There's more than one thing going on when you talk about oil prices. You've got two sides: supply and demand. Currently it's a supply problem. We can only get

There's more than one thing going on when you talk about oil prices. You've got two sides: supply and demand. Currently it's a supply problem. We can only get so much oil per week into this country. There's only so much pipeline and so many tankers that we can send into our country. We are facing demand destruction. People decreased driving by 11 billion miles this March as compared to last March. Decreases in driving YoY have occured three other times and that was during severe oil crises. http://calculatedrisk.blogspot.com/2008/05/us-vehicle-miles-vs-real-gasoline-price.html http://calculatedrisk.blogspot.com/2008/05/us-vehicle-miles-... See this interview if you'd like to learn more about the fundamentals going on currently. http://bigpicture.typepad.com/comments/2008/05/t-boone-pickens.html http://bigpicture.typepad.com/comments/2008/05/t-boone-picke... But there is speculation, that is a fact. The total barrel capacity for Cushing, OK (where light sweet crude is delivered) is around 65 Million bbd. The current open interest for this contract on the NYMEX is about 300 Million bbd. These contracts aren't exercised, they are rolled and such. Not only are their speculators, there are hedgers (transports, airlines, UPS, etc) so that accounts for some. I am not anti-speculation. Speculators give liquidity to a market and encourage price discovery. Upping the margin requirements to trade /CL is a dumb idea. It would lead to further price manipulation. We do need to get rid of OTC (over the counter) markets because they don't show us the price. The same can be said with credit default swaps (CDS), but that's another story. Provide an open market, and that will help. If you want to scare out the speculators, tap into the Special Reserve for a week. That should cause a pop in the bubble. Clinton did it. Bush II has been pumping oil into the SPR and wanted to keep adding in and double the capacity. The numbers were something like 5x as much than what we had before he came in. Legislation just recently stopped him from adding more. In terms of policy changes, you can put a price floor on crude contracts, say 70 bucks a barrel. Anytime the price goes under that, the government collects the difference and puts that money to work in a green hedge fund/pension hybrid. Another policy would be to create economic incentives for people that buy cars. I've already explained this over on my blog (yes, shameless plug): http://www.graduatedtaste.com/2008/05/27/a-solution-to-the-energy-crisis-part-1/ http://www.graduatedtaste.com/2008/05/27/a-solution-to-the-e...