Transcripts

"Two Ways to Play"-Kevin Depew of Minyanville

SUSIE GHARIB: Well, volatility continued in the oil patch today, as prices dipped below $60 a barrel for the first time since May. Traders are reacting to the administrations plan to clamp down on speculators in the energy market. Tonight's "Two Ways to Play" says that plan is both good and bad. Here's Kevin Depew of Minyanville and Minyanville's Kevin Depew.

KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: There's an old saying on Wall Street, it's not the price, it's the volatility which is true, especially when we are talking about things like crude oil. High prices for oil depress consumer spending, but even worse than high prices is volatility. Over the past two years, oil has risen by $80 a barrel and fallen by more than a $100 a barrel before doubling to its current level. Such volatility, caused by speculators, not real demand, damages both consumers and producers. The answer is simple: increase government supervision of and restrictions on speculative trading in oil. Incredible. Even after last year's failed attempt to curb oil speculation, the bureaucrats are at it again, seeking to impose limits or possibly an outright ban on it. This kind of misguided populism sounds great. Who wants to defend a bunch of greedy commodities traders? But the reality is that speculators serve an important function by increasing liquidity and making it easier for end users to hedge against higher or in some cases, lower prices. Because this has been tried countless times before, the consequences of intervention in commodities markets is easy to predict: a government guarantee of higher prices.