This week the blog is focused on the rising cost of oil. What can explain this since peak drive season is gone, demand is down and inventories are up? In a word: speculation.

http://www.investmentu.com/IUEL/2009/October/oil-prices-heading-higher.html

As the article notes:

“With the perception that the U.S. economy is finally moving out of the doldrums, all the hedge fund and speculative money that has sat on the sidelines for months is finding a home in the oil market. Depending on which report you read, world demand for oil is expected to pick back up, and this is adding fuel to the fire.”

In other words, speculators are guessing that the economy is coming back and therefore are pushing prices up. That’s crazy. Why should we pay more at the pump just because some speculators think the economy may or may not be improving? Shouldn’t the price of gas be based on facts, not forecasts?

When it comes to oil, the facts often don’t matter.