Forget the basics of supply and demand, just find someone to blame.
As Congress takes new aim at speculators for the high price of gasoline, some media reports seem to be following suit. But as The Biz Flog explains this week, there is considerable debate over whether speculators should be blamed for the high cost of oil.
June 23, the same day Democrats on the House Energy and Commerce Committee condemned oil speculators, the "CBS Evening News" and ABC's "World News" blamed oil speculation for a large chunk of the spike in prices.
"There's no doubt speculation plays a role in the skyrocketing price, but how much?" ABC correspondent Ryan Owens said June 23. "Experts say if it were just simple supply and demand a barrel would cost $75. Today it closed north of $135."
Scott Horsley explained oil speculation on June 29 for National Public Radio's "All Things Considered," where he pointed out that there have always been financial players in the oil market and there is still a debate over what influence they really have.
Alan Reynolds, a senior fellow with the Cato Institute, said it is fundamentally incorrect to blame speculators.
"There is no mystery behind the rise in oil prices. They rose too high too fast because of booming demand for oil for petrochemical products, electric power and shipping from many emerging economies (particularly China, India and the Middle East)," Reynolds wrote for the New York Post on June 20.
The Biz Flog for June 11 looked at rising demand outside of the United States, looking particularly at countries that subsidize their gas domestically. When the price for a gallon of gas is subsidized in developing countries like China and India, the demand goes up globally-leading to higher gas prices here in the United States.