Oil speculators are benefactors of humanity. We should be very grateful to all of them. Next time you see an oil speculator, thank him for what he is doing. Most Americans would strongly disagree with me. But they are wrong -- not morally wrong, but factually wrong.
One of the consequences of the recent increase in the price of gasoline has been the demonization of oil speculators. Politicians, journalists, talking heads, bloggers, and agitators have been denouncing speculators and proclaiming that the general public has been harmed by their speculating. Most of the anti-speculator rhetoric has been civil. But some of it can be described only as hate speech: Google "speculator, bloodsucker" and you will be directed to 295,000 websites. And this anti-speculator hysteria has not been confined to the usual suspects on the left. For example, the normally sensible Bill O'Reilly has been bloviating about the wicked oil speculators.
We now face an even more dangerous idea than the idea that speculation is harming the average American: the idea that the government should do something about it. Many people, including the president of the United States, have called for the government to stop -- or reduce the amount of -- speculation in oil. Vermont's socialist senator, Bernie Sanders, has announced that he plans to introduce a bill to do just that.
According to President Obama, "[w]e can't afford a situation where some speculators reap millions while millions of American families get the short end of the stick." The president's assertion that some speculators have reaped millions is almost certainly true. But his implication that the American people have been harmed by that is false. Those who believe that speculation makes non-speculators like us worse off are factually incorrect. Their mistake is the result of considering only one of the consequences of speculation, not all of the consequences. Using that methodology, you can prove that anything is evil.
In all the ranting about oil speculators, there is one minor detail that never gets discussed. That detail is this: if it is true that speculators are causing the present price of oil to be higher than it otherwise would be, then it is also true that speculators are causing the future price of oil to be lower than it otherwise would be. It is not possible for speculators to do the former without also doing the latter.
Thus, speculation has two effects. One of them -- raising the current oil price -- is bad. The other -- lowering the future oil price -- is good. Determining whether speculation is good or bad for society amounts to determining which of the two effects is larger. The anti-speculator crowd hasn't gotten to step one in thinking seriously about the question: step one is recognizing that there are two effects. Virtually everyone who has seriously considered this question has come to the conclusion that the benefits of lower future prices outweigh the costs of higher current prices, and therefore, speculation makes the world better off. Some of the gain goes to the speculators
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