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September 01, 2008 at 04:00 AM
Who’s to blame for soaring commodity prices? Inquiring minds want to know.
How do we explain crude’s rapid ascent from $50 a barrel at the beginning of 2007 to today’s nosebleed $150 vicinity? It depends whom you ask.
According to some, sky high oil prices have nothing to do with below-average inventories or supply outages in the Middle East and Nigeria.
What about global demand from emerging mega-markets like China and India driving oil prices to higher platitudes? There’s no connection.
Falling production from Mexico? Wrong again.
And if you think crude oil’s run is related to a weak U.S. dollar, you’re also wrong.
And what about surging prices for agricultural commodities like corn and wheat? Again, it’s not what you think.
Sky high agriculture prices have absolutely nothing to do with the record flooding in the Midwest part of the U.S., which has caused an estimated $8 billion in crop damage.
And if you believe the rising cost of bread and cereal is because of the fact that elevated oil prices have increased the cost of transporting all of this wonderful food, you’re one lost sailor.
And what about the ridiculous cost of animal feed? Maybe the pigs, cows and chickens are eating more than they used to, but none of it has any bearing or relationship to world events or anything else around us.
If these aren’t the culprits, then whom can we blame for runaway commodity prices?
For the answer, just ask Rep. Bart Stupak of Michigan. He knows exactly what makes the complex commodities markets go up and down, especially up.
According to Stupak, “Your pension fund manager may be using your retirement money to drive up the price of oil.”
What a revealingly novel thought.
For those of you keeping score, Stupak has a law background and he earned a bachelor’s degree in criminal justice from Saginaw Valley State College. He can now add commodities trading, with a Ph.D. in the oil market, to his resume of achievements.
If you’re not satisfied with Stupak’s stupendous explanation of why commodity prices are chewing a hole in your pant pockets, perhaps the answers provided by Sen. Joe Lieberman of Connecticut will clear the fog.
Lieberman made the brilliant suggestion that pension funds and other large investors should be banned from investing in commodities altogether. After stiff opposition and possibly recognizing that he had grossly miscalculated, he later recanted his Snow White fairyland solution.
