McCain on the Attack!

Continuing from the previous post, we see McCain countering Obama's lack of boldness with a strong attack. Not wasting any time, he plumbs the depths of his own misunderstanding:

There is the further problem of speculation on the oil futures market, which in many cases has nothing to do with the actual sale, purchase, or delivery of oil. [...] [W]e all know that some people on Wall Street are not above gaming the system. When you have enough speculators betting on the rising price of oil, that itself can cause oil prices to keep on rising. And while a few reckless speculators are counting their paper profits, most Americans are coming up on the short end -- using more and more of their hard-earned paychecks to buy gas for the truck, tractor, or family car. Investigation is underway to root out this kind of reckless wagering, unrelated to any kind of productive commerce, because it can distort the market, drive prices beyond rational limits, and put the investments and pensions of millions of Americans at risk. Where we find such abuses, they need to be swiftly punished.

Breathtaking! The man has come to play ball, giving 110% percent and taking it one game at a time. Extra credit for that bit about "productive commerce." The good old "labor theory of value" is always a winner.

How exactly does speculation in the oil futures market drive up the price of oil? Suppose I bet you that oil will be over $300/barrel next June. I am not buying any oil. Neither are you. I agree to pay you the difference in dollars if oil is under $300, you will pay me the difference if it's over $300. One of us will likely come out on top next June, but will our demand for oil change? No. Will a third party's demand for oil change? No. Will the quantity of oil supplied change? No. Will prices be affected by our bet? No. Please enlighten me John McCain, Dennis Kucinich, and Bill O'Reilly. Explain to me the mechanism, then maybe I will be willing to continue listening to your blathering.

Speculation in real estate and stocks (not in futures) is not the same thing, because in these cases speculators actually go out and buy houses, land or stock. If enough people do this, demand increases. The market becomes a seller's market, and the price goes up. But speculation in oil futures does not involve going out and buying oil, sequestering it in a tank somewhere with the plan of selling it later. If that were how it worked, then yes, it would affect the price. But that's not the way it works.

I wonder if McCain et al. believe that betting on a horse increases its speed. I wonder if they think buying homeowner's insurance boosts burglary rates. I'm afraid that they might.