The Great Oil Debate
Wednesday, July 16, 2008
Matt Simmons appeared on Fast Money last week in what now appears to be the most widely circulated video in the stock market blogosphere. They don't let guys like this on TV too often (he does appear in a lot of oil documentaries though); the looks on the Fast Money traders' faces is absolutely priceless.
Simmons makes two points that are worth re-noting:
First, oil is actually priced lower in the current market than in a market where "shorting and speculating" is outlawed. This goes against the very mainstream opinion that traders and speculators are driving prices up, and that eliminating them will provide instant price relief. In recent weeks, the onion market has been a hot topic of conversation. Futures trading in onions was banned because onion growers were afraid of speculators driving prices down (ironic, isn't it?) and price swings of 100% or more in only a few months have become commonplace. Nevertheless, Simmons thinks if the government intervenes, it ought to set a price floor, not price ceiling; this is very much the opposite of popular wisdom.
Second, Simmons is not talking about electric cars, the hydrogen economy, biofuels, or any other technological answer to our problems. Simmons is much more blunt - if we want to dig ourselves out of this hole, we need to change our lives. Quit commuting long distances to work, quit transporting the food we eat thousands of miles, and most importantly, quit looking for someone to blame for the current hardship and quit assuming that prices cannot, will not, and will never go higher than they currently are.
Posted by Rob Pitingolo 10:03 PM
