There has been a lot of talk recently that oil speculation is the main cause behind the huge run up in oil.  Whether this is true or not could be irrelevant based on a current Businessweek article titled In Praise of Oil Speculation.

The author states a few good reasons for why it does not matter if the increase in prices results from rogue speculators:

“If speculators and manipulators have somehow managed to get prices too high, then those prices will come back to earth as surely as apples fall from trees and meteors land in Arizona. The price decline will inflict billions of dollars of losses on those speculators and manipulators-just deserts.”

Or, if the price increases are legit:

“On the other hand, if by some chance the speculators and manipulators are correct-that oil prices could go even higher, based on supply and demand-then they will have done all of us a favor by ringing the alarm bell. High prices today are inciting suppliers to produce more oil and consumers to use less, which will ease the transition to a future of costly energy.”

“Either way, then, it’s hard to see what the big problem is. Either the traders are wrong and they are setting themselves up to lose a lot of money, or they’re right, they’ll make money, and they’re sending the proper market signals to the economy.”

Though, he is correct, this does not help anyone make money, but it does help ground our thinking in the reality of the current markets.