I think Ed Wallace.. judging from his previous articles dealing with.. oil speculation (again I play the devil's advocate)... is missing the whole picture here. He is presupposing the government's pure intentioned hand in the regulation of "speculators", totally discounting the fact that there is nothing pure or good intentioned about the government.
The Real Reason Behind Oil's Dramatic Plunge - BusinessWeek
In this article he blames Washington for not regulating the speculators...and jumps on the scapegoat bandwagon. No where does he mention growing credit bubbles caused somewhat by a few years of artificially low interest rates fueling a "false" liquidity on the futures markets.
This quote from the article you posted is interesting and off-base:
Of course, as we have found out in the last three years, speculators in the market can drive the price of oil sky high. Worse, they do so without ever intending to take delivery of the crude oil specified in their contracts. Put another way, just as new home prices were driven through the roof in places such as California – unrealistic asset prices covered by overextended mortgages – the same thing happened in the oil market. And as happened in those bad mortgages, many speculators borrowed heavily on margin to finance their upward push on oil prices.
- I'm of average intelligence... but I don't think there is much logic in the above statement in context with the rest of his article. He is dealing with penultimate items here. The speculators are always at fault, nobody says anything about the general demand for commodities and general demand for gasoline... this goes back to one of the elementary principles of economics... an item is worth what someone is willing to pay for it...unforunately that includes stupid people. Maybe I'm way off here... but speculators speculate on which way the market will go, if the rest of the demand doesn't keep up with prices, they loose their bet.
It isn't a bad thing that gas prices are rising, personally I think it will give a little bit more stability... especially as the government injects more liquidity in the economy -potentially creating another demand bubble.