Speculation and Bubbles

Suppose you think that a hurricane might disrupt oil flows in the future. What should you do today? Tropical storm Edouardo gives an example. As the storm approached, people believed there was a chance that oil flows would be disrupted in the future, and the current price began rising as a consequence. If you expect a higher price in the future due to reduced supply or any other reason, you should begin purchasing and storing oil now to take advantage of the higher price in the future, and the increased demand for oil drives today's price up.

This is speculation, the storm may or may not actually hit and disrupt oil supplies, but it's not the kind of speculation we should worry about. We want this kind of speculation - which reflects underlying fundamentals - to occur. The expectation of a supply disruption in the future causes the market to take actions today and store oil for when it will be needed, and this provides insurance against the potential supply disruption, insurance that reflects the probability that the storm will cause problems (the larger the expected fall in future supply, the bigger the price change, and the more that will be stored for the future).

In this particular case, the insurance wasn't needed, but it's still good to have:

''It is pretty much expected the storm is going to slowly weaken now for the rest of the day and overnight,'' said Mike Pigott ... of ... AccuWeather... ''It wasn't anything unusual or spectacular; there wasn't any kind of massive intensification that we saw with Dolly.'' ...

Crude oil touched a three-month low of $118 a barrel on speculation Edouard wouldn't curtail production. Six rigs and 23 platforms were evacuated in advance of the storm, the U.S. Interior Department said yesterday.

Royal Dutch Shell Plc, Europe's largest oil company by market value, said the storm was no longer a threat and it would start regularly scheduled crew changes for its off-shore facilities, according to spokeswoman Darci Sinclair.

Noble Corp., the third-largest U.S. offshore oil driller, may have crews back on two submersible rigs by tomorrow.

The kind of speculation we should worry about is "bandwagon behavior." This is speculation that is disconnected from fundamentals. For example, suppose that people become convinced that offshore drilling will have a large impact on future prices. Even though this isn't true, suppose people become convinced that it is true through some sort of misleading information campaign, perhaps abetted by a media more interested in hyping controversy than in informing people of the facts.

This is the opposite of an expected supply disruption, it's an expected increase in future supply (based upon false information), so the expected future price would be lower. That would cause speculators to release stored oil - it's not as valuable in the future as it was before - driving the price down today, and this validates the markets anticipation that price would fall. Even if you know that the underlying basis for the fall in price is false, if you expect the price to fall further you may jump on the bandwagon and sell stored oil now before the price actually does falls further, and this will amplify the fall in price. To the extent that the fall in price then becomes self-validating, people afraid of a fall in price sell oil which causes the price to fall generating more sales and further price declines, the behavior can feed on itself and generate a large downward fall in prices.

None of this is based upon underlying fundamentals, it's all generated by people buying into the idea that drilling will have a substantial impact on future prices, and changing their behavior because of it. As a political strategy, I suppose it can work if you don't mind misleading people and sacrificing the environment for political gain - prices fall and you can point to the change as evidence that your policy has helped consumers at the gas pump. But eventually the (negative) bubble will pop (hopefully after you are elected), and prices will return where they started.

This type of speculative behavior - bets on price changes that are driven by something other than the underlying fundamentals - is harmful since it distorts both the intertemporal allocation of resources, and the allocation of resources at a point in time. I'm not saying that selling the false claim that drilling for oil will have a large downward impact on prices will create the kind of bubble that makes a bang heard round the world when it pops, or even necessarily affect prices noticeably now or in the future. I think most of the price changes we've seen can be explained by changes in the underlying fundamentals (e.g. see above for an explanation for part of the recent price drop). But the attempt at a distortion is noteworthy in and of itself because if the attempt is successful, it can cause waste and inefficiencies. It shows political gain is more important than telling the truth and solving the problem. Because the fall in price is not based upon fundamentals, it's still a bubble, or perhaps more accurately in this case if I'm wrong and there has been an impact, it's froth (since the price changes we've seen are relatively small compared to the base), and this sends false signals about where resources are needed the most. The people who are doing their best to reinforce the misperception that drilling will significantly impact prices are, to the extent that they are successful, imposing costs on the economy for political gain. This is not the type of speculation we want to see.

This makes another important point. Bubbles do not have to be price increases, they can also occur when price falls (think of a fall in the stock market that is based upon rumors that generate a self-feeding downward cycle that eventually ends, and the price goes back to its fundamental value). We often think of large price falls as the price returning to its fundamental value, and many people are making that claim about oil prices presently, but if there is a negative bubble at work, the fall in price can be taking you away from, not towards, the long-run stable price.

Finally, prices can also be distorted by false information about fundamentals, i.e. an information campaign that misinforms about the relative merits of alternative proposals for dealing with the energy issue. For example, a distortion on the merits of conservation versus drilling could cause us to misallocate resources. Tire gauges and regular tune-ups can do more to help with the energy problem than drilling, but Republicans are doing their best to distort that message and push resources into a suboptimal use:

The Tire-Gauge Solution: No Joke, by Michael Grunwald, Time: How out of touch is Barack Obama? He's so out of touch that he suggested that if all Americans inflated their tires properly and took their cars for regular tune-ups, they could save as much oil as new offshore drilling would produce. Gleeful Republicans have made this their daily talking point; Rush Limbaugh is having a field day; and the Republican National Committee is sending tire gauges labeled "Barack Obama's Energy Plan" to Washington reporters.

But who's really out of touch? The Bush Administration estimates that expanded offshore drilling could increase oil production by 200,000 bbl. per day by 2030. We use about 20 million bbl. per day, so that would meet about 1% of our demand two decades from now. Meanwhile, efficiency experts say that keeping tires inflated can improve gas mileage 3%, and regular maintenance can add another 4%. Many drivers already follow their advice, but if everyone did, we could immediately reduce demand several percentage points. In other words: Obama is right.

In fact, Obama's actual energy plan is much more than a tire gauge. But that's not what's so pernicious about the tire-gauge attacks. ... The real problem with the attacks on his tire-gauge plan is that efforts to improve conservation and efficiency happen to be the best approaches to dealing with the energy crisis — the cheapest, cleanest, quickest and easiest ways to ease our addiction to oil, reduce our pain at the pump and address global warming. It's a pretty simple concept: if our use of fossil fuels is increasing our reliance on Middle Eastern dictators while destroying the planet, maybe we ought to use less.

The RNC is trying to make the tire gauge a symbol of unseriousness, as if only the fatuous believed we could reduce our dependence on foreign oil without doing the bidding of Big Oil. But the tire gauge is really a symbol of a very serious piece of good news: we can use significantly less energy without significantly changing our lifestyle. The energy guru Amory Lovins has shown that investment in "nega-watts" — reduced electricity use through efficiency improvements — is much more cost-effective than investment in new megawatts, and the same is clearly true of nega-barrels. ...

Of course, in recent years, the Republican Party has been affiliated with the oil industry. ... John McCain has been a notable exception. He is not an oilman; he has pushed to regulate carbon emissions; and he opposed Bush's pork-stuffed energy bill, which Obama supported. He also opposed efforts to drill in the Arctic National Wildlife Refuge and until recently opposed new offshore drilling. But now that gas prices have spiked, McCain is running for President on a drill-first platform, and polls suggest that most Americans agree with him. It's sad to see his campaign adopting the politics of the tire gauge, promoting the fallacy that Americans are powerless to address their own energy problems. Because the truth is: Yes, we can. We already are.

Update: hilzoy has more on how Obama's statement is being distorted for political gain (the claim McCain is making that he said putting air into tires is "enough to break our dependence on Middle Eastern oil" is false, Obama didn't say that). Too bad we can't count on the media to point out how McCain is misrepresenting both what Obama actually said and the facts about the impact of drilling on gas prices. pgl comments here with "Hot Air Lowers Gasoline prices!!!"

Update: "It's like these guys take pride in being ignorant":

[2:12]

That's a pretty good response to McCain making fun of proposals that could help families struggling to pay higher energy bills save money and gas. I guess it's easy to poke fun at this when you have enough money not to have to care about saving a few dollars wherever you can, but shouldn't he show more sensitivity to people who do have to care?

Update: Wow. Paris Hilton responds to the McCain ad:

Update: Brad DeLong asks:

Why is it that Paris Hilton is able to speak more substantively on the issue of energy than John McCain? There is much more substantive energy policy in this than in McCain's ad.

Paris Hilton is ready to lead on energy policy Why isn't John McCain?

Comments

[robertdfeinman]

I've been thinking about forecasting and its effects on future behavior.I think this is what George Soros means by "reflexivity".

Suppose some model (based upon current behavior) predicts that X will happen in the future. As a result of the forecast people (or institutions) modify their behavior and X doesn't happen. When looking back from the future will people say the forecast was wrong because it didn't allow for the change in behavior?

It seems to me that much of the type of forecasting that we see is a type of admonishment: "change your ways or else", so the intent is clear. This is as opposed to the type of forecasting where behavioral changes are not relevant or are unlikely to happen. Measuring "success" under these various conditions seems difficult. I've never understood weather forecasts which predict a probability for rain, for example. How do we measure the accuracy under these circumstances?

Much forecasting needs to make explicit assumptions about which variables will be held constant or will change at historical rates, but I'm not sure these constraints are made clear by those who quote the results.

[Mark Thoma]

You are on your way to discovering the Lucas critique (the idea that forecasts that do not account for behavioral changes in response to changes in the rules of the game, policy changes for example, can be way, way off).

[macburger]

The tire gauge wins hands down, when pitted against all the facts you can muster. Humans are apes. Ape behavior is the norm.

The standard economist joke goes "Assume a can opener".

That's a harmless joke, but the "science" you built up on the assumption "Man is Rational", is not a joke. The public policy that flowed from that assumption has been used to defend and to provide cover for the worst sort of theft and looting in the last 2-3 decades.

Even now, when faced with the consequences, the pretension is that the problem is with the implementers, not the faulty bases of the "science".

Which is why, even after all these bubbles, that "science" first cannot admit to the existence of bubbles, then tries to play with the definition of a bubble and define bubbles out of existence, then tries to define good bubbles and bad bubbles..

[kthomas]

"...(the idea that forecasts that do not account for behavioral changes in response to changes in the rules of the game, policy changes for example, can be way, way off)..."

I learn something new on this site everyday. Given the quote, I would say that how the US economy has been administered for 10+ years.

[btg]

"in its report, the Paris-based IEA said it now expected world oil demand to average 87.54 million b/d in 2008"

http://www.platts.com/Oil/Resources/News%20Features/globalcrudeoil08/index.xml

So, at its peak, ANWAR might produce 780 b/d http://www.greencarcongress.com/oil/index.html

increasing world oil production by a maximum of 1% (at current production rates) is not going to have a major impact on the price of oil - the US is part of a world market - if the US were self sufficient in oil and there was no trade in oil, it might make a bigger difference, but adding produiction from ANWAR will mean that the US will import less oil, and any price reduction will be world wide and not accrue to US consumers alone.

[Alex Tolley]

And how does one distinguish "bandwagon behavior" from speculation without hindsight?

Let's speculate on another example. Suppose you state that costs of microchips will get lower, this will stimulate demand which will feedback with larger production runs to result in the lower prices.

There are a whole boatload of phenomena based on "swarming behavior", but it is not clear to me why they should necessarily be considered bad, even in the speculative example given.

[Mark Thoma]

Alex:

That's one reason (difficulty in detection) the Fed is reluctant to try and pop bubbles (though they are rethinking this policy).

[Dave]

Who determines whether the price of oil is reflective of its fundamentals? Who is in the best position to determine the "correct" price of oil?

The market participants have the most to gain and lose, so I suggest you let them decide how much offshore drilling will affect price (among the other numerous variables that affect price that you can't possibly comprehend as a single spectator).

How exactly does the government hope to enforce the regular use of tire gauges (sorry to bring up the subject of reality in the midst of your ivory tower musings)?

[Parrots parroting]

How does the government force companies to drill? They aren't using the leases they have now. Opening up supplies does not imply they will be used at any higher rate than existing leases (sorry to bring up reality in the midst of your baseless rant parroting Rush's talking points).

The market has decided - it's hardly a bump in the price. Why did you think otherwise? You aren't foolish enough to believe this just becase someone said it are you? Why do you think McCain resorted to the "psychological effects" dodge? Psychological effects means lying to people and hoping they believe you (worked on you apparently). Read the administration's report on this.

There are lots of things we can do on the conservation side to help. Are you denying that? That's all Obama said, that this has the potential help as much or more than drillin, which, as all the experts ar emaking clear, it does. Denying that is a lie.

[Logician]

Robertdfeinman:

"I've never understood weather forecasts which predict a probability for rain, for example. How do we measure the accuracy under these circumstances?
"

It's not hard. Wait until you have a hundred instances of a prediction of (say) a 30% chance of rain. See how many times it actually rained. If that number is 30 plus or minus three you had good predictions.

[Julio]

While it is true that lies about drilling can precipitate the "bandwagon behavior", I think the reality is more complicated than this suggests.

Say it takes 10 people to be misled and bet on lower prices to get the "bandwagon" rolling -- after that, it is reasonable for everyone to expect lower prices (until some future time where prices revert to their "natural" state).

So, the lie ("drilling will lead to lower prices. Immediately") convinced 10 people -- and resulted in lower prices. Immediately.
Is it still a lie?

Now change the premise, and replace the lie with a more careful statement: "drilling will not alter the fundamentals enough to cause a drop in prices. But if ten people believe that it will, then the prices WILL drop".
So now ten well-informed and well-meaning people think (rightly or wrongly) "well, there must be ten idiots out there, so I'll go bet on a drop in prices".
Again the price drops. Immediately.

Or, finally, nobody says anything. They just start drilling.
The same ten well-informed people go through the same reasoning, reach the same conclusion.
Same result -- an immediate price drop.

If, after the fact, someone says "the price went down as a result of the drilling", is he lying? Is the original lie still a lie?

[anne]

http://krugman.blogs.nytimes.com/2008/08/05/deep-voodoo/

August 5, 2008

Deep Voodoo
By Paul Krugman

What passes for policy discussion * in the world's greatest nation:

"House Republicans issued the boldest claim yet in their three-day energy protest, insinuating on Tuesday morning that their demonstration [speeches to an empty chamber demanding more offshore drilling] may in fact have already begun to lower gas prices.

" 'The market is responding to the fact that we are here talking,' said Republican Rep. John Shadegg."

In other news, Republicans credited their speeches for the fact that the sun rose today.

* http://www.politico.com/blogs/thecrypt/0808/GOP_Oil_markets_responding_to_our_protest.html

[cm]

robertdfeinman, Logician: Evading the question of how to define the probability of a singular event, or observe the accuracy of repeated predictions, you may be making the mistake of assuming without questioning that certifying accuracy is even required.

Let me illustrate this by the example of a Dilbert cartoon -- Dogbert "develops" a dowsing rod that he uses to identify idiots. When Dilbert asks him how it works, the answer is "you just point it at the person".

On a more serious note, what "probability", "likelihood", etc. mean is often a matter of esoteric philosophical deliberation, and is usually defined with reference to laws of big numbers or repeated uniform sampling, which means they mean essentially projection of an actual or imagined (i.e. modeled) aggregate property onto individual events.

[Lafayette]

Paradigm change be damned

MT: We want this kind of speculation - which reflects underlying fundamentals - to occur. The expectation of a supply disruption in the future causes the market to take actions today

Oh, does it?

Is not the moral hazard …. uh, morally acceptable when the consequences of supply shortages impact the entire population? Shouldn’t the state be concerned about such situations? And, most importantly, is not an ounce of prevention worth a ton of cure?

My point: It behooves a state to do forward thinking. Especially as regards strategic products that bear risk, either in their production or delivery. Either the product must have a strategic reserve (as, in fact, oil does in the US) or its market must be controlled to avoid exaggerated speculation. However, such measure often prove too little, too late.

In the case of oil, was it not obvious, long ago, that oil would bring us to the present predicament? Had we made the right investments, back then, would we be in the same fix as we are now (in terms of energy usage)? When speculation occurs, often, is it not too late to change the fundamentals of supply?

Is it not the responsibility the state to overview Future Risks, and make the necessary investments of a nature so as to reduce their impact by finding viable alternatives? All of which may take much time?

It seems to me that we had blinders on. Hubris reigned supreme. Vested interests were at stake, and paradigm change be damned.

And, so, now we pay the piper. I.e., the speculators.

NB: Lead-head denied the urgency of the Kyoto accords. Now, 8 years on, we are in a far more worrisome state as regards the ecology. Shouldn't the state be taking a more active role in forecasting the future danger of an ecological collapse, and planning/implementing (in a precautionary fashion) necessary measures? (Eg, a carbon tax.)

[mxq]

In case anyone wanted to know:

Revised CFTC data show speculators controlled nearly half of NYMEX oil futures. CFTC data also reveals one trader controlled 10% of oil futures on exchange.

So if NYMEX is "regulated" and non-producers are allowed to own 115 days worth of US WTI, i wondered what happens on "unregulated" markets, like the ICE.

Way to go futures markets.

[Alex Tolley]

Lafayette: "In the case of oil, was it not obvious, long ago, that oil would bring us to the present predicament? "

No it wasn't. The assumption from most parties - oil industry, economists - was that oil exploration and technology would continue to ensure supply 'indefinitely'. Peak Oil was a fringe viewpoint. The experience since the mid-1980's suggested that oil prices might even decline and that there were plenty of reserves (recall the oil mergers based around reserves). More recently there has been the demand to drill in the Arctic with several nations laying claim to the - Russia, Canada, USA. I conclude that the consensus opinion was that the current situation wouldn't happen. Certainly I wasn't aware of issues about resource shortages being discussed even a few years ago.

[hari]

I've suggested the remedy to Oil Futures and unit pricing is enforcement of a global commodity agreement between producers and consumers...We're unable to influence OPEC when they established their HQs in Vienna; although we tried to discern what kind of statistics they're prepared to supply us on actual production, supply and inventories.

BTW Bush/Cheney *oil gang* would be dead against such a regulated global market in which speculation on futures would depend on actual supply/demand - like in other commodity agreements (eg. sugar).

[Nathan Smith]

Drilling increases supply. More supply lowers prices. How much depends on elasticities, but more supply lowers prices. That's just an application of the Law of Demand. It doesn't get any more basic.

It's a disgrace to the profession that this is even being debated.

The government can allow, but not force, oil companies to drill. The fact that there is already some oil they could drill and aren't, of course, proves zero, zilch, nothing. Because the costs on non-authorized sites may be lower than authorized sites. But maybe they won't drill. In that case, the policy will have no effects (except perhaps short-term ones, via expectations). So allowing drilling has either good effects (lower gas prices) or no effects. Suppose I make you an offer: flip a coin, and I pay you $1 for heads, nothing for tails. If you turn down the offer because it might give you nothing, you're an idiot.

If it takes seven years to bring new oil into production, it may take seven years for it to influence the price. Fine. That means we should have authorized new drilling seven years ago, but better late than never. At least we'll do a favor to the US and world economies a few years down the line. It's not a crime to think ahead.

On the other hand, it may NOT take seven years to influence the price, if (a) there are inventories or excess capacity, or (b) oil-now and oil-later are substitutes for each other on the demand side. The extent to which conditions (a) and (b) apply in reality are hard to measure.

The simplest interpretation of the fall in oil prices since Bush and McCain (and now Obama, to his credit) started pushing for new drilling is that, in fact, oil-now and oil-later are substitutes, and/or there was some excess capacity and/or inventories. Thoma offers the ingenious alternative interpretation that it's a speculative anti-bubble. He might be right, but it sounds more like a desperate attempt to avoid looking like a fool after a scornful dismissal of the Law of Demand hasn't worked out the way he hoped.

McCain supposedly said he doesn't know much economics, and I'm inclined to agree. Yet apparently, he knows more economics than Paul Krugman. Or Mark Thoma?

[hari]

@ msq -

Thanks for confirmation of CFTC survey on Oil Futures.
The figs are indeed mind boggling principally because such
speculation is not for actual delivery.

I've a feeling our host (MT) might revisit the issue.

[Lafayette]

The Club of Rome

Lafayette: "In the case of oil, was it not obvious, long ago, that oil would bring us to the present predicament? "

No it wasn't. The assumption from most parties - oil industry, economists - was that oil exploration and technology would continue to ensure supply 'indefinitely'. ….. Certainly I wasn't aware of issues about resource shortages being discussed even a few years ago.

The Club of Rome published in 1972 a report called The Limits of Growth. Have a look, here

The limits to certain resources, amongst them oil, was modelled and considered in depth within this report – whether or not you may agree with the reports dire findings or even its modelling methodology.

And, the debate has a good history between 1972 and the present, very often by coming down on "unlimited supplies". And sometimes showing how supply was manipulated by the oil majors to boost profits, as was thought in the 1970s as well.

The history of this debate is much longer than "a few years ago". And, there is sufficient evidence that it should have been taken seriously then.

You must be very young.

[Real Person from the Real World]

It 's always limits to something. Scarcity. While nothing lasts forever, you are supposed to plan ahead, and start looking for the next technology? Or is that just supposed to happen by accident? Seems like scarcity making something valuable is useful to the seller, and perhaps, like DeBeers and diamonds, the best thing to do is control things to spread out the income (OPEC is another example). When something is scarce, someone somewhere is making money and wants to keep it scarce.

[Lafayette]

NS: On the other hand, it may NOT take seven years to influence the price, if (a) there are inventories or excess capacity, or (b) oil-now and oil-later are substitutes for each other on the demand side.

Who blinded you to oil industry operations?

Someone did, or you wouldn't be spouting such fantasies. Drilling off shore is an immensely complex operation. The recent announcement of one of the world's potentially largest reserves, off Brazil, did not shake the market one iota. Why?

Because everyone knew that, even if Brazil started licensing operations tomorrow, the market would not see oil for another 7 to 10 years.

The arguments for time-to-market have been all over this forum and the press as well.

Furthermore, explain option (b) above. It does not withstand scrutiny as is.

Finally, getting more oil for American gas-guzzler cars is neither the ultimate solution, nor the preferred solution, given hazardous CO2 emissions.

[Lafayette]

Heads stuck in the sand

RP: While nothing lasts forever, you are supposed to plan ahead, and start looking for the next technology? Or is that just supposed to happen by accident?

I was just transposing a key element of corporate planning to Federal planning -- with the notion, "Why not?"

Corporations go out of business if they do not assure future product stream revenues from new or alternative products. Countries just get into a mess if they don't, which is where we are - a right mess as regards alternative energy resources.

This happened 8 years ago, when lead-head and his eminence grise reimbursed their election chit to the Oil, Gas and Coal industry. But, in fact, Billy-boy did nothing either to avoid the present calamity of high prices.

They've got us by the short-hairs. Replacing oil-burning electric generators will take decades and no one has decided with what technologies. Most other countries are opting, belatedly, for nuclear reactors, whilst we've still got our heads stuck in the sand and our finger ....

Oh, never mind.

[ddt]

Tyler Cowen's concept of a negative bubble in the 90's seems somewhat reasonable to me. I think most normal people would just say "undervalued" or "in the dumps", but the price did seem excessively low at less than $20.

I don't think that this can be called a negative bubble. Since 2000 demand increased by what, 10%? And resulted in a 600% price increase? Now it has dropped back to a mere 500% price increase and it is being called a negative bubble? I don't think so.

A bubble is a bubble is a bubble. This was a bubble. $150 oil going into a global slowdown is insanity, plain and simple. Headline in the Toronto Star yesterday was "Commodity Bubble Goes Pop". The TSX (the biggest exchange for commodities companies in the world) was a bloodbath on Tuesday.

re: off-shore drilling. IMO this has had almost no effect on the market whatsoever. Commodities are crashing regardless of the supply story (the supply scarcity storyline was nonsense from the beginning - ask a Saud, or an Albertan for that matter) and is just a classic dash for the exits at this point. The CFTC has uncovered manipulation of the NYMEX through traders being reclassified as commercial hedgers (1 trader held 10% of the NYMEX contracts - who needs position limits), and in September ICE is supposed to be volunteering similar information. The commodities party is over and everyone knows it. The only question now is how far and how fast it will drop. I don't think we're done yet.

The storyline is pretty simple. Markets (especially futures markets) need regulations to protect from market failures (bubbles, manipulation). These regulations were systematically dismantled, and once the time tested regulations on position limits, disclosure etc were thrown out the window, a bubble formed. The commodities market is screaming out for a return to regulated normalcy, but for some strange reason those that one would expect to be leading the charge (Krugman, Thoma) were quasi - efficient markets fundamentalists during the commodities bubble, and are alleging a negative bubble now that it has just slightly deflated.

I imagine that they had the best of intentions (green intentions) but a bubble doesn't help the environment. Look at the Google Maps/United Nations special feature on the Athabasca oil sands. Bubbles cause people to tear up the environment looking for any scrap of oil whether off-shore or in ANWR. It also encourages the use of dirty coal and carbon emission intensive oil production in the oil sands. Price spikes and $150 oil are not and will never be a green panacea.

[Lafayette]

ddt: The commodities party is over and everyone knows it. The only question now is how far and how fast it will drop. I don't think we're done yet.

It couldn't have happened to a better crowd of hucksters.

Still, if they promoted the speculation, it was for the money ... and I doubt that any are coming away sorry.

It's become an easy living.

[Julio]

Nathan Smith:

It doesn't get any more basic.

It's a disgrace to the profession that this is even being debated.
...
Suppose I make you an offer: flip a coin, and I pay you $1 for heads, nothing for tails. If you turn down the offer because it might give you nothing, you're an idiot.

If you think the condescending tone of your "explanation" is appropriate, especially with this crowd, you are [this section deleted by parental filter].