Act Now to Prick the Oil Price Bubble
Analysts give plenty of reasons for the price of oil to climb – including increased demand from China and India, unrest in Nigeria, conflict in the Middle East, increased costs associated with exploration, limited refinement capacities. But these events are not new or sudden and probably don’t fully account for the steep increases, explains Meghand Desai, professor with the London School of Economics. Instead, speculators may have created yet another dangerous bubble. Pricing changes the behavior of governments, citizens and businesses. Speculators collecting profits by preying on and manipulating consumer fear is unethical, and Desai proposes that the New York Mercantile Exchange, or NYMEX, charge speculators – those investors not making or taking oil deliveries – a higher margin on such investments, 50 percent instead of the current 7 percent. Speculators who purchase homes or oil contracts with minimal down payments can easily create bubbles, collect profits and walk away from their losses, letting taxpayers foot the bill. – YaleGlobal
Act Now to Prick the Oil Price Bubble
Friday, June 6, 2008
Click here to read the article in the Financial Times.
Lord Desai is emeritus professor of economics at the London School of Economics and a Labour peer.
http://www.ft.com/cms/s/0/3b4930d8-3301-11dd-8a25-0000779fd2ac.html
Copyright The Financial Times Limited 2008