But. I was pretty stunned to read this part in David Segal's NY Times story about Citi commodities trader Andrew J. Hall:
The company, for example, often wagers that the price of oil will rise so fast during a particular period, say six months, that it can make money by storing oil in supertankers and floating it until the price goes up. (If the price rises by more than it costs to lease the tankers, he makes money.)Wait a second. So Hall, Citi's $100 Million Man bought oil and kept it off the market. And, by the way, kept tankers pointlessly floating in the water, conceivably creating who knows what bottlenecks? Okay, this is indeed an issue. In theory, in a perfect world, we might say this doesn't matter. A speculator buying up oil when prices are cheap and then selling it when there's a shortage can actually even out prices. But this isn't an economics workshop. And when you add the possibility of regional bottlenecks and worse the possibility that the total supply is falling because speculators are tying up the tankers, it doesn't look good.
Is this enough to move world oil prices? Who knows. But without a doubt regional energy prices are susceptible to manipulation--we saw that in California a decade ago when Enron, Reliant, and Duke (who essentially crippled their own plants) ran roughshod over consumers. Am I prepared to say that the mega-spike in oil prices was caused by speculators such as Hall? I don't know. But at the least I want a lot more information.
