices fell and Capitol Hill abandoned the bogeyman du jour to hunt for another one.

It’s coming up again because of the volatility in the oil market. Oil prices fell below $59 a barrel Friday after a steady rise the week before, when it reached a peak of $73. It’s been bouncing around most of the year and has nearly doubled from its low in the first quarter.

Certainly, speculating on energy markets no doubt has some effect on prices.

But the real problem, once again, is simple economics.

Oil prices fell last week on reports of the rise in jobless claims and the drop in consumer spending in the U.S. That means Americans, who use at least a quarter of the world’s oil production, likely aren’t going to be driving or flying much.

In other words, demand in the U.S. fell. And so did demand in those emerging markets — which will drive most of the world’s production in the next decade or two — we hear so much about: China, India, Brazil.

If you want to know when we’ll see $4-a-gallon gas again — and we will — keep an eye on those foreign economies and earnings reports from construction material and equipment companies. That’s when speculators will get involved, betting that the demand for construction in emerging markets will be followed by the demand for oil.

No satisfaction, then, in the rise. Unless we should blame another country for aspiring to the standards the U.S. has set.

Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.

Entry Filed under: oil, economy