Update 11/30/2008: I think it important to correctly identify for the financially flummoxed what laissez faire actually means. See below.
Back in June, Republicans were
It's more than coincidental that gasoline prices have gone down markedly since the Enron Loophole was closed on September 30th.claiming that oil prices had been on the rise because Democrats were blocking off-shore drilling, but they didn't talk much at all about the upward effect on prices due to speculation and the prior deregulation thereof. Although I support U.S. off-shore drilling, because it would have an almost immediate downward impact on the world price of oil, the effect of speculation had a much greater impact on the fact that oil prices reached record levels in 2008, and this factor should not be overlooked.
In the following video, Keith Olbermann talks about how John McCain (or at least his advisors) supported what's come to be known as the Enron loophole, which unleashed the ability of speculators to corner markets and run up energy prices. Olbermann called it "a legalized form of insider trading" which "lets speculators overwhelm trading in oil futures." The result? A huge increase in your energy costs.
By being able to speculate on the future of oil prices, according to Olbermann, the speculators had driven up the price of oil to more than double what it was before the loophole was created, and this speculation had created the potential explosion of a large 'oil bubble'.
Has the bubble finally burst? Yes. Government, which encouraged the bubble in the first place, popped it before it got too large, by closing what's come to be known as The Enron Loophole.
Is deregulation of speculation a good thing? I don't think so--at least not nearly to the extent that the Enron Loophole allowed. It's obviously good not when it's employed by self-seeking shysters like Enron, who nearly brought California to its knees by speculating on electricity there. The robber barons of Enron essentially cornered the California market on energy, and they were able to drive up prices dramatically because of it.
The price of oil has been affected largely by the same type of speculation--until recently.
Speculators have not just been placing bets on the price of energy, they have been been largely able to control future prices in an effort to profit from their insider knowledge, according to Michael Greenberger, former chairman of the US Commodity Futures Trading Commission, who testified before a US Senate committee meeting on June 3, 2008. It was estimated that in the last two years prior to that, the average family spent at least an extra $1500 on energy due to such collaborative speculation. Speculation and its deregulation, according to George Soros, had allowed banks and other financial institutions to purchase and set aside larger reserves of petroleum than even the U.S. has in its entire national reserve.
The Enron Loophole was closed on September 30, 2008. Not long thereafter, gas prices started coming down precipitously (I'm still not sure why the price of diesel remains high). Obviously, other factors, such as declining demand in a weak worldwide economy, have contributed to the downward pressure. However, it's clear that speculative control of large swaths of the oil market caused its price to go up. It's more than coincidental that gasoline prices have gone down markedly since the Enron Loophole was closed on September 30th.
Update 11/30/2008: George Reisman has an intelligent warning to those who claim that laissez faire capitalism is the cause of such bubbles as the recent "oil bubble" and the financial crisis of 2008:
The mentality displayed in these statements is so completely and utterly at odds with the actual meaning of laissez faire that it would be capable of describing the economic policy of the old Soviet Union as one of laissez faire in its last decades. By its logic, that is how it would have to describe the policy of Brezhnev and his successors of allowing workers on collective farms to cultivate plots of land of up to one acre in size on their own account and sell the produce in farmers’ markets in Soviet cities.
Laissez-faire capitalism is a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force. This protection applies to the initiation of physical force by other private individuals, by foreign governments, and, most importantly, by the individual’s own government.