Imagine a beautiful, autumn scene:  still, early-morning air with a sharp, crisp edge; a thin mist dancing lazily around the tops of the green-golden trees; a river winding silently along through a brown grass meadow and out of sight.

Then… a gunshot rings out!  A thousand crows take to the air, wheeling and squawking, circling the air in a communal state of alarm, crying and calling to each other to be wary and careful. For a while.  After a suitable amount of time has passed, the noise diminishes, ceases, and finally the birds return to their perch.  The danger has passed.

But have they changed anything, for all their fuss and turmoil?  Has the hunter been found and neutralized?  Have they learned about guns and bullets and the physics of ballistics?  Have they erected barriers against bullets?  Have they implemented patrols and watches to warn against the arrival of an armed hunter?  Have they formed alliances with other species in the forest?  Have they even determined that the gunshot was part of an attack against them, versus a fisherman merely firing his bear-protection rifle at a distant log because he was bored?

Well, no.  What they did was freak out about a loud sound, flap like crazy in a circle for a few minutes and then go sit down, no better off than they were before, and for all intents and purposes utterly clueless about what just happened.

Stupid birds.


Ha ha, it’s not just birds, is it?

The above gunshot happened back in 2008.  Remember?  By July, oil prices were a feather’s distance from $150 and the crows were in full flight.  Get the speculators out of the market!  Drill Drill Drill!  Invade the Middle East!  Everybody buy a Prius!  It’s the President’s fault!  Elect a Democrat!  Elect a new Republican!  Elect a Libertarian!  Frack Frack Frack!  Burn the NYMEX!  Double the CFTC’s budget!

What was conspicuously absent from that time, back in 2008, was pragmatic, open-eyed analysis of problems and solutions related to a commodity marketplace that was discovering extremely unpleasant high prices.  Everybody with an idea was convinced it was right and sensible and the only way to go; but there wasn’t much clear, undisputed evidence presented to support those ideas.  It’s hard to be analytical when you’re flapping and yelling.

Of course, by February 2009 the oil market had crashed below $40, and after a few more rounds over the trees, most folks went back home and sat down.  It’s hard to flap and yell for no reason; and frankly, an analysis of tooth-chattering volatility in a market that’s making your consumer life easier isn’t as high a priority.  What was accomplished by that tour over the treetops back in 2008?  Absolutely nothing.

In a quiet room inhabited by people in a thoughtful and curious mood, it’s easy to find some real (and large) problems with the oil market.  Market participation is out of whack, when you consider the size of some of the participants. Uncontrolled prices can cripple national economies and individual budgets alike if they rise too far.  

Similarly, that quiet room renders a lot of the shouted ideas pretty thin on substance or sense.  Removing speculators from the market simply doesn’t fix price volatility or maximum prices.  Position limits can balance the impact each participant has on price, but if all participants say “buy” then you haven’t controlled price or volatility that way, either. Calls for “better” regulation of the exchanges by the CFTC serve as an excellent overall mandate, but if you need a to-do list, such calls are useless. Explicit price controls in one country are vulnerable to international exploitation; and if you can’t completely control price then you’ve got a subsidy, not a price control, and that’s not a good long term solution.

There are undoubtedly some reasonable actions that can be taken to solve important problems, but we’ll never find them if we are yelling and flapping.  So if we ever get into this situation again, it’d be really nice to see articles written everywhere from the National Review to Huffington Post, from the New York Times to the NYMEX, that try to dissect rather than attack and defend.  If we could examine what is going on as a system or process rather than a political opportunity, maybe we’d actually learn something and fix problems rather than just make noise until we forget why we started.

So now, let’s see what’s happening in March 2012, because last month we just realized that


…*sigh*… never mind.

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