Jeanne Shaheen is going after speculators again. Last week she joined other New England liberals in the U.S. Senate in signing a letter to the Federal Energy Regulatory Commission. It opened with this sentence: “We write today to urge the Commission to review recent increases in natural gas prices in New England to ensure that they reflect supply and demand and are not being increased by speculation or manipulation.”
About this winter’s natural gas price increases, Bloomberg News reported that the rises through mid-February could be explained “in two words: polar vortex.” According to Bloomberg, “prices jumped as traders got bullish and speculators poured money into natural gas futures contracts, betting on rising prices.”
Shaheen did not have to ask for a federal investigation to find out if speculation has bumped up prices. She just had to read the news — or know that speculation is an essential, daily component of of commodities market trading. It is “difficult or impossible to differentiate between speculative activity and investment,” MIT economists Christopher R. Knittel and Robert S. Pindyck wrote in a paper last year.
Now that we know speculation is happening, shouldn’t we ban it? Let’s ask Knittel and Pindyck. “If anything, speculation had slight stabilizing effect” on oil prices after 2004, they wrote last year.
By the end of February, CNBC reported that “natural gas prices should stay cheap for a long time.” The culprit: rising production driven by fracking. To really lower prices, Shaheen could would work to get radical environmentalists out of the way of gas exploration so producers can put more gas on the market.