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Blame The G8 For Energy Speculation
...But, more generally, the G8--and its members this week--are disingenuous when they speak about energy prices, in three ways.

1) They are trying hard to talk up the market, with regard to global growth. At the same time, the hard data continue to disappoint. Naturally, this causes volatility in oil prices.

2) They claim to see no link between their failure to converge on climate change/environmental policies and what happens to energy prices. The extent to which industrialized countries' effectively control carbon emissions will have a big impact on the longer-run demand for oil. Flip-flopping on this issue discourages investment in the energy sector (regular and alternative), and thus directly and indirectly contributes to oil price volatility.

3) The very cheap money policies of leading central banks, including the Fed, the Bank of England and arguably also the European Central Bank, lower the funding costs for big players who want to take large positions in commodities markets. Essentially, we are providing the credit that makes big speculative positions possible. Add to this mix a "too big to fail" attitude and a "yes we can, recapitalize through trading profits" deal with policymakers, and you see why major financial firms are likely to place huge commodity bets in the months ahead....