I'm always skeptical when people who are unhappy about the price of something or other blame "speculators." But the latest issue of Barron's (rarely mistaken for the Daily Worker) has a straightforward explanation of why limits on commodities speculation make sense--basically, because these markets are so small compared to the vast capital available to be invested in them.

The article supports a regulatory distinction between hedgers--those actually engaged in a given business, such as oil or pork bellies, who use commodities markets to insure against risks in the marketplace--and those who merely place bets, an action that provides important liquidity for hedgers and their industries but which, taken to extremes, could severely distort pricing. With respect to agricultural products, the government enforces position limits only on the bettors--the speculators. Barron's suggests it might just as well do the same in oil, where commodity index funds appear to be a major force in driving up prices.

Of course I'm in favor of higher oil prices. I only wish we had the sense to pay them to ourselves in the form of higher energy taxes. That failing, I suppose we'll have to rely on commodities traders and OPEC nations to take our money instead.