Yesterday I criticized Paul Krugman for seemingly digging his heels in on the issue of speculation in the oil market, but it looks like I was too quick to criticize. In today's column, Krugman does, in fact, argue that speculation isn't the primary driver of high oil prices, but he displays a surprising openness to debate:
Is speculation playing a role in high oil prices? It’s not out of the question. Economists were right to scoff at Mr. Masters — buying a futures contract doesn’t directly reduce the supply of oil to consumers — but under some circumstances, speculation in the oil futures market can indirectly raise prices, encouraging producers and other players to hoard oil rather than making it available for use. Whether that’s happening now is a subject of highly technical dispute. ... Suffice it to say that some economists, myself included, make much of the fact that the usual telltale signs of a speculative price boom are missing. But other economists argue, in effect, that absence of evidence isn’t solid evidence of absence.Krugman has been right far more often than any other commentator over the past 10-15 years, especially about economic issues. So whether you agree or disagree with him, his opinion deserves to carry some weight.