Larry Kudlow, the financial whiz, was on the Joe Scarborough show on MSNBC today. He repeated his unending mantra of "drill, drill, drill," as a way out of the current wilderness of high priced crude.
"Approval of drilling will frighten the futures traders out of the market and the price will go a long way down." "They are already leaving the oil futures market" he went on. "This will push them out even faster."
So basically the logic behind expanding offshore drilling is that speculation is a big reason for high oil prices, and that drilling will frighten speculators into thinking that the price will go down in the future, thus they will get out of the market and the price will go down right away. But if you think that the price of oil is high because of expanding demand and future shrinking supply, then offshore drilling would do absolutely nothing to oil prices, because it would contribute less than 1% to world oil supply:
Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.Also, check out this interesting article Flanders sent me on speculators, The Speculator as Hero:
The miracle is that in taking care of ourselves, we speculators somehow ensure that producers all over the world will provide the right quantity and quality of goods at the proper time, without undue waste, and that this meshes with what people want and the money they have available.