Now, I’ll be the very first to admit that when it comes to economics, I’m not even a neophyte…sort of a protophyte, I expect.
So, I'm looking for some gentle reality-checks here: “Speculation” is about trading in risk, buying into the probabilities of some given commodity increasing or decreasing in value over time. Check?
The alarming proximity between the levels of Supply and Demand in the current global oil market is one of the factors which has driven the very brisk “long” (i.e., projected to increase) purchases of oil futures, which in turn amplify the upward drive in prices (albeit less than many anti-capitalist types may shriek about in their on-going quest to distribute earned capital to those who didn't earn it). Demand continues to increase, while supply is subject to a variety of all-too-plausible scenarios for interruption, with very little slack before it is actually outstripped by demand. Seems, then, a safe bet that “up” will outweigh “down,” by a pretty wide margin. Check?
If the US is seen taking active, concrete, and visible steps toward introducing more oil from domestic sources, while simultaneously incentivizing development of alternative energy and fuels, it will basically start a very public clock ticking toward the supply:demand ratio undergoing a not inconsiderable realignment. [False dichotomy to illustrate the ends of what would actually be a spectrum:] Once it becomes available, either domestically produced American oil will be used domestically (and so take a proportion of American demand off-line in the global market, leaving more available supply from foreign sources), or that domestic oil will be sold on that global market, with the same net effect. Check?
Futures traders will see this clock ticking, observe the conservation and alternative energy/fuel efforts underway, take the measure of the American zeitgeist, and may begin to judge that the future of betting on a consistent rise in petro-prices is no longer so bright. Long orders would decrease, and along with them the upward pressure on prices…before a barrel of oil is actually extracted from the ground. Check?
So the issue of what immediate benefit there would be from beginning exploration and exploitation efforts on domestic fields is tending to be interpreted too narrowly if the effects on the market of the efforts themselves are not being taken into account. Check?Bonus round: Palin is marvelous, but it would be a mistake to decant her before 2012. Check?