Speculating on the drop in oil prices OK?

Financial Times:

Oil prices continued their correction this week as the debate about the influence of speculators in energy markets reached a new pitch.

The US Senate yesterday failed to agree on proposals to limit excessive speculation in energy markets and, with oil prices becoming a huge political issue in a presidential election year, attention turns to the House of Representatives, which will debate the issue next week.

But with US lawmakers about to break for summer holidays, any change to regulations governing oil trading appears unlikely before September at the earliest.

Nymex September West Texas Intermediate sank $2.99 to a session low of $122.50 a barrel on Friday, down 5 per cent this week.

ICE September Brent lost $3.05 to a session low of $123.39 a barrel on Friday, off 5.9 per cent this week. Hurricane Dolly caused minimal disruption to production in the Gulf of Mexico and the ending of that threat contributed to selling pressure this week.

The correction for oil prices has lasted two weeks with Brent down 16.3 per cent since hitting a record $147.50 on July 11 while WTI has sunk 16.8 per cent since reaching an all-time high of $147.27 on the same day.

...

US natural gas prices also fell sharply this week with Nymex September Henry Hub down 12.4 per cent to $9.262 per million British thermal units. US coal prices have fallen, providing an attractively priced alternative to natural gas to some US power plant operators.

...

Are Democrats apoplectic over this precipitous drop in the price of oil? More likely they are just relieved. Their irrational energy policies and their attempt to blame increased prices on speculators will lose its sense of urgency.

In one of the more laughable comments on the price drop Harry Reid took credit for it saying his attempts to go after the speculators was the cause. Harry, you are not that important to the market.

The drop did coincide with the President's lifting of restrictions on offshore drilling. That puts the lie to the Democrat mantra that there would be no short term effect on price from permitting drilling.

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