Why don't more people take an interest in what has been happening in the commodities market in light of?

events? Currently oil prices have everyone’s attention, so why don’t people take the time to understand how the prices are set and then realize we have had problems (and until recently Congress has only made them worse) with commodity market regulation: Enron drove up California energy prices in 2000-2001, Amaranth doubled natural gas prices in 2004-2005, banks selling off mortgages in CMOs meant they could take them off their balance sheet and get around holding sufficient reserves so long as speculation in asset backed paper drove demand for crappy high return loans, and now it is happening with oil prices.

Why do I keep hearing "we need to drill" and "bad oil companies"? Why isn’t everyone tired of what has been happening on the commodity markets and demanding that all trading be subject to audits so we can catch people or develop corrective policy before catastrophe happens over and over and over?
Serious "academic" work? That is ridiculous: I just gave you two examples where one firm acted to drive up prices that are well documented: Enron and Amaranth. And I gave you a third example of how we failed to develop effective policy when the mortgage bond market became speculative because of changes in our regulatory policies.
To say that "rogue traders" cannot drive up commodity prices is a misrpresentation of what happened at both Enron and Amaranth where you had entire trading desks involved, and it also belies an ignorance of just how leveraged futures are: you only need an 8% down payment to secure a futures contract, so 10.4 million dollars, for example, would secure you 1 million barrels of oil and make it appear that there might be a temporary insufficient supply if they are bought in a single block.

5 Responses to “Why don't more people take an interest in what has been happening in the commodities market in light of?”

  1. good guy Says:

    Great question, greg, you have been doing your homework. Yes, it’s the speculators who are driving up the cost of gasoline, but demand has been the fundamental in their actions…this happened in the mid-late 70’s and we’re seeing it again today. But it is unlikely demand will cease worldwide, as we now have china and india seeking more energy (oil), so even when the speculators start taking profits, i doubt we will see much of a drop in prices at the pump.

  2. single occupant Says:

    Greg, I see those markets as utterly manipulated by white collar corruption. Since those markets don’t actually function according to the common laws of the market, but rather are propped up by subsidies, and protected from inspection by a laisse faire attitude, the only real interest I have in them is in their results, not in their management. I know business is dishonest, so I don’t much care to listen to the day to day nonsense, false statistics and obvious gouging. I just want to live my life in such a way as I am prepared for the ultimate collapse I see as inevitable.

  3. David S Says:

    BASICALLY BCAUSE THEY ARE SO STUPID OR APATHETIC THAT THEY DO NOT STAY INFORMEND. A PERFECT EXAMPLE IS THAT EVERY TIME GAS GOES DOWN SLIGHTLY AMERICANS START TALKING ABOUT WHAT A GOOD DEAL THAT THEY ARE GETTING INSTED OF BEING OUTRAGED THAT WE ARE BEING OVERCHARGED BY OIL COMPANIES WHO ARE MAKING RECORD PROFITS.

  4. Chupate esa! Says:

    The philosophy is, everybody has a price and the oil corporations can afford all…

  5. aaa.still Says:

    Serious academic work on cornering commodity markets has time and time again debunked the myth that speculators can drive prices up or down in any significant amount for any material amount of time.

    People may be speculating, but they aren’t controlling price.

    You need to go to a first book in microeconomics and look up two words: "supply" and "demand."