In a True Free Market, Speculation Implies Investment
As evidenced by his use of the phrase “mistaken imperial war,” Chris Powell and I are hardly simpatico, but he makes an important point, here:
Oil and oil products are hardly the only things whose prices have soared lately; nearly all commodities are up sharply, with the Commodity Research Bureau index reporting an increase of 37 percent in a year as the dollar’s value against other currencies having fallen about 12 percent. But Congress has yet to interrogate wheat farmers, copper miners and pizza makers.
I’m neither a financial expert nor an experienced investor, but the term “speculator” evokes the impression of investment for the purpose of exploration. In other words, the speculative dollars building up in the oil industry ought to be going toward exploration and infrastructural development. The problem is that regulations and environmental zealotry are preventing what would amount to a market correction with profound geopolitical implications.
Various liberal commenters have been pointing to OPEC as a symptom of the free market and to the high price of energy as the free market’s inevitable result. It seems to me that OPEC’s power derives largely from other nations’ deliberate restriction of the free market; to the extent that the cartel understands American political realities, it is able to hold production down and prices up.