Speculation does raise oil prices

In a recent editorial, The Daily Sentinel addressed the issue of speculation in the oil market and concluded that, since it is a zero-sum game where there is a buyer for every seller, speculation is not responsible for the sharp and continuing rise in oil prices.
Instead, it said, the rising trend in prices is simply a refection of differences between supply and demand.
The Sentinel could have come to the same conclusion about housing, which is also a zero sum game. Yet, speculators drove housing prices to bubble proportions and we are now experiencing the consequences. The same happened in the stock market, where the bubble burst in the year 2000.
Speculation has been present in markets for hundreds of years. The low cost of speculation is the real problem. Usually, speculators only put up as collateral a small fraction of the value of the asset being purchased.
In housing, the bubble was fed by folks being able to buy homes with no money down. In the stock market and oil markets, futures contracts may be purchased with relatively small margins. In the last few years there have been large investment firms, which have no interest in taking delivery of any oil barrels, buying millions of barrels worth of oil in the futures markets, betting that prices will go higher.
The high demand from investors/speculators is contributing to the rise in oil prices. And this is hurting the global economy. One way to make life a little more difficult for speculators is to raise margin requirements so it will take more cash to make a trade. This is the equivalent of requiring a larger down payment from homebuyers.
While increasing the supply/demand cushion for oil would turn the tide, and move speculators to the other side of the trade, raising futures margin requirements would be a short-term step that would help.
GEORGE GERSON
Grand Junction

Preschoolers put at risk
with state funding fight
Everyone agrees that early childhood education is vitally important, but if Gov. Bill Ritter and County Commissioner Janet Rowland continue to play politics, our children could end up paying the price. Kids should not be used as political footballs.
As a fiscal conservative, I am disappointed that our governor is determined to subvert the voters’ wishes and risk losing early childhood education funding that the state has helped with in the past. The mill levy freeze is his attempt to place the burden on local taxpayers.
Rowland and her fellow commissioners saw this attempted end run as a political opportunity and had our county join the resulting litigation.
The lower-court decision went against the governor, but the ultimate decision remains with the Colorado Supreme Court. That hasn’t stopped Rowland for taking credit for saving local taxpayers millions of dollars. That is a little like claiming a victory at half-time.
What is even more puzzling about Rowland’s joy at taking the governor on is the losers here are 5,500 preschool children who could have funding for these vital programs held up. Rowland cares so much for children?
Both Rowland and Ritter should be ashamed.
CARL BLOMQUIST
Mesa

Congress is gradually
turning the U.S. socialist
Congress is wrongly forcing our nation toward socialism. That’s a nicer word than “communism” but the result will be the same. A ruling class will brutally ensure that the rest of the people will be unable to defend themselves. There will be a total lack of freedom.
Our founding fathers gave us a republic and challenged us to see if we could keep it.
Karl Marx believed one generation of professors would make us become anti-God Marxists. He was wrong. So far the deception has covered a few generations, but it’s close!
The war in Iraq has provided a new freedom there — and has helped to prevent more 9/11-type terrorist attacks on our land.
MARJORIE R. TAYLOR
Hotchkiss

This entry was posted on Monday, July 7th, 2008 at 9:08 am and is filed under Printed letters. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.